Global Trade This Week – Episode 190
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Keenan Brugh 0:00
You're watching global trade this week with Pete mento and Doug Draper.
Pete Mento 0:07
Hello everyone, and welcome to Global Trade this week. No, I am not in disguise. This is actually my beard. It's it's gotten out of control. I had made a promise to myself as a sign of sign of solidarity, that I was going to continue to grow my beard until the crisis is over. And Doug, it turns out that was a really stupid idea. This crisis is not going anywhere.
Doug Draper 0:33
Yeah, yeah. Well, like you said before, little ZZ, top action coming down your way, looking you're seeing dinner down the highway, that's the other thing, Pete, the other thing I got to talk about this, not my bald head, your hat. That's right. Make tariffs boring again. I like it. Yep,
Pete Mento 0:53
I'm I had this specifically made for when we go to the custom symposium here in a few weeks, and I plan on wearing it not during the sessions. Of course, that would be disrespectful, but I will be wearing it as we socialize in the great city of New Orleans. So you can imagine how happy I am that we're doing it down there this year. Yeah.
Doug Draper 1:13
Well, my recommendation is you squeeze it so the bill is real tight and put a fishing hook in there.
Pete Mento 1:20
Well, that fishing cook would have a ridiculous tariff on it. So that would just be another thing I would talk about. I don't know what's worse, the fact that everyone is coming to me for opinions, which is, that's what I'm here for, right? That's part of the job, or the fact that so many people who have absolutely no idea what they're talking about have truly ridiculous opinions, and I just have to keep my mouth shut. So I was at breakfast with my daughter, and the table next to me, I just overheard them talking about tariff stuff, and they could not have been more incorrect. And I just sat there, you know, continuing to eat my omelet, keeping my mouth shut I wasn't gonna. Do not engage. Do not engage, my friend. Do not engage. That's
Doug Draper 2:01
probably the right thing to do, right? You're, you're, you're in the thick of it every single day, my friend, I'm in, I'm in.
Pete Mento 2:11
I'm at Hanover, the Hanover Marriott there, and I forget Whippany New Jersey for the annual CPSC meeting. PCs, excuse me, pharmaceutical supply chain meeting and the keynote tomorrow. They're there. They're definitely getting a little tense because Trump keeps talking about tariffing pharmaceuticals. But man, I tell you the it's just been wild. It's been a wild, wild, wild couple of weeks. Brother, wow, yeah,
Doug Draper 2:39
yeah, it's, it's a little tariff tariff fatigue, right? I have to admit that I've made comments on LinkedIn, but, you know, you can't swing a dead cat without seeing somebody comment on LinkedIn.
Pete Mento 2:51
Everyone's suddenly an expert, you know, and I'm confused by some of the things that are out there. I've had to create PowerPoint slides and flow charts to explain how to apply tariffs. It's that complicated. So anyway, everybody out there, just stay strong. It won't last forever.
Doug Draper 3:08
Yeah, yeah. Well, I'm speaking to my fatigue factor, and I'm not. My two topics have nothing to do with tariffs, and so I'll just jump in, if that's cool with you, my friend, well,
Pete Mento 3:23
please do let's get it going. Let's start the show. All right.
