Overview
Jon Starks presented a cautiously positive outlook for the U.S. economy and freight markets. Growth remains intact, but policy uncertainty, inflation above the desired range, volatile energy costs, and uneven industrial demand are making it harder for companies to plan. His strongest near-term freight signal came from trucking: capacity is extremely tight, utilization is near full, and spot rates have risen sharply. Whether carriers can add drivers will determine how long that pressure lasts and how much additional freight intermodal rail can capture.
Starks repeatedly distinguished between growth and acceleration. Several economic and industrial measures are improving, but most do not yet show the momentum associated with a broad-based boom. The figures and forecasts below reflect his analysis as presented during the session.
Economic conditions and policy uncertainty
Starks argued that greater policy stability would improve the investment environment. Although businesses have more certainty than they did the prior year, significant unresolved risks continue to slow decisions and keep the economy from reaching its full potential.
His baseline view was that the economy can continue growing at a reasonable pace. For freight, annual gross domestic product growth of roughly 2% to 2.5% would be sufficient; the industry does not need 3% to 4% growth to perform well. The larger problem is quarter-to-quarter volatility, which obscures the demand signal companies use to plan capacity, labor, and investment.
Housing was described as broadly neutral—neither a meaningful growth engine nor a major drag. Inflation had eased in the latest monthly report, but not enough to reverse its broader trajectory. Starks expected inflation to remain above 3%, continuing to pressure consumer purchasing power and business costs.
Diesel and energy prices are a central part of that outlook. Starks compared the current pattern with the volatility following Russia's 2022 invasion of Ukraine: an initial spike, some easing, renewed pressure, and a long path toward a new normal. He expects prices eventually to trend lower, but not smoothly or immediately. Persistent energy volatility is therefore likely to remain both an inflation risk and a major factor in transportation pricing.
What GDP does—and does not—say about freight
Starks's goods-transport measure strips out service activity and adds inventory movement to isolate the portions of the economy most relevant to freight. That measure still showed growth, but not at a level that would imply sustained, robust transportation demand.
Two factors make the headline economy look stronger than the physical freight opportunity:
- Inventory swings can lift measured activity without representing durable end-customer demand.
- Artificial-intelligence investment includes expensive computers and data-center equipment that add substantial value to GDP but relatively little freight volume because the products are high-value and low-density.
This distinction is important for railroads and trucking companies: strong dollar investment does not automatically translate into equally strong load growth.
Tariffs and changing trade flows
Starks estimated that the various tariff mechanisms were producing an effective rate of roughly 10%. In his view, a stable, clearly defined 10% framework would have caused less disruption than reaching a similar outcome through repeated negotiations, investigations, and commodity-specific changes.
Steel illustrated the unintended effects. Higher steel tariffs have supported U.S. steel production and encouraged more U.S. steel exports to Mexico and Canada. Some of that steel is then incorporated into finished goods that return to the United States. The result may benefit domestic steelmakers without producing an equivalent increase in U.S. downstream manufacturing. Starks pointed to rising automotive imports from Canada and Mexico alongside relatively unchanged U.S. auto production as an example.
Agriculture provided a near-term positive. Soybean exports to China had recovered, but Starks characterized the change as a return toward normal rather than a new boom. For that reason, he did not expect the same degree of incremental agricultural benefit to continue into 2027.
Trade with Asia continued growing in 2025 even as direct trade with China declined. Imports shifted toward other Asian countries, consistent with a “China plus one” strategy and with China's own movement of manufacturing into Southeast Asia. In other words, much of the apparent diversification is a change in routing and production location rather than a complete break from Asian supply chains.
Starks said bulk exports were up 15.5% year to date, largely because of energy and agricultural shipments. He expects both to remain supportive through much of 2026, but does not view either as a permanent growth rate. Container imports had improved month over month but remained negative year over year, while containerized exports were only modestly positive.
Industrial activity and data centers
The Institute for Supply Management manufacturing purchasing managers' index had remained above 50 for five or six months, indicating that more firms were expanding than contracting. Starks cautioned that the index had not moved decisively beyond roughly 53–54, so it showed breadth of growth rather than meaningful acceleration.
Inflation-adjusted durable-goods orders offered a more encouraging signal. They had returned to year-over-year growth for the first time in an extended period, suggesting improving activity over the following six to nine months. However, high-value technology and computer equipment tied to artificial-intelligence investment are included in those orders and may overstate the freight-volume opportunity.
Data-center construction remained exceptionally strong and, in the revised data Starks presented, had surpassed general office construction. He saw no immediate sign of a slowdown. Yet data centers have a different economic and freight profile from housing, factories, or offices. Most freight benefit occurs during construction; once completed, a data center generates relatively little recurring physical output or surrounding activity. It is therefore an important current demand source, but largely a one-time build rather than an enduring freight generator.
