Effects of escalating trade war have yet to show up in rail traffic data

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BNSF_Grain_Lassen

A BNSF grain train heads through the Columbia Gorge toward Pacific Northwest ports on June 24, 2018. While Department of Agriculture figures show grain exports are down, railroad grain traffic is up in the first half of 2018, according to the Association of American Railroads.

TRAINS: David Lassen

If a growing number of tariffs on goods and materials is having an immediate impact on importers and exporters in the U.S., you’d be hard-pressed to find glaring evidence in railroad traffic statistics – yet.

This month China responded to a wave of U.S. tariffs on Chinese goods by slapping tariffs on American products ranging from soybeans to automobiles. It was just the latest move in an expanding tit-for-tat exchange of tariffs by the U.S. and its trading partners in Asia, Europe, and North America.

“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,” the Association of American Railroads said last week in its latest monthly Rail Time Indicators economic outlook.

But there are early signs of an impact on American exporters, particularly farmers.

Soybean producers have been hit by a double whammy of declining sales to China — their single biggest export market — and lower prices even before the tariffs hit this month. In 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, according to the U.S. Department of Agriculture.

Yet railroads’ grain traffic is up 9 percent through the first six months of the year, according to the AAR, and was up 5 percent in June.

Intermodal traffic set all-time records for average weekly volume in June, the AAR notes. “Unless international trade collapses, which we suppose is at least a remote possibility, this year will almost certainly be a record year for U.S. intermodal,” the AAR says.

But intermodal analyst Larry Gross says cracks may be forming in international container traffic.

Preliminary data for June showed containerized imports grew just 1.4 percent for the month, closing out a weak second quarter of just 1.2 percent growth, Gross points out. That’s down from a 7.5 percent gain in the first three months of the year.

Anthony B. Hatch, an independent rail analyst with ABH Consulting, notes that by some estimates the latest Chinese tariffs alone could have a 6 to 8 percent negative impact on imports of containerized cargo.

However, he notes that the strong dollar — it’s up 5 percent this year, making American goods more expensive abroad — also has an impact on U.S. export volume.

Foreign automakers who have built assembly plants in the U.S. — partly to build cars for export around the globe — are wary about the 40 percent tariffs China imposed on American-made vehicles.

Assembly plants for BMW in Spartanburg, S.C., and Daimler Benz in Vance, Ala., served by Norfolk Southern, and a new Volvo assembly plant that opened last month in Ridgeville, S.C., that will be served by CSX Transportation via a new connection to shortline Palmetto Railway, are among the most susceptible to the new 40 percent Chinese tariffs.

“Half of the 4,000 jobs will build cars for export,” Volvo Chief Executive Hakan Samuelsson told the Wall Street Journal in a recent interview. “That could be jeopardized if something were to restrict trade.” 

Volvo officials have said 70 percent of the plant’s production will be hauled by rail.

NEWSWIRETrains News Wire

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