Doug Draper 3:27
I got two comments. One, this was kind of headline news a couple of weeks ago, and then it just got buried with the chaos of the last couple of weeks. But Walmart is now entering the brokerage business, right? And so obviously, to support their network, but also, I'm reading they're going to be, you know, providing those services for hire. That's what I've heard, right? We'll see how that transpires. But, you know, you got the big dogs coming into the house of the crazy world of truck brokerage, right? And I the reason I started thinking about this. Like, if you remember, we spoke about this during COVID, that some of these big users of services and providers of services were like, we're going to vertically integrate, screw it. We need to control our supply chain more, and we are just going to contract their own steamship lines. I think Amazon did that in house fleets became a lot more popular. So that is pretty interesting. The second piece that I just saw over the weekend is that Amazon is now going to be offering LTL services as well. But this is a little unique because it's only inbound to to their to their warehouses. But I want to talk about that in a second. I'm going to go back to Walmart. So here's the one thing that I want that I saw Pete that caught my attention is the requirements to participate in Walmart's truck brokerage, one of which is a carrier must have a 10 truck minimum, and they must have. Five years of authority, right? Their brokerage authority and their carrier authorities. And there's some safety checks that are above and beyond their Walmart specific safety checks, right? So immediately, the first thing I thought about Pete is that like 90% we could get online and google it, but 90 ish percent of every truck company out there has less than six trucks, right? It's me and my brother in law, and we got a couple of trucks, and my son gets involved every once in a while. And so 90% my point with that is that 90% of the carriers can't play in the in the Walmart world, right? And, and you figure some of them are not going to be able to pass for safety. So there's this whole demographic of trucking companies, which is 90 ish percent aren't able to play. And then the the other piece is that if you can play, I think everybody wants to work directly with Walmart, right? So you're going to have these players that jump in there and say, I work for Walmart. They're going to put it on their website. They're going to talk about it to other customers, and I think they're going to find out that working for Walmart, and the pinch and the squeeze that's involved with every aspect of doing business with Walmart is going to essentially say, hey, we tried it. This doesn't work. And they're going to eject and what that's going to leave Pete, in my opinion, is that it's the big boys that can manage the ebbs and flows that cover all their all their requirements, with 10 truck minimum and five years of authority. So I think it'll be interesting to see a flood of companies come in, and then some are going to realize this isn't worth the juice. Isn't worth worth the squeeze, and then they're going to bail back out, and what's going to be left is the big boys getting bigger. And then, I won't go into extreme detail, but the Amazon pieces is interesting as well. So it's kind of like the vertical integration that we saw during COVID. It should be interesting to see what happens now the big boys are getting in the mix.
Pete Mento 6:57
Yeah. I mean, that vertical integration makes a whole lot of sense when you have that kind of volume. You know, back in the good old days, when I was at Wayfair, we had our own freight forwarder and our own mvcu Because the volumes that we were moving, it just makes sense. It's sort of like being a BCo, right? If you, if you're a BCo, you're controlling your own contractual obligations. This is even bigger. This is about turning something you have to do into a profit, driving kind of engine. And I never, I never, ever underestimate Walmart, ever that is that is something that I think a lot of people have done that have been to their detriment. And when you see other companies like you said, Amazon, doing this. It just makes sense, if you control such a large amount of one way of what's going on. If you know it's going to be empty going the other way, why not get involved? There was a period of time when target had a customs brokerage business. I don't know if they still do. I imagine they do. It ran very smoothly, and they sold their their customs operations to other companies. You know, maybe suppliers who were using them, they were using the service for their own for target zone business. They're like, hey, we can do it for your other customers too. And I know that it was a wildly profitable model. I think because technology has gotten so cheap and you can buy technology to help manage this, that might have a big part to do with it as well. Truck brokerage, to me is that's just mad cap craziness. Very, very crazy to do. I I wouldn't want to do it, but I think if anyone with that volume could pull it off, it'd be a company like WalMart. So to all the haters out there that are saying this wasn't a good idea, let's, let's revisit it in a couple of years and see how they did
Doug Draper 8:34
with it. Yeah, spot on. Agreed. All right, so we're going to jump back into the tariff scene, and let you roll my friend. What you got? Sorry,
Pete Mento 8:42
