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Union Pacific CEO on Trump trade war: 'This is something we can’t screw up'

Julie Hyman
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CEOs have a message for President Donald Trump: getting trade negotiations right is, well, non-negotiable.

“It needs to be, right? I mean, this is something we can't screw up,” Union Pacific (UNP) Chairman, CEO and President Lance Fritz said on Yahoo Finance’s On the Move, referring to Trump’s strategy on tariffs and trade. “While I know our economy is largely driven by consumers, our economy is tightly linked to our trading partners. And if you think about it this way, we represent 5% of the world's population, 25% of the world's wealth. A lot else is happening outside, and we have to have markets available to us.”

Fritz said Trump was receptive to their message. “The president listened to our commentary, probed, was very much engaged in the conversation, but of course, he's the one who has to do the calculus on what he thinks is the right thing to do for the U.S. economy in the long-term.”

Trump said this week he plans to have an “extended meeting” with President Xi Jinping of China during the G-20 meeting in Japan at the end of the month.

China tariff impact

Union Pacific gets all of its revenue from within the United States, and China’s move to impose retaliatory measures has driven second-quarter volumes down by 4%. China’s ban on imports of U.S. soybeans has had a negative effect on customers, as has inclement weather in the Midwest.

“What we’re seeing right now, most of our customer base becoming a little bit more cautious, either on inventory, working capital, or on capital investment, or both,” Fritz said.

A Union Pacific employee climbs on board a locomotive in a rail yard in Council Bluffs, Iowa, Thursday, July 20, 2017. (AP Photo/Nati Harnik)
A Union Pacific employee climbs on board a locomotive in a rail yard in Council Bluffs, Iowa. (AP Photo/Nati Harnik)

That, along with an efficiency push at the railroad company, could result in more job cuts at Union Pacific. “Right now, our employment is down year over year,” Fritz said. “And there's probably still a bit more of that to go as we get more productive. That'll be offset if we can get some top line growth.”

At the same time, Fritz said some of the effect of trade disputes is mitigated by new measures Union Pacific has taken to increase efficiency. He said tariffs may cause a hit to sales, but he doesn’t expect a drop in the bottom line.

The railroad CEO isn’t alone in trying to put pressure on the White House. Earlier this week, a group of 200 apparel and footwear industry executives sent a letter to Trump urging him not to impose new tariffs on China, and an industry association executive said his members are “livid.”

U.S.-Mexico-Canada relations is top of mind

While Fritz is concerned over China tariffs, he and his employees’ more immediate concern is the ratification of the United States-Mexico-Canada Agreement, since it involves the country’s largest trading partners. The railroad’s 42,000 workers are “probably, first and foremost, worried about our relationships with Mexico and Canada, and getting the United States–Mexico–Canada Agreement (USMCA) across the finish line,” Fritz said.

“Our employee population very much has a feel of what's going on in the economy directly — how much traffic is moving through their part of the territory, what kind of work are they being asked to do,” he added. “And so they feel when the economy doesn't feel quite right.”

Julie Hyman is the co-anchor of On the Move on Yahoo Finance.

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