U.S. transportation is positioned for a solid second half of the year, according to Fitch Ratings in its mid-year outlook report, though potential auto tariffs remain a concern for the sector as international trade policies continue to fluctuate.
There are concerns that domestic tariffs over time could trigger a possible broader trade war that reduces economic growth or triggers a recession, which would inevitably impair growth for airports, toll roads and ports over time. As such, potential shifts in U.S. economic and trade policies remain a highly evolving area worth close watch in the coming months.
“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,” said Director Scott Monroe. “Auto tariffs themselves, however, are not likely to wield any major sector-wide impact for the foreseeable future and would likely be offset by more influential underlying strengths.” Among the factors counteracting tariffs are broad-based economic growth, low unemployment and reasonable gas prices. There could be some longer term repercussions were tariffs to widen across industries.
Broader trade issues aside, the U.S. transportation sector looks healthy for the remainder of 2018 with growing volumes likely to outweigh rising interest rates and gas prices.
Airline passenger growth is over 3% thus far in 2018 with the trend set to continue, though growth could level off somewhat in the latter half of the year. “Large-hub airports still remain the leading performers, but mid-tier and smaller regional airports are also showing favorable performance,” said Seth Lehman, Senior Director and lead analyst for U.S. airports.
While individual ports with greater exposure to Asian trade may see volume shifts as tariffs come online, widespread trade concerns do not seem to be affecting growth among major U.S. ports year to date, with overall volumes trending stronger than past years. “Investors are showing increasing interest in terminal assets as they seek steady cash flows in infrastructure assets,” said Senior Director Emma Griffith, who oversees coverage of U.S. ports.