How Trump’s trade war with China could impact the MBTA

“It’s especially a big concern for us and something we are going to monitor very carefully."

Springfield, MA - 12/18/18 -  Governor Charlie Baker tours the factory.  A rolling out ceremony was held at the Chinese manufacturer CRRC MA in Springfield with Governor Charlie Baker, Huang Ping, the new Chinese Consul General in New York, CRRC MA Chairman and President Jia Bo, Springfield Mayor Domenic J. Sarno, Transportation Secretary Stephanie Pollack, and MBTA Deputy General Manager Jeff Gonneville.  (Lane Turner/Globe Staff) Reporter:  (in caps)  Topic: (19orangeline)
Gov. Charlie Baker tours the Springfield factory where the new Orange Line trains are being assembled. –Lane Turner / The Boston Globe

The MBTA is on the verge of replacing its current Orange and Red Line fleets with hundreds of sleek new train cars. However, President Donald Trump’s trade war with China is complicating matters.

During an event Tuesday in Springfield commemorating the first new, locally manufactured Orange Line trains, Gov. Charlie Baker said he was “especially” concerned about the trade war’s potential impacts, according to MassLive.

In 2014, the MBTA signed a contract to have the new cars manufactured by CRRC Corp., a Chinese government-owned railcar-building company, at a massive facility in Springfield. According to the MBTA, the $843 million project calls for CRRC, which is based locally in Quincy, to assemble a total of 404 new cars and put them all into service over the course of the next five years.

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But the 25 percent tariffs imposed on Chinese goods by the Trump administration this fall — amid then-escalating trade tensions between the two countries — are hitting a number of essential, imported railcar parts, which CRRC says is unexpectedly increasing the costs of producing the new trains.

According to the contract, the transit agency is the one responsible for paying any cost increases due to tariffs. That means taxpayers are the ones ultimately on the hook, not only in Massachusetts, but also in other cities — including Chicago, Los Angeles, and Philadelphia — that have deals with the Chinese company.

“In other words, these tariffs are essentially a tax on commuters who live in our country’s largest metropolitan areas and use these transit systems in their daily lives,” state Sen. Eric Lesser wrote in a September letter to Trump’s trade policy chief, U.S. Trade Representative Robert Lighthizer.

Lydia Rivera, a CRRC spokeswoman, told Boston.com Wednesday that the imposition of tariffs will “materially increase” the company’s costs of suppling new railcars, “which will in turn increase costs” for the MBTA and state taxpayers. Rather than achieving the Trump administration’s stated goals around intellectual property and “forced technology transfers,” Rivera says the tariffs will backfire on American manufacturing.

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While the company says the majority of its materials are sourced from the United States, the tariffs affect around 95 items needed to assemble the new MBTA cars. Those items include the frames of the railcars, according to The Boston Globe.

CRRC filed with Lighthizer’s office in October asking for 16 separate waivers from the 25 percent tax. Rivera said a second package of waiver requests was submitted last week.

The Globe reported Tuesday that CRRC has told Lighthizer that if they aren’t exempted, the tariffs “will result in increasing costs to all parties involved, which in turn will ultimately either be borne by the public or, alternatively, result in less value being utilized from limited federal and state funds.”

Their waivers with the USTR are reportedly still pending, and Rivera says it remains unclear when the USTR will respond. According to the Globe, the MBTA says that CRRC has not — yet, at least — requested any changes to the contract as a result of the tariffs.

While suggesting that the state would be willing to bear the burden of the cost increases, Baker told reporters that “no one has been really clear with us about the impact” and emphasized that the much-needed upgrades to the MBTA were already locked in.

“It’s especially a big concern for us and something we are going to monitor very carefully,” the governor said, according to MassLive. “It’s not going to change our commitment to the project.”

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