Trade War Could Impede US Transport Infrastructure Growth
An escalating trade war between the United States and some of its major trading partners would impair growth for U.S. airports, toll roads and ports over time if it slows the economy or triggers a recession, Fitch Ratings said on Wednesday.
Major credit rating agencies have increasingly been concerned that U.S. tariffs and retaliatory measures could harm state and local economies dependent on international trade.
The administration of President Donald Trump has imposed tariffs on steel and aluminum imports from Canada, Mexico and Europe, and on billions of dollars of Chinese goods, bringing swift retaliatory tariffs on U.S. goods.
In its latest report, Fitch cited potential auto tariffs as a concern for the bond-financed U.S. transportation sector, where stable operations are expected for the remainder of 2018.
"Were auto tariffs to significantly raise the cost of purchasing an automobile, they could act as a sort of tax on motorists that would increase the costs of auto transportation and in turn reduce demand," Scott Monroe, a Fitch analyst, said in a statement.
Fitch said factors such as broad-based economic growth, low unemployment and reasonable gas prices would counteract tariffs.
Meanwhile, the trade situation has not yet hurt U.S. ports, although facilities with higher dependence on Asian trade may feel the impact when tariffs hit, according to Fitch.
"Investors are showing increasing interest in terminal assets as they seek steady cash flows in infrastructure assets," said Emma Griffith, a Fitch analyst.
As for airports, air cargo is a small part of their operations, but a trade war could worry facilities that handle large international shipments, according to Seth Lehman, a Fitch analyst.
"It would take a long time for a trade issue to filter into the airport sector," he said.
Ahead of a visit to China this week on city business, Chicago Mayor Rahm Emanuel raised concerns about the impact of a trade war on O'Hare International Airport, which he said handles 29 percent of China's air cargo to the United States. Passenger growth at airports topped 3 percent so far this year, with large hubs being the leading performers, according to Fitch.
(Reporting By Karen Pierog; Editing by Daniel and Bernadette Baum)