Tariffs, Trade, and Railcars: How Policies Are Impacting the Railcar Market

Tariffs, Trade, and Railcars: How Policies Are Impacting the Railcar Market 

If you’re like me, you’ve been closely following the nonstop changes in global trade and tariff policies (and probably checking your stocks and investment portfolio more than usual!) and are focused on how these changes will impact your business. From supply chains to stock portfolios, these shifts are impacting everyone. In the rail industry, they’ve become make-or-break factors, driving critical decisions about shipping, leasing, and fleet strategy. In its Rail Industry Overview on May 8, 2025, the Association of American Railroads said “Rail remains a powerful, real-time indicator of economic conditions—capturing both long-run structural demand and near-term shifts in manufacturing, trade, and consumption.” At Tealinc, we pay close attention to the tool used to ensure rail traffic movements: Railcars. With so many moving parts influencing the most critical commodities hauled by rail, here’s a look at how global trade is reshaping the commodities we move and, more concisely, the railcars that move these commodities.

The Trade Ripple Effect
One of the best tools we use at Tealinc to understand what’s really going on in the North American rail shipping is Railinc’s Rail Time Indicators (RTI) report. Although technically a lagging indicator as it reports on activity in the previous month, RTI provides a strong pulse-check on rail shipment activity focused on commodity movements. Here’s an overview of some of the key commodities we watch that are tracked in RTI and the ripple effect of global trade policies correlated to railcar type.

Chemicals and Plastics

• The U.S. chemicals and plastics sectors remain in flux in 2025 as they contend with global trade tensions, regulatory tightening, and shifting supply chain strategies. Demand for plastic remains strong across core industries. In May 2025, Grand View Research reaffirmed its forecast that the U.S. plastics market will grow at a compound annual growth rate (CAGR) of 3.5% through 2030. That growth is being driven by increased use of plastics in automotive manufacturing, lightweight packaging, and consumer goods, even as recyclability and circular economy pressures mount (Grand View Research, May 2025). As global suppliers face tariff pressures, many manufacturers are opting to reshore plastic production to avoid cost volatility and ensure supply chain continuity. That shift is redefining domestic freight demand and raising new questions about rail and truck logistics capacity.
• Railcar Market Impact: The movement of plastic pellets by rail is critical to keeping supply chains running. These pellets, the feedstock for countless plastic products, are primarily moved in large covered hopper railcars equipped with pneumatic outlet gates designed for efficient unloading. As the plastics industry grows and more domestic production comes online, the demand for these specialized railcars is intensifying. According to Railinc’s 2024 Umler Equipment Index, the plastic pellet railcar subfleet has grown by approximately 7,700 cars over the past two years. While this expansion signals a strong response to market demand, it hasn’t been enough to offset broader fleet constraints. With few new builds in the pipeline and high capital costs tied to steel prices, supply is likely to stay tight for the foreseeable future, making fleet access and leasing strategy a key competitive advantage.

Forest products, lumber, and building materials.

• The North American forest products and lumber markets are navigating significant disruption in 2025 due to trade policy shifts, labor shortages, and persistent transportation bottlenecks. As of May 2025, tariffs on Canadian softwood lumber remain a major factor inflating input costs across the construction and manufacturing sectors. Canadian producers, who supply roughly 25-30% of U.S. lumber, have already signaled reductions in output and exports in response to the tariff hike, compounding domestic supply shortages (Random Lengths Weekly Market Report, May 2025). At the same time, sawmill production in the U.S. South, the country's top-producing lumber region, has slowed due to high operating costs, labor constraints, and reduced forward-looking demand from homebuilders (Forisk Consulting, Q2 2025 Outlook). These combined factors are keeping lumber prices volatile. As of early May, the Random Lengths Framing Lumber Composite Price sits around $540 per thousand board feet, up from $470 at the start of the year but still far below pandemic-era peaks. Demand for engineered wood, plywood, and other building materials is similarly under pressure. Commercial and residential builders are pulling back or delaying projects in response to cost uncertainty and elevated interest rates. According to Redfin’s May 2025 report, the national median monthly mortgage payment is $2,807, up 11% year-over-year, while Freddie Mac places average 30-year fixed mortgage rates at 6.76%. These affordability challenges have forced many first-time buyers out of the market and led to a decline in permit applications for new single-family homes (U.S. Census Bureau, March 2025 data).
• Railcar Impact: These shifts in the lumber and forest products supply chain are having a direct effect on the rail industry. Lumber and building materials are primarily shipped in centerbeam flatcars and bulkhead flatcars, railcar fleets that are already. AAR’s 2025 fleet data indicates there are about 87,000 non-intermodal/non-autorack flatcars in service across North America, with roughly 30% dedicated to forest products and construction materials. We see that with an exceptionally tight flatcar market persisting for the last decade, we do not anticipate an excess of flatcars. New builds will be required to keep up with the replacement of aging and destroyed equipment in the North American railcar fleet.

