Economic Briefing
Q3 GDP Starts Out Sluggish
US economic growth in the second quarter exceeded expectations on the surface. Growth for the quarter came in at 3.0%, well ahead of initial expectations for growth of just under 1%. Consumer spending, corporate investment in commercial equipment and structures, and government spending highlighted areas of growth. But Q3 is starting off sluggishly, Blue Chip analyst forecasts are currently showing growth of just 0.8% for the quarter.
Many purchasing managers have built peak season retail inventories earlier than normal to avoid tariff pressures, and that has pulled forward activity that would have normally occurred early in Q3. Back-to-school shopping is underway in some markets, and this is expected to be a robust season vs prior years. The National Retail Federation (NRF) estimates that the average family will increase spending per child by 17.3% compared to last year and more than 67% started shopping early this year. More than 70% of parents reported that they will approach the year conservatively, looking to save money wherever possible.
Notably, many shoppers are reporting that they may pull back on discretionary purchases during this period, cutting back slightly from prior years on shopping for technology, clothing, supplies and books to stretch their budgets. Many retailers went into the season light on inventory, and even some reductions in spending could create sell-through, and force some to reload certain discretionary inventories this fall (clothing and technology primarily). That could lead to some late season supply chain scrambling.
Staring at the October 14, 2025 China-Built Container Fee Hike
As most supply chain managers are well aware of, the US is still planning to impose a fee of $18 per net ton per voyage (or $120 per container – whichever is higher) for Chinese-made ships docking at US ports. That fee will escalate to $33 per net ton by 2028 ($250 per container). This duty is imposed on 5 voyages per year per ship (and would impact multi-stop movement of freight). There is some limited evidence that many firms are already planning for this cost increase and have begun to shift asset planning strategies (carrier-side) and modifying sourcing strategy depending on specific product exposure to the container fee (shipper-side). For instance, low-value goods will notice the impact of the fee much more so than high-value goods. In addition, densely packed containers will spread the fee out among many items versus those that have fewer items and are lower value (like toilet paper, paper towels, etc.).
For now, container volumes are still fairly flat. Spot rates to ship on key Asia/US trade lanes are still 55% or more lower than rates at this time last year. Shipping volumes are also reportedly down (some suggest perhaps as much as 9% Y/Y) versus a similar period from last year.
The question continues to be the role of pulled-forward inventory building activity and whether it was sufficient to last through the end of the year; or if there will be significant scrambling activity to try and cover stockouts near the end of the year. Manufacturing assembly lines will likely continue to see continuous reorders once this initial inventory stockpiling has been depleted. The latest manufacturing surveys suggest that most firms are sitting below average on inventories and that some scrambling may be the order of the day late in Q4.
Air Cargo Rates Remain Elevated in Late Summer
Air cargo rates were moving upward through June (latest available). The US Inbound Price Index for air cargo showed them 8.8% higher year-over-year. Since then, several different indexes show that they held those higher levels through the end of July despite those growth rates moderating.
WorldACD showed that global pricing remained fairly stable at the end of July after June’s sharp increase. Some cargo volume increases were noted out of China and Hong Kong headed to the US. Volumes and rates were also higher between India and the US as shippers largely tried to expedite freight into the US (once it was clear that trade negotiations were not going well between the two countries) and supply chain managers attempted to get ahead of potential tariff hikes. Asia in general experienced a 7% Y/Y increase in outbound air cargo weight through the end of July. Other markets grew marginally by 2-4%.
Inside This Edition
Q3 GDP Starts Out Sluggish
US economic growth in the second quarter exceeded expectations on the surface.
Staring at the October 14, 2025 China-Built Container Fee Hike
As most supply chain managers are well aware of, the US is still planning to impose a fee of $18 per net ton per voyage (or $120 per container – whichever is higher) for Chinese-made ships docking at US ports.
Air Cargo Rates Remain Elevated in Late Summer
Air cargo rates were moving upward through June (latest available). The US Inbound Price Index for air cargo showed them 8.8% higher year-over-year.
Trucking Sending Mixed Signals Entering the Peak Retail Season
A wave of inbound freight hitting the US West Coast has pushed the trucking spot market higher, adding a 19.9% increase in shipment demand vs. July of last year according to DAT and a 57.3% increase in the number of loads looking for available trucks.
US Cross-Border Activity Mixed Through July
US to Mexico freight movement anecdotes through the end of July show that volumes are still weak relative to last year.
Transportation Briefing
Trucking Sending Mixed Signals Entering the Peak Retail Season
A wave of inbound freight hitting the US West Coast has pushed the trucking spot market higher, adding a 19.9% increase in shipment demand vs. July of last year according to DAT and a 57.3% increase in the number of loads looking for available trucks. This surge in the current load-to-truck-ratio is significant, the current national ratio is 6.65 vs. 4.0 in 2023 and 3.63 in 2024. And yet, on the spot market, TL prices are still showing increases of just 0.5% Y/Y.
Other data showed a 1.8% increase in truckload prices through the end of June (the latest available in the Producer Price Index survey) and LTL was up sharply by 7.8% Y/Y. The Yellow Freight bankruptcy was weighing more heavily on industry-wide capacity than is being seen in truckload. Despite tonnage generally remaining sluggish, pricing has firmed across the sectors.
Forecasts for the full year show total trucking volumes being up 1.6% with truckload carrying a 1.5% tonnage increase and LTL pulling in 2.0% more for the full year. For 2026, the growth rate is expected to be 5.0% higher for LTL Y/Y and 2.0% higher for truckload.
US Cross-Border Activity Mixed Through July
US to Mexico freight movement anecdotes through the end of July show that volumes are still weak relative to last year. Automotive volumes were hit hard by steel and aluminum tariffs and volumes were weaker through the end of the month. Long waits at some border crossings were also still a factor slowing down transits and slowing overall order volumes. However, in the July manufacturing report from Mexico there were hints that conditions could be improving in the country. Better new order activity and a potential trade deal between the US and Mexico were helping improve manufacturing sentiment. Mexican rail traffic was up just 0.4% YTD but declined 2.2% in week 30 vs. the same week last year.
Canadian cross-border activity was slightly better than southern border freight flows, but the economic condition in Canada is worse. July data showed that Canadian manufacturers were struggling more than US or Mexico firms, and the broader Canadian economy was under more intense pressure. But, since goods under USMCA guidelines can still move tariff-free between the countries (aside from Section 232 tariffs), freight was still flowing between trading partners. US/Canada intermodal rail traffic was up 4.5% YTD and surged by 14.1% in week 30 vs last year.
