Less volume doesn’t mean less pressure. July’s story was frontloading: inventory rushed in ahead of tariff deadlines, ports running near-record volumes, warehouses absorbing more than they were built for.
August is the sequel nobody planned for: the volume is starting to ease, but the cost and capacity strain it created hasn’t gone anywhere. It’s moved farther inland.
Shippers Are Paying More to Move Less
The clearest signal comes from the U.S. Bank Freight Payment Index released earlier this month. National freight shipments fell 2.8% year over year in the second quarter, while spending rose 28.1% over the same period. Shippers are paying nearly 30% more to move roughly 3% less freight – proof that a soft freight market and an expensive one aren’t mutually exclusive when capacity, not demand, is doing the driving.
In the Midwest specifically, shipment volume dropped 3.7% quarter over quarter, the steepest regional decline in the country, while spending still ran 22.9% above last year. Even the region absorbing the biggest volume pullback couldn’t escape the cost side of the equation.
Where July’s Inventory Actually Went
The Logistics Managers’ Index helps explain why. The overall index eased to 68.9 in July from June’s 71.1, still higher than any reading between 2023 and 2025, but the internal shift is the real story.
Inventory levels among downstream retailers swung from strong expansion at 66.0 in June to outright contraction at 46.3 in July, while upstream levels barely moved. The LMI’s own researchers points to the likely explanation: the inventory retailers pulled forward ahead of July’s tariff changes appear to be sitting with wholesalers and manufacturers rather than flowing through to store shelves.
Meanwhile, inventory costs kept climbing to 77.0, now running 22 points ahead of inventory levels, well above the LMI’s historical average gap of 13 points. In other words, companies don’t need dramatically more inventory for the cost of carrying it to rise dramatically. Warehousing capacity is showing the same upstream-downstream split: it’s contracted to 46.3, its tightest reading since March 2024, with upstream capacity contracting even more sharply at 42.4. Whoever is holding this inventory right now is finding less room to put it.
The Ports Are Slowing, But the Pressure Isn’t
Ocean import volume tells a complementary story. U.S. containerized imports hit 2.5 million TEUs in July, the fourth-highest July on record, even with a 4.3% year-over-year decline off last year’s unusual frontloading spike. The NRF/Hackett Global Port Tracker now projects a steady falloff from here:
It might seem like declining import volume means declining pressure, but inventory that’s already arrived still has to get warehoused, allocated, and moved, and that work doesn’t taper off just because the ships carrying the next wave are running lighter.
Two Kinds of Capacity, Same Direction
Physical space and truck capacity are tightening at the same time the ocean side eases, which is the part of this story that should matter most to anyone planning network capacity into Q4. On the warehousing side:
The transportation side is tighter still. DAT’s dry van data shows spot rates easing modestly off July’s highs but still running 45% above last year, with the load-to-truck ratio up 74% year over year. The 10 states that carry a third of all U.S. van freight and tend to lead the rest of the country are running even hotter, at $3.06 a mile and up nearly 48% year over year.
By early August, national dry van rates had eased further to roughly $2.32 a mile and reefer to $2.65 – real relief, but both still sitting near the top of their historical range. Capacity has left the market faster than rates have cooled.
It’s worth noting the one place new supply is showing up: warehouse construction starts climbed 18% year over year in the second quarter, and developers like Prologis are signaling a meaningfully bigger 2026 build-out than last year. That additional supply should eventually provide relief, but projects beginning now won’t solve the capacity decisions shippers have to make for this year’s peak.
What Changed on the Trade Side
The tariff uncertainty that helped drive July’s frontloading is no longer uncertain. New Section 301 duties took effect July 24 on 60 trading partners covering 99.4% of U.S. imports, replacing the temporary tariffs that expired the same day. That’s a landed-cost reality now, not a pending decision. It also closes the loop on why the inventory position described above exists in the first place: retailers and manufacturers weren’t guessing when they pulled goods forward this spring and early summer. They were pricing in exactly this outcome, and the LMI’s upstream inventory numbers are the result of that bet paying off on timing even as it adds new holding cost.
The Strait of Hormuz situation remains unresolved as well, having reopened and then disrupted again within the same month – one more reminder that transit and fuel-cost assumptions built around any single snapshot haven’t held up well this year.
Worth a Conversation
What August calls for is a network that can absorb inventory sitting upstream longer than planned, hold cost pressure without losing margin, and flex transportation capacity without betting on rates staying where they are.
Connect with our team to talk through what that looks like for your network heading into the rest of peak season.