Scrap metals market.

• The scrap metals market, encompassing both ferrous (iron and steel) and non-ferrous (aluminum, copper, brass) materials, is in a period of heightened volatility. In March 2025, the Trump administration imposed 25% tariffs on all steel and aluminum imports, eliminating previous exemptions for key trading partners including Canada, Mexico, Brazil, South Korea, and the European Union (Reuters, March 2025). In response, U.S. steel producers are increasingly turning to domestically sourced scrap metal, which remains exempt from these import penalties, driving up demand for recycled inputs. This shift is expected to benefit domestic scrap processors and recyclers, especially those supplying electric arc furnaces (EAFs), which now account for more than 70% of U.S. steel production according to the American Iron and Steel Institute (AISI, 2025). However, the surge in demand may also elevate scrap prices, creating cost pressures for downstream industries such as automotive, manufacturing, and construction that rely heavily on metal feedstocks.
• Railcar Impact: The North American gondola railcar fleet is directly impacted by the changing dynamics in scrap metal flow and domestic steel production. According to Railinc’s 2024 Umler Equipment Index, gondola railcars represent about 10% of the total revenue-earning freight fleet and continue to see modest year-over-year growth (Railinc, 2024). Recent additions to this fleet such as mill gondolas and coil cars are tailored to carry scrap metal, steel coils, and semi-finished goods, reflecting the industry’s strategic alignment with EAF-driven steel output. With scrap exports constrained and mills prioritizing domestically sourced material, inland transportation of scrap is expected to increase, boosting demand for gondola railcars to support this shift (Steel Market Update, Q1 2025). Additionally, rising steel prices, caused by both restricted import supply and elevated domestic consumption, are inflating the cost of new railcar builds. We see a continued demand for the legacy steel bodied coal cars that were transitioned into the scrap metals market and continuing need for new builds to support the volume moves that are ahead for this car type.

Coal.

• The North American coal market is undergoing significant shifts due to recent trade policies and domestic energy strategies. Trump's administration has enacted executive orders aimed at revitalizing the U.S. coal industry. These measures include extending the operation of aging coal-fired power plants, lifting federal mining barriers, and providing a two-year exemption from emissions regulations for coal plants. The administration also seeks to promote coal leasing and exports, positioning coal as a key component in meeting the rising electricity demands driven by data centers and artificial intelligence technologies. ​
• Railcar Market Impact. These developments have direct implications for the North American railcar market. Domestically, the administration's pro-coal policies may lead to increased coal production and consumption, thereby significantly boosting demand for coal transportation via rail. Conversely, international trade tensions and logistical disruptions may necessitate a reevaluation of export strategies, potentially affecting the utilization rates of coal railcars. With the last coal railcar built in ~2010, this shrinking fleet doesn’t have any recent rebuilds to replace aging, destroyed, or repurposed units which could lead to tight supply during times of increased demand.

 Aggregates:

• Aggregates, encompassing materials like crushed stone, gravel, and sand, is facing significant challenges due to recent global trade policies and tariffs. The imposition of tariffs on imported crushed stone from countries such as Canada and Mexico has led to increased costs for the U.S. construction sector. Given that aggregates are heavy, low-margin commodities, even modest tariffs can substantially raise prices, particularly in regions heavily reliant on imports. For instance, a 25% duty on crushed stone, valued at approximately $10–$15 per ton at the border, could add around $2–$4 per ton, significantly inflating prices in markets already burdened by high transportation costs for imports. ​
• Railcar Market Impact: These developments have direct implications for the rail industry, especially concerning the demand for small cube open top hoppers, aggregate-gondolas, short-sided gondolas, and some small cube covered hoppers in transporting aggregates. The anticipated slowdown in construction activity, driven by increased material costs and reduced demand, could signal a decreased utilization of these railcars; however, like so many other railcar types, insufficient supply of these railcars in the existing market will most likely keep all the existing railcars utilized.

