As of Monday, foreign investment into the United States is officially on hold.
That’s because the administration of Mexican President Enrique Peña Nieto announced Monday it has approved a deal that would create the No. 1 railroad in the United States, the Kansas City Southern rail line in Kansas City, Missouri. The deal was approved on Monday.
The proposed deal will also create the second-largest railroad in North America, bumping BNSF Railway from that spot to the top of the list. The third-largest is Canadian Pacific Railway, which is headed by former Kansas City Southern CEO Hunter Harrison.
The Canadian firm has long-struggled to grow in the United States, due in part to very restrictive U.S. federal regulations that limited its growth.
Kansas City Southern is based in Kansas City, Missouri.
Many people are wondering what the U.S. government’s response to the deal will be. The Trump administration has been aggressively cracking down on overseas companies investing in the United States, blocking plans for a Chinese conglomerate to buy a Utah-based real estate company and heavily scrutinizing a $12 billion investment by the state-run Saudi firm in U.S. defense contractor Boeing.
In March, President Trump said he wanted to reduce his country’s trade deficit with Mexico — over $63 billion last year.
Still, the government allowed the Kansas City Southern deal to go through. That means the two companies have a deal they can start incorporating into their agreements. It will take 60 days for the U.S. to approve that deal.
The Kansas City Southern rail line carries significant quantities of freight. Cargo goes in and out of its state terminals and on its routes between Kansas City and Chicago and into the Midwest and the Gulf.
The two companies have said this will lead to better service for shippers, and that it will allow them to return to their roots as entrepreneurs.
Kansas City Southern is a holding company. The rest of its businesses are Midwest Express and Midwest Western Industries, transportation suppliers that also have companies in other markets.
The transaction is expected to close in the third quarter of 2018.
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