Leave it to Eric Starks, Chairman and CEO of FTR Transportation Intelligence, to cut right to the chase on how POTUS 47’s worldwide tariff torpedoes and retaliatory strikes from “friend and foe alike” (to paraphrase President John F. Kennedy’s 1961 Inaugural Address) will affect the North American freight rail industry. Lest you have forgotten, Canada, the United States and Mexico have been reaping the rewards of a unified rail system since NAFTA, now the USMCA.
However, Eric’s “this is nuts!” pronouncement came at Rail Equipment Finance 2025, one month before the bad movie morphed from a preview to a feature film. Whether the movie is a gory slasher special or a pratfall-populated slapstick comedy remains to be seen. These days, Abbott & Costello’s “Who’s on First” routine makes more sense. More from Eric later. Meanwhile …
Uninhabited-by-humans Antarctic Ocean islands aside (what do penguins export to the U.S., besides endearing YouTube videos?), what do these tariffs mean for the rail industry? Few in our industry are saying much on Trade World War I (or is it II?). As I scratch my pointy little head, I wonder why. Take for instance, this “the Pope is a Catholic” statement on the tariffs that “makes the obvious less obscure” (as my predecessor Luther S. Miller liked to point out) from the Association of American Railroads:
“Railroads play a critical role in connecting American industries, small businesses and farmers to global markets and helping drive economic activity across the nation. AAR analysis indicates that 38% of all rail traffic—or 11.3 million shipments in 2023—were directly linked to trade-related activity. Railroads are focused on providing customers with the reliable, cost-effective and efficient service that helps them compete and drive economic growth into the future.”
All true, right? But we already know this, right? Why be so innocuous? Could it be that the AAR and others won’t throw caution to the wind and say something strong because 1) the poisoned hot air blowing on Capitol Hill will blow it right back, with tornado force; 2) there are widely varying views among railroads (AAR members, mainly) and other industry stakeholders on whether tariffs present an opportunity or a risk, and taking a firm position isn’t a good idea; or 3) no one really knows what’s going to shake out, so it’s best to take a “wait and see” approach?
People in our industry who think I occasionally know what I’m talking about have asked, “What do you think is going to happen?” “Ask me tomorrow“ is my usual response. And if they ask me tomorrow, I’ll give the same answer I did the day before. Tomorrow is pitching. Today is catching. Maybe I should play shortstop (“I Don’t Give a Darn”)?
Railway Age Capitol Hill Contributing Editor Frank N. Wilner, who for two decades drafted AAR policy positions and congressional testimony, calls the AAR statement “a contortion in vagueness. One doesn’t require a degree in economics or American history—or any degree—to understand that these tariffs, as the 1929 Smoot-Hawley tariffs, are an accelerant to business downturns and a reduction in the standard of living for an overwhelming majority of American families. One need only read and listen to the comments of independent experts, including Nobel laureate in economics Paul Krugman, who calls them ‘malignant stupidity.’ The U.S. Chamber of Commerce, serially supportive of Republican Administrations, terms the tariffs a ‘tax increase’ that will upend supply chains.”
“The AAR is delusional in ignoring what, especially, investors are saying and warning,” Wilner says. “For an industry that had no fear in condemning the economic harm of excessive regulation, the AAR sadly seems to have fallen in line with, for example, cowardly law firms, colleges and a majority of Republican lawmakers who, despite knowing better, tremble, rather than laugh and point, before a White House bully standing without clothes. These tariffs have put American exports—including coal, corn, grain, pork and soybeans—at great risk; threaten the flow eastward of tens of thousands of container loads of products Americans buy and want; and likely will put a legion of rail workers on furlough.”
“If the AAR is concerned over the cowardice of any of its members, it should heed its own history,” Wilner concludes. “In the midst of the 1970s fight for economic deregulation, the AAR stood bold, firm and loud in support, despite misgivings of railroads Burlington Northern (now part of BNSF) and Norfolk & Western (now part of Norfolk Southern). There is a courageous alternative to mimicking the ostrich with its head in the sand. The late American Trucking Associations CEO Tom Donohue once met such a situation head on, telling the media (paraphrased), ‘Some of our members are in support and some of our members are in opposition. We support the position of our members.’ Credit Donohue with transparency and honesty.”
I might add that about 90% of all freight cars are built in Mexico or Canada. The same applies to a sizable chunk of finished motor vehicles, at least 70% of which are transported by rail throughout the USMCA nations. If you think those factories and jobs can easily and quickly be relocated to the U.S., think again. But that’s what POTUS 47 wants us to believe.
Stark Observations
I asked Eric Starks to provide some “one month later” observations. Like Frank Wilner, he’s OK with speaking his mind (bravo!):
“This feels like October 2008. I cannot see how we don’t slide into a recession. The calculations the Administration has done on retaliatory tariffs are overly simplistic. Where is the thought process? Where is the analysis? It’s like a bunch of kids throwing s__t against a wall and seeing what sticks. How do we navigate this? It’s like trying to drive on a bumpy road and avoid rocks falling in front of you. And there are too many moving parts. The President loves the chaos, but chaos doesn’t work for government and most businesses. He doesn’t care, and he’s surrounded by a bunch of ‘yes people.’ It’s a huge s__t show, and the craziest thing is that it could get worse.”
North of the Border View
“Sitting here in the eye of the Auto Storm with our Windsor, Ontario Stellantis assembly plant shutting down, I have a strong reaction to POTUS 47 and his High School Student Council running the U.S. right now,” says rail industry veteran and Canadian (the distinction is important here) Rod Case, retired Oliver Wyman Rail Practice Partner, now a senior advisor to companies like Anacostia Rail Holdings. “I think it is fair to say that the auto plant shutdowns should propagate more over the next two weeks. Our assembly plant shutdown just caused 900 layoffs at a Tier 1 supplier in Michigan. Cross-border truckers are laying people off, as many parts were prepositioned and the peak shipping is past, and parts inventories are dropping by the day.
“It appears that many Americans don’t do abstract economic concepts well anymore—things like international law, trade strategy, etc. My trip to Asia and Europe two weeks ago was illuminating with regard to the ‘foreign investment’ flows and changes. During a long walk in an Asian capital with two global finance people, each with billions in recent debt trades/issues, I was brought into their world. To suggest that U.S. influence is falling would be hard to overstate. Their view matched the graphic below, which POTUS 47 is demanding people stop talking about:
“The U.S. is down to less than 20% of the G20 and lower in total global GDP. U.S.-based foreign investors are increasingly ‘dark money‘—their term, not mine—and the sovereign wealth funds, ADB, EDB, etc., are filling the space. Short version: It may be easier to work excluding the U.S. going forward. Juxtapose this view of the money traders with POTUS 47 allies suggesting that the world just needs to let him manage the global economy. I am sure my colleagues are laughing over their lunch.
“The U.S. is increasingly looking like the caricature of the high school football star who peaked in his youth and hasn’t realized that nobody at the party is interested in hearing again how awesome he was at 18.“
So, what comes next? Ask me tomorrow.
P.S. Should you need some distraction:
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