 Grain, soybean, and fertilizer inputs.

• S. grain exports have shown year-over-year improvement, with corn exports projected to reach 2.7 billion bushels for the 2025/26 marketing year, up from 2.6 billion bushels in 2024/25, driven by lower prices increasing global demand. However, extreme weather events and shifting global competition continue to introduce volatility. China, the world's largest soybean importer, has increasingly turned to Brazil, which now supplies approximately 70% of China's soybean imports, benefiting from a record harvest and lower prices. Despite a recent tariff truce reducing China's tariffs on U.S. soybeans to 10%, U.S. exports remain uncompetitive, with projections indicating a potential 20% drop in U.S. soybean exports without a substantial trade agreement. This shift reduces U.S. export volumes and erodes market share, directly impacting the demand for large cube and jumbo cube covered hoppers used to move grain to export terminals. Tariffs on key agricultural inputs, particularly fertilizers like potash, have driven up production costs. While the U.S. reduced tariffs on Canadian potash from 25% to 10%, farmers still face elevated input prices. These higher fertilizer costs strain farmer budgets, leading to reduced planting and further declining grain volumes moved by rail. With exports making up roughly 20% of U.S. farm income, the financial impact on American agriculture is significant.
• Railcar Market Impact: Without coordinated policy responses, grain and fertilizer-related transport will remain vulnerable to ongoing global trade volatility. We could anticipate the potential for an underutilization of North America’s covered hopper railcar fleet; however, given older railcar assets continuing to age out, assets otherwise underutilized will most likely go into service as replacements, maintaining demand for covered hopper railcars despite fluctuations in grain and fertilizer shipments.

Sand.

• The U.S. silica sand market is accelerating in both value and strategic importance in 2025. According to a May 2025 report from Global Market Insights, the market is expected to grow from $8.1 billion in 2024 to $15.3 billion by 2035, reflecting a CAGR of approximately 5.8%, driven largely by demand in hydraulic fracturing, industrial glass production, and construction applications (Global Market Insights, May 2025). Geopolitical tensions and recent trade policy shifts are amplifying that growth trajectory. With rising global tariffs on energy-related products and steel components, the U.S. is doubling down on energy independence and domestic production.
• Railcar Market Impact: Small cube covered hoppers, typically in the 2,900 to 3,250 cubic foot range, are the backbone of sand transportation for the energy sector. With energy companies ramping up domestic output to mitigate exposure to global market volatility and tariffs on imported oil or steel components, it’s an important time to reinforce the critical role that small cube covered hoppers will play in supporting the U.S. energy transition. The industry has been long cars and with so many of these cars being cut/scrapped or repurposed into different car types and limited to no new builds entering the market, we’re seeing the supply and demand for this car type getting right-sized.

The Bottom Line

Trade policy is unpredictable and railcar fleet planning isn’t a once-a-year activity anymore. Tariffs on Mexican and Canadian built railcars, rising material costs, and an overall pullback in new car builds mean replacement costs are climbing making existing fleet decisions even more critical. The current environment demands agile thinking and data-backed moves. Holding onto underutilized or mismatched railcars could lock up capital and limit your flexibility in a fast-changing market. Conversely, failing to secure the right equipment now could leave you unable to meet demand spikes or shifts driven by evolving trade policy. Whether it’s assessing dwell time, identifying underperforming lanes, or timing your lease renewals or divestitures, the window for smart, strategic moves is now.

Now’s the time to take a closer look at your fleet. Not next quarter. Ready to rethink your fleet strategy? Reach out to our team to talk trade trends, supply chain changes, railcar types, and smart moves you can make today.

Warm regards,

Julie Mink, President

Tealinc LLC

Mobile: (720) 733-9922
www.tealinc.com | julie@tealinc.com