The first half of the 2025 freight market has been defined by stagnation, driven by waves of economic uncertainty. A renewed trade war and the erratic implementation of tariffs have pushed the shipping community into a defensive posture, effectively capping investment. The silver lining is that sentiment—rather than structural issues—has been the primary headwind, meaning conditions could shift quickly in the second half of the year, despite the current sluggishness.
However, a potential rebound does not come without risk. The truckload sector has continued to lose capacity at an accelerated rate, even as many expected improvement. Shippers should closely monitor how this may impact route guide compliance and service reliability later in the year.
End of Pull Forward Inventory Management
An unexpected wave of aggressive tariffs — particularly on Chinese imports — extended the pull-forward effect, creating an early maritime peak season. This also drove increased use of intermodal over truckload, as shippers scrambled to secure warehouse space and move freight well in advance of fulfillment windows. The resulting surge in inventory and warehouse costs is beginning to erode the value of just-in-case inventory strategies.
The Logistics Managers’ Index (LMI) indicates that inventory costs rose sharply in the first half, even though inventory growth was modest and uneven. Because much of this freight arrived with significant lead time, shippers leaned into intermodal to move goods across the country. In this environment, intermodal’s slower transit time became a benefit rather than a drawback — a stark contrast to the urgency of the pandemic era.
Intermodal demand has shown year-over-year growth since mid-2024, particularly along transcontinental lanes, where added capacity from providers has helped. J.B. Hunt’s Intermodal division just announced a peak season surcharge of $1,500 per container to take effect in mid-June, the earliest in recent memory. Conversely, truckload has lost share on longer-haul routes requiring multiple days of driver time. It has now become the preferred mode for shorter, more local moves where intermodal lacks utility.
Capacity Tightens Despite Weak Demand
Truckload demand has declined significantly, with tender volumes down as much as 16% year-over-year in early July. Ordinarily, this would drive rates lower, but that hasn’t happened. Instead, tender rejection rates have continued to rise on an annual basis—albeit at a slower pace than last year. Even as volumes fall below 2023 levels, rejections remain elevated compared to 2024.
Because tender rejections are less influenced by inflation or sentiment, they are a more reliable indicator of capacity shifts. The takeaway is clear: truckload capacity is exiting the market at nearly the same pace as demand is declining.
Regionally, the picture is uneven. West Coast rejection rates have been the lowest in the country, averaging below 3%, even lower than traditionally loose regions like the Northeast. In contrast, the Southeast has seen the sharpest increase, averaging above 7.5%, followed by the volume-heavy Midwest. This disparity suggests carriers may be gravitating toward California markets, or getting stuck there, due to a lack of eastbound freight. This trend will be worth watching as freight demand is expected to shift westward later in Q3.
Budget Season and Risk Outlook
This year’s budgeting process could be the most difficult since the pandemic, though for very different reasons. Consumer spending remains flat to slightly down, making a conservative forecast a safe bet. The recently passed One Big Beautiful Bill (OBBA) holds long-term potential to drive capital investment, but its near-term impacts remain speculative.
If current conditions persist, truckload capacity will continue to shrink, raising urgency for shippers managing increasingly fragile sourcing and inventory strategies. While the market has not yet turned, it is showing signs of moving toward an inflationary cycle. That said, timing remains uncertain, and risk mitigation is essential.
Contract rates have flattened since January after showing modest upward pressure last fall. Spot rates have remained mostly stagnant through the first half, aside from short-lived spikes tied to seasonal events like winter storms, Roadcheck Week, and the Fourth of July. Interestingly, carriers responded more quickly to the latter two events than they did last year—suggesting they’re ready to react when given a clear signal.
Despite continued softness, contract rates have not dropped, indicating that they may be at or near the floor while operating costs continue to rise. Carrier exits have accelerated, with revocations outpacing 2024 levels by about 12%. Though new carrier authorities have also increased, the broader environment remains highly challenging for both incumbents and newcomers.
The Key Takeaways
While the surface may appear calm, the market remains fragile underneath. Shippers should factor this risk into procurement strategies. Although last year carried similar warnings, high intermodal usage may have only delayed the inevitable truckload market shift. The data suggests the market is moving toward inflationary pressure.
Three main factors support this view:
- Intermodal is losing viability as just-in-case ordering slows.
- Capacity continues to exit the truckload market, exposing growing gaps in carrier networks.
- There is more upside potential for demand than downside risk over the next 12 months.
Shippers should adopt a more defensive stance, avoiding bottom-tier rate targets and strategically testing new carriers or 3PLs, especially in volatile or imbalanced markets. Additional vetting for financial stability is also essential. Rarely has the market been this vulnerable, and a strong risk mitigation strategy is now critical to maintaining service levels.