buddy. I know you're you're like 99% of Americans who don't want to talk about it anymore. Surprising news over the weekend, there were a number of electronics categories that were carved out of the tariffs. And everyone is talking about this like it's some sort of capitulation, but there's a story behind it that isn't being wildly reported in the news. It's being reported, but people aren't putting two and two together. So yes, over the weekend, a lot of consumer electronics and computer peripherals and these kinds of things received a carve out from the Chinese tariffs, and that was big news, right? So imagine a cell phone now is going to cost you a kidney and your firstborn because the tariffs would have been so high instead, rather that that 125% additional tariff has been waived for a period of time. And again, people saw this as Trump waving a white flag. Well, what was happening behind the scenes is they're they're implementing what's called a 232 investigation into all of these tariffs. Now the 232 tariffs, many of you may have heard of about these because of steel. So steel and aluminum have a 232 associated with them. It's basically a tariff that goes into play for unfair trade practices. And the President, while all those tariffs were. Or were being given an exception at the same time they have it constituted a 232, investigation of all these products, which says to someone like me that in very short order, not only are those tariffs going to go away, but there's going to be a new, additional one that's attached to them. So there, there's going to be, like the 25% steel and aluminum, like the 301, tariffs. There's going to be a tariff on those products that are coming into America because of what's being considered unfair trade practices. So when you when you put the two together, it makes a bit more sense, but when you look at them apart from one another, it does seem like we waved a white flag on something, and it does. It sounds like we're just doing another one of these silly investigations. No one has a lot to do with the other. And in the very near term, it would appear that the tariffs on these types of products could go up dramatically, dramatically, and most Americans get these products from Chinese consumers. So we know Apple's moving to India. That's a pretty interesting one, right? Who else is going to end up moving their electronics manufacturing to the India's the definitely the Mexico's the Vietnams of the world. I think that's what's going to happen
Doug Draper 11:07
next up. Yeah, it's, I don't know what to think about all this. The challenge to me is twofold, right? If there was some stability in what's going on on a macro level, people can make decisions, right? I there's two things. I heard an article like, imagine if you're a CEO and you're trying to figure out, am I going to invest billions of dollars in building a factory in the United States or move a significant amount of operations to India? And then over the weekend, things change, and then on Wednesday, things change. And so, you know, posturing and the art of the deal and all those kind of things. I get it, but it's not negotiating a real estate deal in downtown Manhattan. It's the global economy, right? And there needs to be some stability, even if it's bad news, there needs to be some stability, which, to me, is what's coming out with the tariff fatigue, right? It's just, it's just crazy. And then you hear stories, and I'm going to say one story, Pete, and then we can go to halftime, because I have a buddy that's a freight forwarder, and he said that there was a customer that brought in two small company, two ocean containers, his duty rate at that moment. And I'm sure it'll change, or it has changed, and everything else. But in that moment last week, the guy just abandoned his shit. He's just like, F it, I can't deal with it, because his duty rate from went from $30,000 to $200,000 and he's like, I'm gonna be bankrupt. Like, I literally cannot afford it. Yeah, I'm gonna burn the money I paid for the all the stuff, but the guy was just like, I'm done. Just forget it, you know, which sucks for the freight forwarder, because he's got to deal with all that aftermath. But you hear stories like that. Those are the human interest stories that are drawing attention. But my whole point with that, Pete, is it, we just need some stability so people can make business decisions. And as you have said multiple times, and we've talked about on the show, you know, panic is more costly than patients, so I think you're gonna see a lot of people just sitting tight and not doing a whole lot.
Pete Mento 13:11
Yeah, the market, as you pointed out, any market, right? They want stability. They want predictability. And part of the chaos of all of this plays into the hands of every party, you know, every party, the United States, the country that we're negotiating against we place into everyone's hands, because that lack of stability is scaring people from buying things and selling things, which ultimately is bad for both parties. But you know, you keep hearing in the news, there's a lot of there's a lot of progress being made in negotiations with certain countries, except for one big one, and that, of course, is China.
Doug Draper 13:44
Yeah, yeah. So brought to us by CAP logistics. We were just chit chatting with Keenan. We appreciate everything he's doing for the show and giving us our soapbox every week. So shout out to cap logistics for making this thing happen. So anyway, I'm gonna go first, because I like yours and I have more feedback on yours. But I don't know if you saw but Blue Origin just blasted an all female crew into space this morning. I haven't looked I'm assuming that they're back on Earth, and things went well, but it was just funny. I didn't realize this. Katy Perry, right? Is was on the voyage. And then some gal, Gail, something or other from the CBS, someone
Pete Mento 14:33
from the view, I guess was on the flight too.
Doug Draper 14:37
Yeah, it's, it's, it's crazy, I don't know. So it's cool that it's all female. It's definitely a press opportunity, especially with Katy Perry, I think she made some funny comments about women finally in space, not finally in space, but about women's crew on a private spaceship. So, Pete, would you go? Space. That's the bottom line. Question,
Pete Mento 15:02
I would love to, I would love to, I'm, I'm that kind of idiot that would when I was a little boy, you know, what? What job did you want to have? That was one of them, definitely. I would, I would absolutely love to go. Would you? Would you go up?
Doug Draper 15:16
Yeah, I think I would. But it would be kind of in the the know, what they did 11 minutes. Just let me float around for a little bit, come back down. I got a lunch appointment I need to get to. So, you know, I'm not going to spend days and weeks and and months up there, but, yeah, send me up for 11 minutes and I'll come back down
Pete Mento 15:37
Doug. I would be insufferable. I would tell everyone that I was an astronaut. I would, I would, that would be insufferable. That would be, like, the coolest thing about me. It would be my entire personality. I've been to space, yeah, yeah.
