Rail Executives Urge Vigilance Amid Looming Tariff Uncertainties
Class I railroad chief executives expressed deep concerns at an investor conference, acknowledging a lack of clarity surrounding the potential impacts of tariffs proposed by President Donald Trump on Mexico and Canada.
The 25% tariffs, which were initially slated for implementation this month, were postponed to March following preliminary discussions with government officials in Mexico City and Ottawa. Additionally, the president has already enacted 10% tariffs on Chinese imports and hinted at similar moves towards the European Union.
"I don’t know what’s going to happen and how it’s going to play out. I would guess that none of us do," remarked Tracy Robinson, CEO of Canadian National.
Union Pacific's Chief Executive, Jim Vena, whose railroad dominates cross-border rail activities with Mexico, stated, "We have prepared ourselves to deal with whatever happens, good or bad, with the tariffs." His sentiment was echoed by Canadian Pacific Kansas City CEO Keith Creel, who added, "There’s a whole lot of uncertainty."
During the 42nd Annual Barclays Industrial Select Conference in Miami, executives shared insights on the limited expected impact on their cross-border traffic and international intermodal business.
Mark George, Norfolk Southern CEO, noted, "It is going to take a while for things to play out," emphasizing the patience required in navigating these uncertain waters.
Joe Hinrichs, CSX Chief Executive, observed an opportunity arising from the 25% tariffs on aluminum and steel imports. "There are some new aluminum and steel investments being made on our network," Hinrichs stated, suggesting potential advantages if tariffs persist, incentivizing manufacturers to expedite launches.
The overarching consensus remains cautious, with the executives aligning on a belief that tariffs will not drastically derail their operations. "We have modeled that there will be some impact from tariffs without a doubt, but not so much as to drive Canada into a recession and the U.S. into a high inflationary mode," Robinson reassured.
Historical Context and Future Implications
Reflecting on precedents, the 25% tariffs on Canadian steel and 10% on aluminum during Trump’s first term scarcely affected the trade dynamics long-term. The subsequent implementation of the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement, which had only a mild impact, similar to tariffs on Canadian lumber.
Creel, whose railroad bridges operations across Canada, the U.S., and Mexico, highlighted the deep connectivity bolstered by nearshoring post-pandemic, maintaining that it's unsustainable for all manufacturing to revert to U.S. soil due to labor constraints and risk of inflation.
He advocated for an expedited renegotiation of the USMCA agreement, originally slated for 2026, emphasizing the benefits of achieving stability and certainty in North American trade sooner.
Ed Elkins, Norfolk Southern’s chief marketing officer, projected that manufacturers would hold off significant supply chain shifts until clearer outcomes regarding tariffs materialize. It might take several quarters post-clearance for any realignment, particularly with expectations leaning towards relocations in the Southeast and Midwest regions of the U.S.
Union Pacific is witnessing a 9% rise in intermodal volume this year, attributed to importers rushing orders to circumvent potential tariffs deadlines.
For industry professionals and businesses, adapting to these changes requires strategic foresight—leveraging rail’s pivotal role in sustaining and enhancing economic trade partnerships across North America.
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The post originally appeared on firsteld.com.
