The transportation sector is the global economy's physical heartbeat. Virtually everything you consume, build, or buy moves through a complex freight network before it reaches you. Because of this reality, tracking commodity movements provides a timely, real-time view of economic activity that goes far beyond traditional headline data.

For supply chain professionals and business leaders, understanding these underlying transportation metrics is critical. Relying solely on lagging economic indicators can leave you unprepared for sudden market shifts. By examining the intersection of macroeconomics and freight, companies can make better, more informed decisions regarding inflation, trade, and overall business activity.

Recently, Louisa Fernandez-Willey, Principal Economist for Canadian National Railway (CN), shared her insights on this topic. Her analysis reveals a fascinating landscape in which artificial intelligence infrastructure, shifting inventory strategies, and deep cross-border integration are rewriting the rules of North American trade.

The Current State of the North American Economy

The global, Canadian, and US economies have faced a gauntlet of overlapping headwinds in recent years. From geopolitical conflicts and Middle East tensions to high inflation and energy price volatility, the economic landscape has been anything but predictable. Despite these substantial challenges, the US economy remains remarkably resilient and is currently growing above its potential.

This persistent growth is heavily supported by robust consumer spending, which accounts for roughly 70% of the entire US economy. Additionally, massive business investments in technology and overall international trade are keeping the economic engine running. However, this growth is heavily segmented, with high borrowing costs putting significant pressure on interest-rate-sensitive sectors like residential construction and housing.

Freight vs. GDP: Why They Don't Always Match

While national GDP continues to hover around a healthy 2% growth rate, freight markets are telling a slightly different story. Demand and growth are currently uneven across the broader economy. GDP measures all goods and services produced, but the freight industry relies almost exclusively on the goods-producing sectors of the economy, such as manufacturing, agriculture, and housing.

During the pandemic, the economy experienced a massive structural shift where consumers aggressively purchased physical goods like appliances, laptops, and home improvement materials. This created an unprecedented boom in freight volumes. Today, consumer spending has reverted to historical norms, heavily favoring services like travel, restaurants, and live entertainment.

Because you cannot put a concert ticket or a hotel stay on a railcar, the freight market doesn't see the same demand surge from service-based spending. Furthermore, high raw material costs and elevated interest rates have slowed down housing starts. This means the heavy commodities that support construction—like lumber, steel, and aggregates—haven't grown at the same pace as the broader GDP.

AI Infrastructure: The Unexpected Freight Driver

While traditional manufacturing and housing may be facing headwinds, a new, powerful catalyst has emerged for the freight sector. The explosive growth of artificial intelligence is driving a massive wave of industrial manufacturing and supply chain activity. Unprecedented capital expenditure on AI infrastructure is creating a ripple effect across multiple heavy industries.

Building the physical backbone for AI requires far more than just software engineering. It demands the specialized manufacturing of heavy industrial equipment, including massive HVAC cooling systems, commercial generators, and complex semiconductors. These enormous components must be transported to buildout sites, creating a lucrative new pipeline for specialized freight and heavy haul carriers.

The Cross-Border AI Supply Chain

The United States currently leads the world in artificial intelligence development and deployment. However, building this infrastructure is a highly collaborative North American effort. Canada plays a vital role in this technological revolution by extracting and producing the critical raw materials, inputs, and components needed to build these data centers.

The data center buildout shows no signs of slowing down in the near future. Immense underlying demand for power grid expansion, energy generation, and infrastructure inputs supports these facilities. Total spending in data centers has surged 425% since 2020, ensuring that the freight networks moving these heavy materials will remain highly active.

Shifting Supply Chain Strategies in 2025

The Federal Reserve's ongoing battle for price stability has profoundly altered how businesses manage their physical supply chains. Inflation, driven largely by energy supply shocks, has forced the Fed to keep interest rates higher to temper consumer demand. These higher borrowing costs naturally make businesses pause and calculate carefully before expanding physical inventories or launching new business lines.

From Just-in-Time to Just-in-Case

The supply chain disruptions of the past four years have fundamentally changed inventory psychology. Shippers have permanently shifted their operational models from "just-in-time" to "just-in-case" planning. Supply chain managers are now willing to absorb higher inventory carrying costs if it means guaranteeing product availability during unexpected disruptions.

We saw this dynamic play out vividly in the first quarter of 2025. Import volumes surged as companies aggressively moved freight inland ahead of anticipated policy shifts and tariff announcements. By front-loading their supply chains, businesses are prioritizing extreme resilience over extreme efficiency.

Similarly, despite ongoing consumer anxiety regarding inflation, physical goods are still moving when the incentives align. For example, auto sales recently spiked to an annualized record of 17.3 million units. This massive surge in automotive demand drove incredible volumes of finished vehicles across the North American rail network, proving that targeted consumer demand remains highly potent.

The Highly Integrated North American Trade Network

To understand freight economics, view the United States, Canada, and Mexico as a single, unified production platform. Trade across these three nations is deeply integrated and goes far beyond the simple exchange of finished retail products. Intermediate components frequently cross international borders multiple times during a single production cycle.

Consider the complex journey of basic industrial materials across the continent. Specialized Wisconsin sand is routinely moved north to Canada for oil and gas exploration. In return, Canadian heavy crude and energy products move south into the US for advanced refining. Those refined US plastics then travel back to Canada and Mexico for final manufacturing and assembly.

Mexico serves as the crucial manufacturing and assembly hub for North American automotive, electronics, and heavy machinery production. Remarkably, 25% of the value-added content in Mexican exports to the US actually originates from Canada. This intricate dance of raw materials, energy, and finished goods relies entirely on a seamless, highly efficient cross-border freight network.

Looking forward, the economic forecast remains surprisingly optimistic despite the daily headlines. Central banks across the US, Canada, and Mexico project that North American economies will continue growing over the next few years. For supply chain professionals, tracking commodity flows through tools like the US Bureau of Transportation Statistics (BTS) cross-border dashboard will remain essential. By closely monitoring these physical freight movements, business leaders can read economic signals accurately and build supply chains ready for whatever comes next.