Tariff uncertainty front and center at MARS conference

“We saw a significant change in the flow of freight … from an import-export standpoint. The New Orleans market, 90% import steel and rubber, completely went down 70%. But we gained in other commodities, so that understanding of the supply chain is going to be incredibly important.

“From a Patriot footprint, we’re going back and looking at the last round of tariffs. How did we perform? What roads were impacted? I think we’re in a good situation that the majority of our freight is domestic. We’re serving a lot of U.S .manufacturing. A good example I talked about is New Orleans, where import steel really got hit, but the domestic steel production and the plants that we serve can really benefit.”

“I think it’s a little early,” said BNSF Railway CEO Katie Farmer, “because we’re not totally sure what that’s going to look like yet. I would tell you that regardless of the administration, the very first thing that we do as an industry is we spend a lot of shoe leather going in, educating our senators, congresspeople about the importance of the supply chains, and we’re going to do that as well.

“When it comes to tariffs, if what is being discussed happens, certainly it will have an impact primarily on our consumer customers as well as our agricultural customers. … And I’m going to tell you that while tariffs need to be fair, that primarily we would say that sound policy around that is good for the American consumer.”

Patrick Lortie, senior vice president and chief strategy officer at Canadian National, said the railroad has been preparing for the prospect of tariffs for the “the better part of a year.

“It’s a path we’ve been down before as a country, or as countries, including the U.S. I would say at this point we’re as prepared as we can be. There are opportunities that come with it and we’re ready to jump on, and we see some of this right now, with the pull forward of some of the volume” [from shippers bringing in products to beat the possible imposition of tariffs]. …  Of course there’s some risk that comes with that, and we’re sitting here about a week before maybe something that will give us a little bit more clarity.”

In a panel on industrial development, Pauline San Millan, senior vice president, business development at Intersect Illinois — the state’s business recruitment agency — said some foreign companies she’s dealing with about possible business sites are exploring onshoring, while others are in a wait-and-see mode: “How’s it going to affect me if most of my competitors are located in other places? Is it going to be an increase in customers? Do I need to relocate? … I think there are some questions if it’s just going to be general tariffs for every industry or just for certain countries? So I see a lot of interest, but in terms of deciding, they are waiting to see once the federal government changes.”

Ryan Higgins, chief commercial officer at OmniTRAX, said during that same panel that “the things that keep me up at night in our business is that I do a lot of cross-border steel with Mexico, and bring agricultural products out of Canada to the U.S, and I bring beer to Atlanta from Mexico. So how is that going to impact our business? How are those customers going to respond? And it’s either, I’m going to go really fast and do something now, or I’m going to do nothing … so it’s still just a lot of uncertainty.”

Chuck Baker, president of the American Short Line and Regional Railroad Association, who was the moderator of that panel, suggested uncertainty may be the status quo for a while.

“If I were able to offer psychological advice to the whole country,” Baker said, “it might just be going to have to be comfortable with some uncertainty. Because I would predict that if we were having this conversation six months from now, it still won’t be clear where everything with tariffs is going to land. And that might be true two years and six months from now.”