AAR Warns Tariffs Would Harm Railroads

The Association of American Railroads is warning that tariffs on foreign goods could adversely affect U.S. grain exports, which in turn would be bad for Class 1 railroads.

 “For the industry whose job is to connect businesses, the integration of the global supply chain changed the game not just for our customers but also for how we run a railroad,” AAR said in a statement in response to the Trump administration recently announcing billions of dollars worth of punitive tariffs on Chinese-made products.

The administration has described the tariffs as a way to address what it terms unfair trade practices by China.

The tariffs on Chinese goods have not yet gone into effect and the threat of a trade war has sent stock prices plunging in recent weeks.

AAR released an analysis that showed international trade directly accounts for 42 percent of rail carloads and intermodal units, 35 percent of annual rail revenue, and 50,000 rail jobs worth more than $5.5 billion in annual wages and benefits.

“With ongoing trade posturing, much of the discussion of potential impacts has been narrowly focused on targeted commodities or whether the states where those goods are grown or produced went red or blue in 2016,” the AAR said. “Even when looking at a single commodity, the potential effect in a global market goes much deeper.”

Speaking of grain exports, AAR said farmers are accustomed to dealing with uncertainty due to weather or fluctuating prices and demand,  but “[t]hrowing questions about what foreign markets will resemble come harvest makes already challenging planting decisions even more fraught.”

AAR said that its members are caught in the middle in trying to plan for asset allocation “when they don’t know if their services will be needed.”

The AAR said rail revenue from grain totals more than $5 billion annually.

Mexico is the second-largest importer of corn whereas China purchases 62 percent of soy exports and 22 percent of sorghum exports.

Most agricultural products exported to China begin their journey in a rail car.

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