Will Trump Be Good For The Logistics Industry?



The short answer is maybe, but a hopeful maybe. We have seen and heard a lot of “bullish intent” on the campaign trail but not a lot of detail. However based on statements Trump has made we can at least make some inferences and general assumptions.

Rebuilding America’s Infrastructure

As I noted in a previous article both Clinton and Trump agreed that our nation’s infrastructure needs rebuilding. Trump’s 10 year $1 trillion infrastructure funding plan is predicated on lessening the “mountain of red tape” and introducing a private sector financing plan. Investors would provide on average about one sixth of the cost of a project in equity and finance the rest. The government would provide a tax credit equal to 82% of the equity amount, thereby negating the need for a return on 82% of the investment by the investor. The government would make back this tax revenue credit through the income tax on the labor required for the project plus the corporate tax on the contract.

This looks all very neat and splendid at first take but I have a couple of issues with it. It’s revenue neutral for the government, i.e. us the taxpayers, but what incentive is there for the private sector to undertake these projects? They need to make profit. Does this mean we’re going to see an explosion of shiny new toll roads?  Toll roads have had a very checkered history as we all know.

According to a Wall Street Journal article:

“You wouldn’t have the highway system now if they were for-profit things. The public is not well served by private roads,” said Todd Spencer, an executive vice president at the Owner-Operator Independent Drivers Association, which represents 158,000 independent drivers and small companies that operate only a handful of trucks.

I’ve no doubt Trump wants to build infrastructure and put a lot of people to work. I’ve also no doubt he can put together some creative financing plans to do so. But I’m not sure he can rely 100% on the private sector to recognize opportunity and invest their own money.

However The American Trucking Association has already met with Trump’s transition team and left the meeting pretty confident. President and CEO Chris Spear stated:

“During the campaign, he highlighted the need to create jobs, and recognized that improving our nation’s infrastructure is critical to strengthening the economy. As the industry that moves nearly 70% of our nation’s freight and is a key economic driver, we look forward to working with President-elect Trump on a host of issues, including long-term, sustainable infrastructure funding, tax reform and fair and free trade.” 

Railroads Are Optimistic Too But For Different Reasons

Trump “understands many of the economic challenges facing this country,” the Association of American Railroads (AAR) said. “As such, we hope he will move quickly on issues such as comprehensive tax reform that reduces the corporate rate, a review and reform of the broken regulatory system and an embracement of fair and open trade.”.

Railroads could benefit significantly from increased oil and coal transport if Trump goes ahead with a complete overhaul of the US energy policy. No detail as yet but the intent seems to be there.

But Kansas City Southern (KCS) is not so happy. Its share price dropped 10% in early trading on Wednesday. KCS have a heavy stake in US – Mexico free trade. Trump’s protectionist position on trade agreements, particularly NAFTA, could have a severely negative impact on KCS’s business.

William H. Galligan, vice president of investor relations at KCS said the railroad would “have to look at our use of capital dollars” if a Trump administration is “hellbent” on restraining trade with Mexico. But, he said he believes Mr. Trump would tread carefully on Mexico trade.

Never forget this, my fellow Veterans and Marines on this Veteran’s Day

It is the soldier, not the reporter, who has given us freedom of the press. It is the soldier, not the poet, who has given us freedom of speech. It is the soldier, not the organizer, who gave us the freedom to demonstrate. It is the soldier who salutes the flag, who serves beneath the flag and whose coffin is draped by the flag, who allows the protester to burn the flag.

— Father Dennis Edward O’Brien, USMC

The Shipping Industry Is in Shock

The shipping industry is in the worst down cycle it has seen for over 30 years and Trumps anti-trade rhetoric can only make things worse.

The Wall Street Journal reports

“There is little detail about Trump’s trade policy, but his overall protectionist, anti-globalization stance will likely hurt shipping—an industry that thrives on low trading barriers for goods,” said Basil Karatzas, a New York-based maritime ad adviser who works with the industry’s biggest names. “In the short term, the shock effect to the markets will likely lead to lower trading volumes at a time when shipping companies report earnings in bright red numbers.”

However from the same article:

“Business is business and I don’t think Trump wants to be a one term president by upsetting world trade. Like all politicians he has a public negotiating posture and a private posture when he sits down with trading partners,”  said Robert Bugbee,president of Scorpio Tankers Inc., the biggest U.S-listed refined products tanker company with a fleet of around 90 ships that move petroleum products such as gasoline, diesel and aviation fuel.

Personally I think it’s going to be very tricky for Donald Trump to either pull out or renegotiate international trade deals. Business is global. Virtually every domestic industry sector relies on international trade of some sort. Trump even builds his hotels with Chinese steel! (But that could be a subject of a blog article in its own right.)

Mike Pence in his home state of Indiana is even having problems

“There is definitely a concern among Indiana manufacturers over the fact that both presidential candidates want to turn back the clock on free trade,” said Nate LaMar, international sales manager at Draper Inc. in Spiceland, Ind., which exports window coverings, audiovisual equipment and athletic gear.

Common Sense Will Prevail

I think common sense will prevail, and that can only be good for the logistics industry. After all Trump is a businessman and he will fight for US business interests. He understands our infrastructure needs serious improvement. If not it will continue to be a drag on the free movement of goods domestically. The logistics industry can only benefit from an infrastructure improvement.

He understands we need global business partners. He may want to renegotiate better trade terms but we still need to continue doing business. And the logistics industry can only benefit from that too.

I remain hopeful…

If you’re interested in learning how shipping by rail might better meet your freight transportation needs, or need warehousing to bring your goods closer to your customers, call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.

Please have a restful and respectful Veterans Day.

Important note: This is a logistics industry blog, not a political blog. NMT is not commenting on any party’s views on the issues nor is NMT publicly supporting any party.

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