Posts Tagged ‘tariffs’

Industry Observers Speculate on How a Biden Administration Will Affect Freight Railroads

November 11, 2020

Railroad industry observers are already speculating as to how the Biden administration is expected to affect freight railroads and they see a few changes coming.

Joseph Biden, a former vice president and U.S. Senator from Delaware, is seen by many as likely to abandon the broad use of tariffs that had been favored by the Trump administration.

Those tariffs had drawn sharp criticism from many businesses and business trade organizations who said they caused economic disruptions because China responded with tariffs of its own that hindered exports of some U.S. goods and commodities.

In particular, U.S. agriculture exports were hurt by the tariffs. The railroad industry had opposed those tariffs because trade is related to 40 percent of rail shipments.

Statements issued by the Association of American Railroads have called for opening more markets to international trade and ending obstacles to sustained growth.

Biden during his campaign expressed support for two-person freight crews.

That will likely put him at odds with Class 1 railroads that are pushing to eliminate two-person crews on some trains in favor of a roving conductor who would handle multiple trains as needed.

Class 1 railroads also want to explore autonomous train operations.

During the Trump years, the Federal Railroad Administration said there was no data showing that two-person crews are inherently safer than one-person crews and therefore there was no need for a federal minimum crew size regulation.

It remains to be seen how a Biden appointed FRA administrator will respond to the crew size issue.

Another potential point of tension will be the two-person crew laws approved in some states at the behest of railroad labor union.

Courts have ruled that federal law in regards to crew size preempts state laws on the matter.

Ultimately, though, the crew size issue will be resolved in collective bargaining between the Class 1 railroads and labor unions, a process that may continue to drag on for a few more years.

Railroads will be keeping an eye on the Biden administration’s environmental policies.

Biden has said one of his first actions as president will be to have the United States rejoin the Paris climate accord.

He has called for ambitious targets to reduce the nation’s emissions of greenhouse gases that contribute to climate change.

In doing this, the Biden administration may favor policies that would have the effect of reducing the market for such energy-related commodities as utility coal and fracking sand used in oil and gas production.

However, if the Biden administration imposes policies that hinder pipeline construction that could boost the shipment of crude oil by rail.

A Biden administration might also seek repeal of regulations allowing the shipment of liquefied natural gas by rail.

The rail industry might be able to take advantage of a focus on the environment by claiming that it is a more environmentally friendly way to ship freight than trucks.

Container Imports Ticked Up in May

June 9, 2020

Trans-Pacific container traffic showed an unexpected uptick in May which could be good news for intermodal traffic.

However, it is unclear what prompted the increase although there are a number of theories as to what prompted it.

The uptick came after container traffic plunged in late March and throughout April amid an economic downturn linked to the COVID-19 pandemic.

But now shipping companies are reinstating canceled sailing from China and are adding extra sailings.

During the depths of the pandemic, shipping lines had canceled 20 percent of sailings of container ships between China and the United States.

One theory for the uptick is that shippers canceled too many sailing after overestimating the near-term demand declines stemming from stay at home orders issued in numerous states.

Another theory is that consumer demand is stronger than predicted after states began relaxing and removing stay at home orders and allowed businesses and other activities to reopen.

Yet a third theory is that buyers of imported goods anticipate the collapse of a U.S.-China trade deal that could lead to new tariffs imposed by both countries.

At other times during the global trade war importers have ramped up buying in advance of tariffs and the same might be playing out now.

The e-newsletter FreightWaves repoprted market watchers saying this moving orders forward behavior is still being tempered by reduced demand due to the economic downturn.

Some observers have theorized that the upturn in shipping is temporary and will fall in early summer.

Shippers Seeking to Get Ahead of Planned Tariffs

December 11, 2019

Shippers trying to get ahead of planned December tariffs have significantly boosted their import activity last month, the National Retail Federation said this week.

In a report compiled in association with consulting firm Hackett Associates, the trade group said container volume at the nation’s major ports surged as retailers imported merchandise ahead of new imposition of the tariffs.

Although the Trump administration announced in October a tentative agreement on a partial trade pact with China that would negate the tariffs, that deal has yet to be finalized.

The tariffs on consumer goods are scheduled to take effect on Dec. 15.
“At this point, holiday merchandise is already in the country, so the direct impact of new tariffs won’t be seen until the season is over,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold in a news release.

