Sector snapshot and prolonged stagnation

The U.S. full truckload (TL) market, valued at roughly $387 billion, has been effectively stalled for about three years, and any recovery has been slow and uneven. Carriers are facing a protracted freight recession driven by excess capacity and soft demand, with industry participants cautiously expanding fleets only in modest increments.

One visible symptom of the downturn: spot rates have dipped below $2 per mile since the spring of 2022, underscoring the weak pricing environment that many operators are navigating.

How tariffs and economic forces are shaping demand

Multiple analysts point to tariff policy and other macroeconomic factors as contributors to the falloff in freight volumes. Market data from Uber Freight quantifies potential impacts of tariff increases on truckload demand:

• A 1% tariff rise could cut TL demand by about 0.15% or more
• A 10% tariff increase could lower demand by roughly 2%
• Tariff levels in the 18% to 28% range might depress demand by approximately 4%–6%

Jonathan Starks, CEO of freight forecaster FTR, summarized the situation bluntly: “Transportation has been exceptionally impacted and will continue to remain in flux until at least the end of the year.”

Volume lows and the tactical response from shippers and carriers

First-quarter freight volumes reached their lowest point for any calendar year, a condition that can favor transactional shippers hunting for marginal per-mile savings but is unwelcome for tens of thousands of dry-van operators who have endured nearly three years of recessionary conditions.

The industry's prevailing maxim—“Make your money when you can”—helped prompt moves such as J.B. Hunt’s decision to implement peak-season surcharges earlier in the year. That step was largely a reaction to global trade complications and the front-loading of shipments intended to avoid anticipated tariff increases.

Why market concentration remains low and driver labor pressures persist

Even the largest TL carriers control only a sliver of the overall market—barely 1% each—because truckload operations generally avoid heavy real-estate terminal networks and instead run direct Point A-to-B services. This structure keeps barriers to entry relatively low and tends to reward the lowest-cost operators.

In the non-union TL sector, the challenge of attracting and retaining qualified drivers continues to be a chronic issue, with direct consequences for capacity, cost structure, and overall operational performance.

Quarterly financial snapshots from major carriers

Performance has varied across large public TL companies.

• Knight-Swift, parent of the nation’s second-largest truckload carrier, reported $72.6 million in consolidated operating income for the second quarter, a 14.4% year-over-year increase. Knight’s truckload division led gains, while its newly formed less-than-truckload (LTL) unit posted a substantial decline versus Q2 2024 and the intermodal arm recorded a widening operating loss. As Knight CFO Andrew Hess said, “Overall, most segments experienced pressure on revenue year over year with a soft freight environment.”
• Heartland Express, ranked 13th among TL carriers, saw operating revenue fall 23% to $210 million in Q2 and reported an operating ratio (OR) of 106, signaling a difficult quarter.
• P.A.M. Transport’s trucking division reported an OR of 112.5 in Q2.
• Covenant Logistics Group reported relatively flat combined revenue across its expedited and dedicated TL segments; CEO David Parker observed, “We believe that general freight market fundamentals are slowly improving, although progress is uneven.”
• Landstar, the fifth-largest carrier, limited forward guidance entering Q3 because of economic uncertainty; its automotive segment declined about 17%, and management cited tariff effects and interest-rate sensitivity as contributors to a sluggish outlook.

Rail consolidation, intermodal dynamics and competitive pressure

A proposed $85 billion merger between Union Pacific and Norfolk Southern to create a transcontinental east-west rail network could shift freight away from trucks. Analysis from T.D. Cowen suggests the deal might redirect as much as $1 billion of truck freight to rail, especially shorter-haul volumes around the Mississippi River that are currently trucked.

Intermodal transport—trailers or containers moved on flatcars—has been one of the more profitable niches for TL operators for decades. Routing long-haul freight (typically over about 1,200 miles) onto rail can free drivers to focus on short- and medium-haul runs, easing the driver shortage pressure to some extent.

The UP/NS proposal could also trigger further strategic moves among railroads, such as a potential Burlington Northern Santa Fe interest in CSX, illustrating how many interlinked outcomes hinge on rail consolidation. As UP CEO Jim Vena put it this summer on an earnings call, “If you stand still, you get left behind.”

Industry fallout and shifting revenue strategies

Slackening demand has already contributed to bankruptcies and business closures among dry-van carriers in various regions, as the weakest operators have felt the impact most acutely. In response, truckload executives are exploring alternative revenue streams to keep volume growing while the broader market recovers.

One increasingly prominent strategy is to deepen partnerships with logistics firms and shippers across the U.S.-Mexico-Canada supply chain. Near-shoring of manufacturing to Mexico, coupled with new distribution centers and logistics hubs, could generate sustained truckload demand—particularly for cross-border services.

