Rick Snyder: Trump wrong about Gordie Howe Bridge

Former Michigan Governor Rick Snyder rebutted President Trump’s threat to halt the opening of the Gordie Howe International Bridge, noting Canada financed the project and Canada and Michigan are 50/50 owners (Canada to be repaid from tolls) and that a Buy America waiver was applied because half the bridge lies in Canada. Snyder argues stopping the bridge would chiefly harm U.S. companies, workers and consumers by perpetuating bottlenecks solved by the new crossing, while benefiting the Moroun family/ Ambassador Bridge owner that has spent millions (including $30 million in 2012) to block the project; he also flagged Canada’s dairy tariffs as a separate bilateral issue to be negotiated.

Analysis

Market structure: A stoppage or delay of the Gordie Howe International Bridge (GHIB) is a concentrated shock to Detroit–Windsor cross‑border logistics: winners = Ambassador Bridge owner (monopoly rents), short‑term trucking congestion vendors; losers = auto OEMs (GM, F, STLA), tier‑1 suppliers (APTV, LEA, BWA), and rail/third‑party logistics that would capture throughput gains. If the GHIB opens as financed, expect a 5–10% reduction in border wait times over 12–24 months, translating to a 1–3% gross‑margin tailwind for high cross‑border freight users.

Risk assessment: Tail risks include a federal directive halting opening (low probability, high impact), protracted litigation, or retaliatory trade measures tied to dairy tariffs that extend to supply‑chain tariffs. Immediate (days) volatility will be headline driven; short term (weeks–months) manifests in spot CAD weakness and trucking spreads; long term (years) benefits accrue via sustained throughput and regional GDP growth. Hidden dependency: toll pricing and concession agreements – if tolls are set aggressively high, traffic could remain with legacy routes.

Trade implications: Favor convex trades around resolution: directional long positions in cross‑border infrastructure beneficiaries (rail/3PL) and a short/hedge allocation in auto suppliers for 3–6 months; use FX call spreads on CAD (3–6M) to express resolution risk with capped premium. Use put spreads on supplier tickers as cheap insurance if stoppage lasts >4 weeks and factory schedules are disrupted.

Contrarian angles: Consensus reads this as purely political; misses that Canada financed construction and has strong legal/financial incentives to open — probability of permanent cancellation is <15%. Reaction is likely overdone; implied volatility will spike then mean‑revert once procedural/legal steps confirm opening. Historical parallel: infrastructure threats (ports/bridges) tend to produce 1–3 month dislocations, not permanent market shifts.

Key Decisions for Investors

• Initiate a 2.0% NAV long in a rail/logistics basket: UNP 1.25% and CP 0.75% (6–12 month horizon). Rationale: captured cross‑border volume if GHIB opens; target 4–8% absolute upside; set tactical stop‑loss at -8%.
• Buy a 3‑month CAD call spread sized 0.75% NAV (long CAD vs USD) with strikes ~2%–4% OTM to capture FX appreciation on de‑escalation within 90 days; close or flip to USD if federal action to block occurs.
• Buy 3‑month put spreads on Aptiv (APTV) equal to 0.5% NAV (5–10% OTM) as insurance against a >4‑week disruption that would compress supplier volumes 10–20%.
• If no federal/legal action within 30 days, add 1.0% NAV to UNP/CP and initiate 0.5% NAV long in CAT (construction equip) to play increased regional infrastructure activity over 12–24 months.
• If administration signals intent to halt opening within 14 days, establish a 1.0% NAV tactical long in volatility: buy 1–2 VIX call contracts or equivalent IV call spread to hedge headline risk and regional equity downside.