This story originally appeared on Trains.com.
PALM BEACH, Fla. — Canadian Pacific Kansas City CEO Keith Creel is confident that free trade will continue in North America despite President-elect Donald J. Trump’s threat to impose 25% tariffs on goods imported from Mexico and Canada.
U.S. trade with Mexico and Canada has grown since the Trump-driven United States-Mexico-Canada Agreement replaced the North American Free Trade Agreement and went into effect in 2020, Creel points out. The pandemic, meanwhile, exposed the risk of long supply chains dependent on Asia. Since then, manufacturing in Mexico has grown, partly due to nearshoring.
“There may be tariffs,” Creel told an investor conference Wednesday. “I think in the end what matters to this administration is economic growth.”
Trump likely will negotiate the best trade deal possible for the U.S., Creel says, and that will ultimately benefit CPKC as the only railway to connect Canada, the U.S. and Mexico. “In the end our best position is solid trade relationships with our two most key partners, which are Mexico and Canada,” he says.
Of all the Class I railroads, CPKC is the most dependent on cross-border traffic. Some 41% of its revenue is tied to North American trade, and CP and Kansas City Southern merged to take advantage of trade growth.
CPKC will realize between $700 million and $800 million of merger-related revenue growth this year and $300 million to $400 million on top of that next year as additional cross-border growth initiatives come online, Creel says.
CPKC is set to open its second single-track bridge across the Rio Grande at Laredo, Texas, later this month. The span, which will be named for the late KCS CEO Pat Ottensmeyer, will more than double CPKC’s cross-border capacity, because it will eliminate the four-hour northbound and southbound windows on the existing single-track bridge.
Creel also says he’s encouraged by potential changes at the Federal Railroad Administration under the incoming Trump administration. The FRA has blocked CPKC’s efforts to eliminate brake tests and inspections that are required on both sides of the border and contribute to congestion.
Today CPKC and CSX ran their fourth interline train over the former Meridian & Bigbee Railroad, which creates a shortcut linking the Southeast with Texas and Mexico. On Sunday, the railroads shifted interchange traffic from New Orleans to the new interchange at Myrtlewood, Alabama, on the former MNBR.
The new trains allow Schneider, a joint customer of CPKC and CSX, to offer its first intermodal service between the Southeast and Mexico, which is a prime route for auto parts shipments. Schneider believes the volume conversion opportunities from highways in the Southeast-Mexico and Southeast-Dallas lanes are twice as big as the Chicago-Mexico service currently running on CPKC hot shots 180 and 181, Creel says.
The Mexico Midwest Express premium intermodal trains continue to grow, Creel says, and are now running at around 7,000 feet. “The train is actually a good-sized train now,” he says.
Schneider says the MMX service is faster than truck between Mexico and Chicago. “It’s trucklike reliable. They can’t compete with it with their own trucks,” Creel says. “That’s how reliable it is.”
The trains are a source of pride for the crews who launch the trains every day at CPKC terminals in Bensenville, Illinois, and Mexico, Creel says. “The train runs like clockwork. It has to,” he says.
The trains have begun hauling Mexican-grown produce from Laredo to Toronto for Loblaws, Canada’s largest grocery store chain. “We’re taking produce that they have trucked historically from Mexico to Canadian markets,” Creel says. “Today we’re putting it on rail in Laredo.”
Still to come: New perishables service with partner Americold, which is building a cold storage facility at CPKC’s intermodal terminal in Kansas City, Missouri, that’s scheduled to open next year. Shipments of pork and beef will be trucked to the facility, where they’ll be transloaded into refrigerated containers for the trip to terminals in Mexico. They’ll return filled with Mexican produce bound for the Midwest and Canada.
Mexican inspectors will be stationed at the Americold facility in Kansas City, allowing the shipments to make a quick and seamless trip across the border at Laredo, Creel says. “That’s going to drive growth,” he says.
The service initially will link Kansas City and a facility in Monterrey. Similar cold storage facilities are in the works on CPKC locations elsewhere in Mexico, Creel says.
Creel spoke at the UBS Global Industrials and Transportation Conference.
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