Western Railroad Discussion > UP CEO warns of trade issue damage

Here’s the top of a story on the front page of this morning’s Omaha World-Herald:


WASHINGTON — From the threat of NAFTA withdrawal to the ongoing tariff battles, trade disruptions are threatening to undermine an otherwise robust economy, the head of Union Pacific said Thursday.“The decisions made here in Washington about trade affect my hometown of Omaha, Nebraska, and all of our citizens,” Lance Fritz said at the National Press Club. “It affects the 7,300 communities that Union Pacific serves.”The chairman, president and CEO of the Omaha-based freight rail behemoth has been publicly and pointedly making the case this year for free trade, which is fundamental to the company’s bottom line.

<<Fritz made the remarks at the National Press Club in Washington, DC.  He went on to say about 40% of UP traffic originates or ends outside the United States.  He also pointed out the railroad handles 70% of the business going in and out of Mexico.

Copy19 Wrote:
-------------------------------------------------------
> <<Fritz made the remarks at the National Press
> Club in Washington, DC.  He went on to say about
> 40% of UP traffic originates or ends outside the
> United States.  He also pointed out the railroad
> handles 70% of the business going in and out of
> Mexico.

We already had a discussion on this topic  about 3 months ago right here on TO. It was based on a New York Times article, where Mr. Fritz was quoted saying something similar.

I take his comments lightly, because we have this thing called recession which affects the economy, too, but usually it happens with little warning. In this case, Mr. Fritz has plenty of time to run his railroad to grow domestic business REGARDLESS of of global trade. Hopefully, he's doing his job right now, so the effects from a full-blown trade war can be minimized.

In other words, he should heed his own warning, and hopefully, not trying to play politics in which case he should be ashamed.

I think what Fritz is saying is, "don't screw with our profitable import-export trade business, even if the US as a whole is getting the short end of the stick on most of the deals".   Everybody wants something, nobody wants to make the tough calls or sacrifice for awhile to make things better in the long run.

Interesting thoughts.  If we're in a recession, why is our stock market doing so well?  If UP can make-up the difference in domestic trade as in your opinion, why would he worry?  A trade war will not increase domestic production for UP or anyone else,  so I'm not sure where your reasoning comes from.  The effects will not be minimized.  Check your research on historical trade wars and domestic spending.    

cchan006 Wrote:
-------------------------------------------------------
> Copy19 Wrote:
> --------------------------------------------------
> -----
> > < Club in Washington, DC.  He went on to say
> about
> > 40% of UP traffic originates or ends outside
> the
> > United States.  He also pointed out the
> railroad
> > handles 70% of the business going in and out of
> > Mexico.
>
> We already had a discussion on this topic  about
> 3 months ago right here on TO. It was based on a
> New York Times article, where Mr. Fritz was quoted
> saying something similar.
>
> I take his comments lightly, because we have this
> thing called recession which affects the economy,
> too, but usually it happens with little warning.
> In this case, Mr. Fritz has plenty of time to run
> his railroad to grow domestic business REGARDLESS
> of of global trade. Hopefully, he's doing his job
> right now, so the effects from a full-blown trade
> war can be minimized.
>
> In other words, he should heed his own warning,
> and hopefully, not trying to play politics in
> which case he should be ashamed.

Whenever there is change there can be winners and loosers and whiners.  The governement questionable mandate of ethanol has been a railroad boom. The loss of coal business means that costly investments in equipment and infrastucture will never yield the returns hope for. Difficulty in constructing pipe lines has aided oil shipments.  Resistance to oil ports curtains oil shipments.

Obviously you cheer government intervention when it helps and grouse when it does not.

Trade is not a new concern.  Nafta for one was a trade agreement.  the trade environment changes with time. 
People love their inexpensive imported goods but then complain about the lack of good jobs.
The problem with trade tariffs is conventional wisdom. All the economists read the same text books, went to the same schools, learned the same conventional wisdom.
How things will work remains to be seen.

Bob

CNBC had a similar stand up report this morning, from the Port of Long Beach CA.  The Port's economist estimates a 15% - 25% reduction in volume if the full range of tariffs is applied.

 

While Lance Fritz has every right to be concerned, especially about NAFTA, I also take some of his public statements with a huge grain of salt.  This isn't whining buts its close.  

I'm waiting to see if BNSF's Carl Ice or KCS's Patrick Ottensmeyer make some kind of similar public statement.  BNSF has the most to lose if we're taking trade with China, not only in grain shipments to the PNW but also in container shipments...BNSF has contracts with all the biggest international maritime container shippers such as Maersk and MSC.  

The election of the new President of Mexico Andres Obrador has muddied the NAFTA waters, as he has publicly stated he wants changes in NAFTA too, I'm just not sure what.  


Allen

 

Lackawanna484 Wrote:
-------------------------------------------------------
> CNBC had a similar stand up report this morning,
> from the Port of Long Beach CA.  The Port's
> economist estimates a 15% - 25% reduction in
> volume if the full range of tariffs is applied.

I believe this is being overstated by quite a bit because of issues within the maritime industry itself (thus, changes not yet made).  We're likely to see more "slow steaming", the biggest containerships being used (the largest cannot fit through the Panama Canal), fewer port calls on ship rotations and possibly fewer containerships using the Panama Canal in general. The Ports of Long Beach and LA aren't going to be left out based on the population and area served.  My guess would be 10%. But yes some ports, especially in the PNW, could see reductions of greater than 15%.


Allen 
  

The "full range of tariffs" is a very flexible standard.

Many U.S. companies have received waivers on their raw materials, thereby exempting that specific steel etc from tariffs.

