The Trump administration's plan to levy tariffs on steel and aluminum imports is "troubling in a number of ways" and almost certainly would send ripples through Louisiana's economy, the head of Union Pacific Railroad said at a World Trade Center reception in New Orleans.
President and CEO Lance Fritz was speaking before a crowd at the Port of New Orleans Thursday evening, just hours after President Donald Trump's tariffs announcement.
Fritz credited Trump for working to "hold our trading partners accountable to live in the context of free and fair trade" but also expressed deep reservations about protectionist trade policies in general.
"I don't know that the tariffs that are being contemplated are the right remedy," he said.
Fritz cautioned against rising public sentiment that global trade deals — rather than gains in worker productivity — are to blame for the disappearance of thousands of American manufacturing jobs in recent decades, particularly in the upper Midwest.
"In today's environment, there's a number of our U.S. citizens … who think that they've lost their job as a result of international trade," he said. "And to some degree, they're right — there is a portion of logic there, but it's grossly misrepresented" and "not the big story."
Fritz cited research by Ball State University that concluded nearly 88 percent of job losses in manufacturing were tied to gains in productivity.
"If you read the papers, you'd think that manufacturing is dying … we're just doing it with less people, and that's mostly about productivity," he said.
From an "America First" train of thought, Trump has repeatedly said the long-standing North American Free Trade Agreement should be renegotiated because it has been "a catastrophe."
"NAFTA has turned into a dirty word," Fritz said in disagreement. "NAFTA's really been a boon for us," said Fritz, whose company connects 23 states in the western two-thirds of the U.S. by rail and plays a major role in the global supply chain.
Renegotiating NAFTA, the 1994 agreement with Mexico and Canada, would certainly be felt in Louisiana. Overall, trade among the three countries has climbed from $293 billion in 1993 to almost $800 billion in 2016. Mexico is one of Louisiana’s top trade partners.
Additionally, some fiscal experts warn that Trump’s plan to levy tariffs on steel and aluminum imports could negatively impact Louisiana by driving up costs for manufacturers, which would likely be passed along to consumers, as well as opening up the possibility of retaliation from other countries. However, the obvious winners would include the state's steel makers, who contend that cheap foreign steel has unfairly flooded the market.
Any changes in global trade policy could have an outsized impact for Union Pacific, where roughly 40 percent of the railroad's business is international, including moving 70 percent of U.S. freight-rail shipments to and from Mexico.
Highlighting that point, Caitlin Cain, CEO of the World Trade Center of New Orleans, noted in opening remarks that at least 35 percent of rail revenue is directly associated with international trade.
"The strength of the global supply chain is incredibly important to the work of Union Pacific, and incredibly important to the work that we do, and the World Trade Center of New Orleans," she said.
Although distancing himself from Trump's protectionist trade policy, Fritz credited Trump for other pro-business moves. "The administration has done a great job on deregulation," he said. "I feel that, as all business and all my customers feel it."
But Fritz sought to reassure the crowd that he's working to stem the protectionist tide, saying that he's met with various federal officials to "spread the gospel of what we all know here, which is closing our border won't create jobs."
Rather, he added, "it'll destroy jobs and it'll destroy the jobs that the president believes he was elected to grow."
In a statement released Friday, Brandy Christian, president and chief executive officer of the Port of New Orleans, said the facility is particularly sensitive to tariffs on imported steel and aluminum because those metals are important revenue sources. The port imported nearly 2.5 million tons of steel in 2017, accounting for 30 percent of its total general cargo tonnage.
The New Orleans ports and other ports along the lower Mississippi are vulnerable to any sort of retaliatory trade action because so much is exported from them. Nearly 60 percent of the grain exported from the Midwest goes through south Louisiana ports.
“Port NOLA supports the enforcement of all trade agreements, but an across the board action fails to recognize those countries playing by the rules,” Christian said.