U.S. ports covered by Global Port Tracker handled 1.88 million 20-foot equivalent units in October. Although that was an increase of 0.6 percent over September it was 7.5 percent below the record 2 million TEUs set in October 2018.

November volume jumped to 1.95 million TEUs, up 8 percent year over year as retailers sought to build inventories ahead of the scheduled tariffs.

The November figure was the highest number since 1.97 million TEUs in August, when retailers took the same approach ahead of tariffs that took effect in September, NRF officials said.

Railroads Continue to Feel Effect of Trade War

August 28, 2019

As the United States and China engage in a war of words and dueling tariffs in a trade war, the effects continue to be felt by North American railroads.

The carriers are hauling fewer aircraft, plastic products, chemicals and agriculture products among other commodities due to the effects of the tariffs that each country has imposed on the exports of the other.

“China’s announcement of imposing additional tariffs on $75 billion of U.S. imports signals more trouble for American agriculture,” said Zippy Duvall, president of the American Farm Bureau Federation.

Thus far in 2019 soybean exports to China are nearly half as much as they were at this point in 2018, U.S. Department of Agriculture statistics show.

In a news release, the American Soybean Association said farmers still have unsold product from last year and are worried about where they will be able to sell the crops that are in the ground this year.

Auto exports to China have also felt the pinch of tariffs. Last year, auto exports from the U.S. to China totaled nearly $10 billion, but rail shipment of motor vehicles and parts are off 2.3 percent this year while intermodal traffic is down 3.8 percent.

Although President Trump called on U.S. companies to move operations that are now in China back to the United States, much of the production that is being shifted out of China is being moved to Malaysia, Mexico, Vietnam, India and Thailand.

That has led to changes in the world’s supply chains although those changes are not necessarily harmful to North American railroads if it simply means that items once made in China for export to the United States are now being imported from other counties.

Nonetheless, one large container shipper, Maersk, has projected that if all of the announced tariffs are implemented, worldwide container volume next year could fall by up to 1 percent, a loss of 7.5 billion TEUs (20-foot equivalent units).

Tariffs Not Hurting Railroads — Yet

July 12, 2018

Although the railroad industry has been warning about being adversely affected by the growing trade war being waged by the Trump administration, those effects have not yet shown up in the most recent freight traffic figures.

Nonetheless it may be too early for that evidence to be appearing.

Just this week Edward Hamberger, the CEO of the Association of American Railroads warned that recently announced tariffs on certain foreign goods will hinder global commerce and could reverse economic progress.

“The president’s more recent trade decisions could reverse that tremendous progress, adding hundreds of billions of dollars in potential costs for American businesses — costs that could ultimately be borne by consumers,” Hamberger and two other CEOs wrote in an op ed column that appeared in the Washington Examiner.

Also writing the column were American Chemistry Council head Cal Dooley and American Petroleum Institute CEO Jack Gerard.

The most recent figures issued by AAR showed that U.S. Class 1 railroads have posted a 9 percent traffic gain through the first six months of the year and a 5 percent gain during June.

“What these tariffs will mean for the overall economy is not clear — their impact will vary from firm to firm and industry to industry, with overall damage depending in part on how long the disputes last and how they escalate,” AAR said last week in its monthly Rail Time Indicators economic outlook.

After the U.S. imposed tariffs on goods coming from China, that country responded by placing tariffs on such American products as soybeans and automobiles.

The U.S. and several European and North American countries have also imposed tariffs on each other’s exports.

Soybean producers were already seeing declining sales to China even before the tariffs were imposed.

During the first four months of 2018, U.S. grain exports are down nearly 7 percent, with soybean exports down 10 percent and wheat off by 22 percent, the U.S. Department of Agriculture reported.

Although intermodal growth this year has been strong, international intermodal container traffic rose just 1.4 percent in June, which might be an indication of slowing traffic.

International intermodal traffic had posted a 7.5 percent increase during the first three months of this year.

Nonetheless, the AAR expects intermodal to set records this year barring  a collapse of international trade.

Anthony B. Hatch, an independent rail analyst with ABH Consulting, told Trains magazine that the Chinese tariffs could have a 6 to 8 percent negative impact on imports of containerized cargo.

Hatch said a strong U.S. dollar has also made U.S. products more expensive aboard.

AAR Warns Tariffs Would Harm Railroads

April 17, 2018

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.