USA: Tariffs on imports adopted by the second Trump administration will affect all economic domains, including rolling stock. Far-reaching impact will be made on the production of both freight cars and passenger coaches and cars, the latter being built by relatively new market players. Though, further development of this domain in the USA today depends above all on the preservation of the extensive government support that was offered during the railway ‘renaissance’ in the country. The tariffs, while an important factor in the development, play a lesser role than this support.
Freight rolling stock
Risks associated with the new tariffs are quite significant for freight rolling stock, as more than half of the production facilities serving the North American market are now located in Mexico. The most important companies in this sector – Greenbrier, Trinity Rail and FreightCar America – moved them between the 2000s and the 2020s to cut costs.
Car assembly shop of the Freigh Car America plant in Castaños, Mexico. Source: Railway Age
Price hike is expected whether freight cars are imported with the tariffs in place or production is moved back home where labour costs are higher. The US economy is sensitive to freight car prices, with a wealth of freight traffic falling on the railway. In an effort to mitigate the impact of the tariffs, work has begun to introduce tax credits for those freight operators that will renew their fleet with cars built in the USA. With a steady demand for freight rolling stock, the long-term effect of the tariffs will be to encourage car manufacturers to bring the production back into the country.
Diesel locomotives at Wabtec’s plant in Erie, USA. Source: Greg Wohlford/Erie Times
Two major players building freight locomotives in the country create a duopoly in the market. The first is Wabtec and the second is Progress Rail, a subsidiary of Caterpillar. Other companies in the sector are small and mostly involved in overhauling in-service locomotives to refurbish them and extend their service life. Traditionally, the segment is characterised by a high degree of localisation, so the impact of the tariffs will be minimal.
Passenger rolling stock
Almost all production in the segment is controlled by companies headquartered in Europe and Asia. The only local company is Brookville, but its facilities only allow for the production of small batches of trams.
Following the acquisition of Bombardier Transportation in 2021, Alstom is the main player in the sector. It also provides passenger service in a number of states. The fact that its assets are located in the USA and Canada has both advantages and disadvantages. On the one hand, the plant in Hornell, NY, is expected to be stable in the current trade war. It has a large order for Avelia Liberty trains, complies with the Buy American programme and boasts a relatively high level of localisation, including components. On the other hand, the former Bombardier facilities, which served the interests of the West Coast, are located in the territory of Canada, thus developing local component suppliers. Under the new conditions, the tariffs will definitely worsen the position of these Alstom plants, as their production is considered Canadian.
The high-speed Alstom Avelia Liberty. Source: Amtrak
Locomotives and coaches for passenger service as well as trams are produced by the Siemens plant in Sacramento, CA. It has been in operation since the 1980s and has many suppliers in the country, so the tariffs will not have a significant impact on the cost price of its rolling stock.
The position of the Swiss company Stadler is more vulnerable under the new conditions. It has recently begun to expand its presence in the US market, signing contracts for MUs, metro trains and trams. All of these contracts are fulfilled using the assembly facilities in Salt Lake City, Utah. What is more, Stader has only become a global player in recent years and therefore purchases many components from external suppliers, mostly Swiss. It is possible that the cost price of rolling stock produced for the US market will increase substantially, as it is imported from Switzerland with a tariff of 31% and from other EU countries.
At the Stadler plant in Salt Lake City. Source: UIPA
With a high share of imported components, CAF from Spain, Kawasaki Rail and Hitachi Rail from Japan and Hyundai Rotem from South Korea face similar risks. They supply light rail vehicles and have assembly facilities in the USA, but use components produced by companies in their own countries and have only just begun to develop US suppliers.
High risks for Chicago and Boston contracts with CRRC
CRRC from China has been banned from bidding for new rolling stock contracts in the USA from 2020 after the US Congress passed a law banning government funding for the purchase of rolling stock from Chinese manufacturers, citing cybersecurity threats. As required by the Buy American programme, CRRC has two in-country facilities, but its low level of involvement in supplier development and suspicions of importing workers from China have already led to unfavourable criticism.
First 7000-series metro train by CRRC entered service in Chicago. Source: CRRC
The company’s order book is dominated by two major contracts signed before 2020: 404 metro cars for Boston and 400 cars, with an option for 446, for Chicago. While CRRC won these tenders by offering a price well below that of its competitors, the fulfilment of the contracts is significantly delayed, disrupting the operators’ fleet renewal plans. The 145% tariff on imports from China could bury these CRRC deals, leading to contract cancellations and the search for an emergency replacements.
Fate of federal support as key matter
In 2021, the administration of former US President Joe Biden adopted a plan under the Infrastructure Investment and Jobs Act. Of the $1.2 trn allocated for its implementation, $105 bln is earmarked for the development of rail and urban public transport through support for infrastructure construction and purchase of rolling stock, including high-speed projects. This money is funding the country’s current railway ‘renaissance’ and attracting European and Asian manufacturers to invest funds and expand their presence in the USA.
Donald Trump already criticised this funding back in 2021 and now, in his second term, has called for a revision of the amounts. This is the main uncertainty for the development of the US rolling stock market, and the haggling over the tariffs is only adding to it. For example, it has been announced that federal funding for high-speed railway projects in California will be frozen. This is crucial for their implementation, especially as Siemens and Alstom claim that the small size of the order (16 trains in total) makes full localisation impossible. As the first prototypes will be imported from the EU, the tariffs will significantly increase the cost of these projects and cast doubt on their prospects.