Posted from Android

.



Edited 1 time(s). Last edit at 08/21/18 08:38 by darkcloud.

Fritz was interviewed by Cramer on Mad Money 22nd of May.  Video is still available.

If Pres Trump has a strategy, hope it works.  Trade wars not good UP or the overall economy.   

Sec. Pompeo in Mexico working with Pres Elect Lopez Obrador.   

sphogger

 

darkcloud Wrote:
-------------------------------------------------------
> Since NAFTA appears to allow Mexican workers to
> run trains several miles into the US at Laredo,
> but bans US workers from likewise running trains
> into Mexico at Nuevo Laredo, then parts of NAFTA
> need renegotiating.

seriously?  i had no idea........

66

cchan006 Wrote:

> I take his comments lightly, because we have this
> thing called recession which affects the economy,
> too, but usually it happens with little warning.
> In this case, Mr. Fritz has plenty of time to run
> his railroad to grow domestic business REGARDLESS
> of of global trade. Hopefully, he's doing his job
> right now, so the effects from a full-blown trade
> war can be minimized.
>
> In other words, he should heed his own warning,
> and hopefully, not trying to play politics in
> which case he should be ashamed.

Grow domesitc business when all the class one's have done thier best to run it off. Hopefully all those switches and spurs they put back in are steel from the US. 


 

darkcloud Wrote:
-------------------------------------------------------
> Since NAFTA appears to allow Mexican workers to
> run trains several miles into the US at Laredo,
> but bans US workers from likewise running trains
> into Mexico at Nuevo Laredo, then parts of NAFTA
> need renegotiating.

Canadian drivers and U.S. drivers have rights in each other's country.

Mexico has offered rights to US drivers since the 1990s, but the US won't reciprocate. So, no deal,

Posted from Android

Lackawanna484 Wrote:
-------------------------------------------------------
> darkcloud Wrote:
> --------------------------------------------------
> -----
> > Since NAFTA appears to allow Mexican workers to
> > run trains several miles into the US at Laredo,
> > but bans US workers from likewise running
> trains
> > into Mexico at Nuevo Laredo, then parts of
> NAFTA
> > need renegotiating.
>
> Canadian drivers and U.S. drivers have rights in
> each other's country.
>
> Mexico has offered rights to US drivers since the
> 1990s, but the US won't reciprocate. So, no deal,
>
> Posted from Android

I see many mexican trucks on I-5 going north and south. I know many companies enter Mexico with thier trucks making deliveries, so i think the US has reciprocated.

bradleymckay Wrote:
-------------------------------------------------------

> I'm waiting to see if BNSF's Carl Ice or KCS's
> Patrick Ottensmeyer make some kind of similar
> public statement.  BNSF has the most to lose if
> we're taking trade with China, not only in grain
> shipments to the PNW but also in container
> shipments...BNSF has contracts with all the
> biggest international maritime container shippers
> such as Maersk and MSC.

Don't need to wait any longer:

https://waysandmeans.house.gov/wp-content/uploads/2017/07/20170718TR-Testimony-Ottensmeyer.pdf

https://www.progressiverailroading.com/federal_legislation_regulation/article/Rail-leaders-speak-out-Dont-pull-the-plug-on-NAFTA--53923

 

pnger64 Wrote:
-------------------------------------------------------
> Grow domesitc business when all the class one's
> have done thier best to run it off. Hopefully all
> those switches and spurs they put back in are
> steel from the US. 

Yup, you understood my point. It's not Fritz's fault, but UP, like many other businesses in this country are trapped in the globalization pipe dream.

bnsf6606 Wrote:
-------------------------------------------------------
> Interesting thoughts.  If we're in a recession,
> why is our stock market doing so well?  If UP can
> make-up the difference in domestic trade as in
> your opinion, why would he worry?  A trade war
> will not increase domestic production for UP or
> anyone else,  so I'm not sure where your
> reasoning comes from.  The effects will not be
> minimized.  Check your research on historical
> trade wars and domestic spending.    

Nope, I have to explain again, then.

Fritz has PLENTY of time to react to the alleged fall out from POTUS's trade war. He already talked about this 3 months ago, so what has he done since then?

When recessions occur in this country, we don't get the luxury of a warning several months in advance, so companies like UP sometimes can't react fast enough, except by furlouging and laying off employees. Instead of yapping off to the press, Mr. Fritz can anticipate the POTUS fallout, unlike when recessions happen. I didn't say we are in a recession, in case you speed-read too fast. Get it now?

But a reply above by pngr64 basically reinforced my true point, that maybe it's too late for us to save ourselves because we outsourced too many things?

robj Wrote:
-------------------------------------------------------
> All the economists read the same text
> books, went to the same schools, learned the same
> conventional wisdom.
> How things will work remains to be seen.
>
> Bob

You're being nice. There's a word for that when masses of people subscribe to the same B.S., often blindly. It's called brainwashing!

I've been criticized here (but mostly elsewhere) when I've been calling out globalization, especially after watching our adversary take advantage of us (stealing technology, undermining our "allies" in their favor, etc.) for many years. Brainwashed people can't see the cracks in the ceiling until disaster is imminent. Let's hope we're not there yet, but I'm not holding out hope.

I love that no one can blame these tariffs on President Obama.  Nope---it's all Trump.  And the "flyover" states voted for him en masse, but are paying the price (less coal, less soybean exports, less grain exports, less meat exports, less rail business, etc.  They wanted him--and now they can enjoy him.

By the way, IMPORTS thru the Port of Oakland were reported today to have set a new June record.  It's been reported that's probably due to big advance orders placed before the tariffs took effect.