Doug Draper 15:49
Love it cool. All right. Well, what you got? Yeah,
Pete Mento 15:53
so you know this Make America healthy again. You have a lot of people beaten up on fast food. And if you're part of the X universe, you see a lot of stuff back and forth about McDonald's. First of all, I will defend McDonald's to my dying breath. It was an important part of my youth. Big fan. But it begs the question, Doug, what is your go to fast food restaurant, and what is the meal you would get when you go,
Doug Draper 16:21
Hmm, does this fast casual fit into that? Or is it just everything you
Pete Mento 16:28
get through a drive through, we can say, we could say, so, yeah, fast casual works. Yeah,
Doug Draper 16:34
Chipotle burrito. I don't know all the details, but it would be white rice, pinto beans, steak, sour cream, cheese, lettuce, some corn, salsa. So I don't want to get super specific, but it would be something like that, right?
Pete Mento 16:52
Yeah? So you like to build your own burrito. Kind of joints? I
Doug Draper 16:56
do? I do. Yeah, this is honest to God, Pete, I'm not, I'm not even joking. I have like, four staples, hamburgers, pizza, Mexican, Mediterranean, and you can just rotate that every four days, and then I'll mix in a can of green beans every once in a while, just to check that box. But, yeah, I like the fast food piece of it, but I guess, a Big Mac, where you open it up in the box, and you put your fries on one side, and then you squirt all the ketchup in there, and then your fingers get all gooey because you're trying to get the last bit of fries. That'd probably be my second go to
Pete Mento 17:30
when you say Mediterranean Doug, are you talking like Greek food? Yes, yeah. Okay, that's awesome. I never, yeah. Manchester is mostly French Canadian and Greek people. It great greek food in Manchester, I love Greek. Big, big, big fan. I'm not a big fan of feta cheese, which is weird, but yeah, I love Mediterranean, middle eastern food. One of my go tos is always a falafel on a pita. I really love that. Some tahini sauce. That's good.
Doug Draper 17:57
My favorite nurse or not? Oh, it's
Pete Mento 18:00
not my my favorite still remains from my childhood. Burger King I am. I've not done it a long time, but I love the Whopper with cheese. Give me all the crap on it. I want. I want the lettuce, tomatoes. I want everything on there. I love their fries. I've always, really been a big fan of their fries, and I rounded off with a chocolate shake. If, you're really gonna go, go big. So I worked at McDonald's as a young man, you would think that I would have some kind of affinity, you know, but I don't. I do enjoy McDonald's, particularly when I'm out of the country. But for for me, I love Burger King. And don't get me wrong, Doug, hey, let's face it, you got your five guys, you know, fat burger, all that stuff, water burger, and in and out. That's all great, but the consistent, consistently comfort food level that I get from going to a Burger King, I just can't match it. That's good.
Doug Draper 19:00
Cool. Well, that's it. That's half time. We got a quick one today, so I'm just going to bust into my next topic. This one's kind of kind of quick. Again, it was from a week or two ago, and then we got derailed with all the tariff type of stuff. But in in true form of rolling back a lot of I but I can't even think of the right word here. Pete rolling back different requirements out there is that there was an EPA emission requirement that was going to go into effect, I think in 2027 right? It was a trucking EPA standards which talked about emissions and nitrogen oxide in the greenhouse gasses. And there was some concern that as that became closer, there was going to be this pre buy and all these trucks, right? Because it's not retro, it's anything that's, that's, that's a May 2027, and further. So there was this expectation. There was going to be this explosion of of truck acquisitions and purchases, which was going to spike the market, right? And there was, you know, there are people that will benefit from that, and people that won't, but they were expecting truck prices to go sky high. And I think the one group that that's really going to benefit, which I just spoke about on my first topic was really the small owner operators that were like, I can't afford to to make these these purchases. So it was say, what you will, about greenhouse gasses and the global warming and everything else, right? But the fact that they rolled this regulation back is going to eliminate, least for now, the pre buy surge on trucks before the standards went into effect. So anyway, that caught my attention. I want kind of a trucking theme today, and wanted to throw that out there. So I don't know if you've heard about that or have any comments.