Cross-border investment trends and executive perspectives

Werner Enterprises CEO Derek Leathers has pointed to rising foreign direct investment (FDI) in Mexico as a potential upside for cross-border truckload volumes. According to Mexican government data, Mexico attracted more than $55 billion in FDI during the first half of the year, a record pace.

Leathers noted at the Deutsche Bank 2025 Transportation Conference that over $25 billion of that inflow—nearly half—came from the United States and Canada, highlighting the regional nature of manufacturing and logistics investment that could support future TL demand.

Outlook for shippers, rates and carrier earnings

Shippers need to track structural shifts in the truckload market and align operations to meet evolving service expectations. Analysts caution that sustaining rate increases will be difficult; most improvement in TL carrier earnings is expected to stem from internal efficiency gains rather than broad-based rate hikes to shippers.

Absent a clear change in trade policy or a rapid rebound in demand, the outlook into 2026 remains largely an extension of current conditions, with carriers adapting through incremental capacity additions, service diversification, and closer cross-border relationships.

Senators ask STB to scrutinize the merger closely

Late last week, Senators John Hoeven (R-N.D.) and Amy Klobuchar (D-Minn.) sent a joint letter to leadership at the Surface Transportation Board, naming Chairman Patrick Fuchs, Vice Chair Michelle Schultz and Member Karen Hedlund. The senators said they intend to closely scrutinize the proposed Class I merger of Union Pacific and Norfolk Southern and to require clear, demonstrable long-term gains in competition and tangible service improvements.

Lawmakers who co-signed the letter

The letter attracted bipartisan co-signers across several states. The senators listed as co-signers were

• Tim Sheehy (R-Mont.)
• Martin Heinrich (D-N.M.)
• Bill Cassidy (R-La.)
• Tina Smith (D-Minn.)
• Steve Daines (R-Mont.)
• Raphael Warnock (D-Ga.)
• Roger Marshall (R-Kan.)
• Patty Murray (D-Wash.)
• Mike Rounds (R-S.D.)
• Ruben Gallego (D-Ariz.)
• Roger Wicker (R-Miss.)
• Tammy Baldwin (D-Wisc.)
• Jim Banks (R-Ind.)
• Tammy Duckworth (D-Ill.)
• Joni Ernst (R-Iowa)
• Dick Durbin (D-Ill.)

Senators invoke the 2001 Major Rail Consolidation Procedures

The senators reminded the STB that its post-2001 Major Rail Consolidation Procedures were adopted to put heightened emphasis on whether Class I mergers enhance competition rather than merely preserve it. They noted this UP/NS transaction would be the first merger considered under those procedures and urged the Board to apply the heightened standards as intended.

Concerns about market share and risks to agriculture

In the letter lawmakers warned that a combined Union Pacific–Norfolk Southern could handle more than 40 percent of U.S. freight rail traffic and would form a transcontinental network spanning roughly 50,000 route miles across 43 states. They cautioned that service interruptions of that scale could have severe consequences for agricultural producers: time-sensitive harvest shipments could be delayed or spoiled, export windows missed, and access to global markets diminished.

Call to weigh agricultural impacts alongside competition mandates

The senators pressed the STB to consider how approval could affect the nation's farmers and ranchers as part of the agency’s mandate to preserve long-term competition and ensure efficient, economically viable rail service for shippers.

Freight Rail Customer Alliance opposes consolidation

Industry organizations have already registered opposition. In August the Freight Rail Customer Alliance, which represents a coalition of large trade associations and says its membership covers more than 3,500 electric utilities, agricultural, chemical and alternative fuel companies and their consumers, reiterated its long-standing objection to further rail consolidation.

FRCA argued that past consolidation produced higher rates, more fees and unreliable service. The group noted that at the time of the Staggers Rail Act of 1980 there were about 40 railroads; today there are six major carriers and four of those move roughly 90 percent of the nation's rail freight. FRCA spokesperson Ann Warner said railroads have lost market share to trucks over the last two decades but have still increased profits and reduced operating ratios, and that shippers have been pushed into contracts outside STB jurisdiction that offer little protection from poor service or rising fees. Warner also contended that efficiencies cited under Precision Scheduled Railroading have not been passed through to shippers but retained by rail companies and their shareholders.

Other trade groups registering opposition

Several other associations have publicly opposed the proposed merger, including the National Industrial Transportation League, the American Chemistry Council and the Alliance for Chemical Distribution.