Why trucking is the key near-term freight story
Starks identified trucking as the market showing the most consequential change. Several pressures are converging:
- Tariffs on commercial vehicles, trailers, and parts are raising equipment costs. He estimated an ongoing increase of about 5% for trucks, while trailer prices had risen approximately 9.5% to 10% in the recent period discussed.
- The national greenhouse-gas pathway toward zero-emission heavy vehicles had effectively been removed, but a separate nitrogen-oxide and particulate-matter engine rule remained scheduled for January 1, 2027.
- The revised engine rule changed warranty, useful-life, and credit provisions and introduced a sliding noncompliance penalty. Starks estimated that a compliant engine could cost an additional $10,000 to $15,000, while the maximum penalty described in the rule was $7,000. That gap leaves uncertainty over whether manufacturers will complete the transition or temporarily build noncompliant engines and pay the penalty.
- The Class A driver population has fallen from its post-pandemic peak. Hiring began to recover in late 2024 and 2025, but stepped-up enforcement reduced capacity again.
These factors leave the truckload market at roughly 99% utilization in mid-2026, with little excess capacity. Starks offered two sharply different scenarios. If higher rates and wages attract drivers in the normal way, utilization can ease and pricing pressure can moderate. If enforcement and hiring constraints prevent fleets from adding drivers, utilization could remain near 99% for another year—an unusually long period at essentially full capacity.
The spot-rate surge and the contract outlook
Starks traced the rise in spot rates to several sequential shocks rather than to demand alone:
- Holiday activity lifted rates at the end of 2025.
- Mid-January winter storms removed productive capacity and caused an immediate increase.
- Higher fuel costs added another increase in late February and early March.
- A May safety-inspection event further reduced available capacity as some drivers avoided inspection activity.
Spot rates reached approximately 50% above the prior year—far beyond the 10% to 20% increase Starks would previously have considered plausible. He attributed that move to the combined effect of enforcement, years of capacity contraction, productivity disruptions, fuel, and modest demand growth arriving at the same time.
He expected seasonal spot pressure to ease after the July 4 peak, but rates should remain elevated. Contract pricing is likely to stay on an upswing through 2027 because it adjusts more slowly. If the spot market remains tight, contract pressure could persist even longer.
Implications for rail and intermodal
Starks used the proposed major railroad merger to illustrate the size of the intermodal opportunity. The merger application identified 2.1 million potential truckloads that could move to rail. Against an annual U.S. market of approximately 725 million truckloads, that represents only about 0.3%. Against a more realistic addressable market of roughly 75 million longer-haul loads, however, it approaches 3%—large enough to create meaningful intermodal growth and modestly reduce trucking's growth.
The key question is retention. Rail can often win freight when truck capacity is tight, but the harder test is whether intermodal service can keep those loads when trucking capacity loosens. The present pricing gap favors intermodal, and Starks described service as relatively good despite limited disruptions. Continued diesel volatility would strengthen rail's cost advantage.
Domestic containers were producing nearly all meaningful intermodal growth, while trailer-on-flatcar traffic was growing from a very small base. Starks expected more robust intermodal growth in 2026, with a still-positive but more moderate outlook for 2027. If trucking remains tight over the next three or four quarters, intermodal could gain substantially more volume in late 2026 and through 2027; if truck capacity expands, that upside will be smaller.
For carload traffic, Starks forecast approximately 2% growth in 2026, slowing to about 1% in 2027. The 2026 outlook was an upgrade from an earlier expectation of roughly 0.5% to 1%. He also noted that the overall available railcar population had gradually increased over the preceding year and a half, with overcapacity in selected car types, making equipment analysis highly specific to each fleet segment.
Rail-equipment tariffs
Starks discussed a 25% tariff on tank cars and a separate 25% tariff on railcar parts. Depending on how the provisions are applied, he said the combined effect could produce a very large increase in tank-car costs, but the actual exposure was unclear.
His team found only $1.2 million in recorded tank-car imports over the preceding 10 years, an amount too small to explain the potential significance of the policy on its own. That leaves two possibilities: the government may broaden or change how equipment is classified and assessed, producing a major cost effect, or the tariff may have little practical effect under current treatment. Sourcing will matter because the result may vary significantly by country and supplier.
Audience question: cars built in Canada or Mexico
An audience question asked how North American trade rules and the import status of tank cars built in Canada or Mexico affect the tariff analysis. Starks replied that such cars are generally placed into service where they are built and then move throughout the network, rather than being recorded as a conventional import or export. That operational treatment helps explain the very low reported import value. He cautioned that a future change in classification or enforcement could alter whether the tariff becomes economically significant.
Main takeaway
Starks's outlook was positive enough to support freight growth, but not a broad boom. The most important variable is truck capacity. A normal return of drivers would reduce utilization and ease spot-market pressure; continued hiring and enforcement constraints would keep trucking tight, sustain contract-rate inflation, and create a larger opening for intermodal rail. For shippers, carriers, and equipment owners, the practical priorities are to monitor driver availability, fuel, contract resets, tariff implementation, and the durability of intermodal service—not simply headline GDP.