How the STB rules affect shipper expectations

Under the 2001 merger rules—standards the senators stressed have not yet been applied—a Class I merger must demonstrably serve the public interest and produce enhanced competition to win approval. For many shippers that means stronger railroad-to-railroad competition rather than competition only with trucks, since trucking is not a practical alternative for many carload customers. FRCA emphasized that a transcontinental combination would need to increase competition for unit train shippers that typically rely on a single rail carrier for point-to-point moves.

Union Pacific argues the deal will improve single-line service

Union Pacific's CEO Jim Vena has argued that a merged UP/NS would create new single-line routes and broader access nationwide, making rail a more cost-effective option for more shippers. He said eliminating interchanges would speed deliveries, improve reliability, lower brake costs per mile and reduce customers’ inventory and equipment costs by shortening cycle times.

CPKC leader warns consolidation carries risk

Keith Creel, CEO of CPKC—the railroad formed from Canadian Pacific’s merger with Kansas City Southern approved by the STB in March 2023—told investors on a third-quarter earnings call that his company believes further consolidation is unnecessary and not in the best interest of the industry, shippers or the U.S. economy. Creel said CPKC will participate actively in the regulatory review to ensure the full facts are understood and warned that the proposed merger would create a single carrier responsible for about 40 percent of U.S. freight rail traffic. He noted the transaction is not a simple end-to-end deal, pointing to overlapping operations in markets such as Chicago, Memphis, St. Louis and New Orleans, and he cautioned that concentrating decision-making on that scale introduces unprecedented risk with wide supply-chain implications.

Quarterly financial highlights

Memphis-based FedEx Corp. said late yesterday that its fiscal quarter produced rising earnings across key metrics. Consolidated revenue reached $23.5 billion, up 7% year over year, operating income increased to $1.38 billion, a 31% rise, and diluted earnings per share were $4.82, topping Wall Street consensus of $4.02.

CEO frames results as strong despite external pressures

President and CEO Raj Subramaniam described the period as an "outstanding second quarter," saying the company executed its growth plan and moved forward with a network transformation while operating amid difficult external conditions. He praised FedEx employees worldwide for their dedication during the Peak season.

FedEx Express performance and underlying drivers

FedEx Express posted revenue of $20.4 billion, an 8% increase year over year. Management attributed the gain to several internal and market factors, while noting offsetting pressures.

• Primary contributors included higher U.S. domestic and International Priority package yields
• Ongoing cost savings tied to transformation initiatives
• Reduced business optimization costs and higher U.S. package volume

These positive factors were partially offset by the financial effects of global trade policy changes, rising wage rates and variable incentive compensation, higher purchased transportation costs, and the grounding of the MD-11 aircraft fleet.

FedEx Freight results and spin-off costs

FedEx Freight generated $2.13 billion in revenue, down 2% year over year. Operating results were pressured by lower shipment volumes, increased wage costs, and investments in dedicated less-than-truckload (LTL) sales staff ahead of a planned spin-off, although improved yields helped offset some of those headwinds.

The business recorded one-time spin-off expenses of $152 million during the quarter.

Planned separation of FedEx Freight

FedEx said the process to separate FedEx Freight into an independent, publicly traded company is progressing and is expected to be completed in a manner that is tax-efficient for FedEx shareholders. The company said the separation is planned to be executed on June 1, 2026, and that the newly independent FedEx Freight will trade on the New York Stock Exchange under the ticker FDXF.

Operational momentum and customer wins

Brie Carere, FedEx executive vice president and chief customer officer, attributed the quarter’s results to momentum the company has built over the prior year and to a focus on high-quality revenue growth. She said average daily domestic volume rose 6% and highlighted a B2B healthcare contract that supported strength in U.S. priority and deferred express services.

Carere also noted that the onboarding of a new Amazon contract focused on large, heavyweight shipments is proceeding well, while international export volumes declined, led by reduced volumes on the China-to-U.S. lane.

Network transformation and operational discipline

On the earnings call Subramaniam emphasized that Network 2.0, the Tricolor initiative, and structural cost reductions—enabled by data and technology—have embedded greater rigor in the company’s operations and contributed to margin expansion and adjusted EPS growth in the quarter.

Outlook and analyst reaction

FedEx now expects fiscal 2026 revenue growth of 5% to 6%, edging up from its prior forecast range of 4% to 6%.

Stifel analyst Bruce Chan called the quarter a solid and reassuring result for F2Q26, citing healthy peak-to-date demand despite an uncertain macro backdrop. Chan pointed to the continued onboarding of the company’s new-for-2025 contract with Amazon, noting that average daily volume (ADV) exceeded his expectations, and he highlighted disciplined yield management that helped lift International Priority yields by nearly 10% year over year.