Pete Mento 20:56
I looked into it after I saw your topics, and yeah, this sort of rollback on it. And I don't know if it was more of a political move or if it had more to do with just the financial side of it, but either way, it would have been a hell of an expense, right? And I wonder how those people feel that front loaded at this point. The environmental policies, we say it all the time, right? It starts in California, moves its way across the country, and those policies have a pretty significant impact on cost, really significant impact on cost, whether it's new equipment, changes to fuel, changes to accessories on trucks that make them more fuel efficient, expectations that these owner operators have to do to get their product, their trucks up to code, the safety Parts of it as well. I remember very well Smokey and the Bandit, and I don't think the snowman stopped overnight to get his rest in. I'm pretty sure. I'm pretty sure they started from start to finish. All these things eventually it's easier to make the argument when it's a safety issue, you know, when it's a driver safety, public safety issue, the environmental stuff always gets a huge pushback because of questions as to whether or not it's truly effective. It's kind of like the tariffs you were talking about Doug, I wish they'd just stick to something. I wish they'd just stick to something so that we can create solutions that will help our clients and be able to price it in there. You know, work it into our pricing matrices, make it easier. The flip flopping doesn't help, because this will come around again, yeah, around again. And when it does, we're going to be in the same position trying to understand how to manage it.
Doug Draper 22:29
Nothing before, Yeah, agreed. Alright, bring us home on top your second topic,
Pete Mento 22:36
yeah, but my second topic is going back to these vessel fees out of China. There. The original intent was we were going to pop these Chinese vessels with a $1.5 million fee per port call. It's a lot of money. I think, I think you talked about it last week or the week before, yeah, but yeah, you brought it up. Sounds like, you know, this got to Capitol Hill, and Congress and the Senate just sort of took it behind the woodshed and beat the hell out of it. I'm not sure exactly how that happened. You know, I'm not sure if that was political pressure, financial pressure, whatever the case may be, but the, you know, the poor folks from the Federal Maritime Commission and USTR and all the rest of them, they just took their belts off and be more or less for a couple of days saying, what is the point? What is the point of this? And the point is to rebuild American maritime infrastructure. Okay, great. Well, those costs are just going to get passed on to the consumer, whether that's the NVOCC or the PCO or their ultimate consumers, one way or the other, these additional costs are going to impact Americans. So if we're going to build these new shipyards, if we're going to upgrade all of this, we have to have real, concrete reasons for it, because it is going to impact consumer cost, and the responses back were always the same. This is a strategic move that our country has to do if we intend to put ourselves in a position where we're going to be able to be to defend ourselves and to project maritime power, to do all the things that this country needs to do. We've gotten a little too dependent on our allies when it comes to moving cargo. And I don't know if typical Joe voter is going to go along with that when they find out that each container is costing them, you know, three, $400 more a piece, and that's going to get pushed on people. Forget this money doesn't come out of thin air. We don't just manifest a check for a couple of billion dollars, ocean carriers are going to find a way to recoup that money, because they have to that they have shareholders, and their shareholders have an expectation. So Doug, I think this was something that was conceived in haste, was politically beat up pretty bad, and unless the President does an executive order putting it in place, things going to have a hard time getting all the all the support that it needs to become reality.
Doug Draper 24:44
The one thing that caught my attention was your comment there at the very end. I think this was done in haste, I would say, Yeah, that's exactly what it was then you, you, I don't want to say level heads, right, but you get some people to really understand what that means. What do we as Americans in the United States of America to hey, I get it, man. Let's make more vessels here. You would know more than I would that that infrastructure doesn't exist on the scale that it's needed to be to get out there and have that make money and sell it to other companies across the world, right? You can't just manifest that overnight. So I love the idea. I think it's valid. I think it needs to happen. But that's infrastructure, my friend, that's fascinating people and getting trained and things of that nature that can't pivot overnight.
Pete Mento 25:35
The number that keeps getting popped up there is 200 billion. It's going to take $200 billion so I haven't done this math, but I think somebody should what would an additional $200 billion to the inbound supply chain of the United States end up costing the consumer per household, when all was said and done, when everybody puts their profit on top of that? I think it's a hell of a number. And you know that number needs to be understood before we we're only what, 85 days into the Trump administration, second one, and we're already throwing around numbers like this. We need to slow this one down and have a good long look at it. Understand how it's going to impact the consumer. Yeah,
Doug Draper 26:15
yeah. Slow things down. Take a look at the impact. That's the common theme for this show, for sure, and what everybody's been talking about, you know, for the last 14 days. But you're right. You're like, really, you know, they always have, like, what happens in the what's been accomplished in the first 100 days of the administration, and in years past, it's been, like, a couple of check marks, and everything else this year is all bets are off the table, all
Pete Mento 26:38
gas, no brakes, baby. Yeah, yeah. Snow breaks, yeah. All
Doug Draper 26:43
right. Well, that wraps us up for another edition of global trade this week. Pete, as usual, coming from a hotel somewhere. I'm fortunate enough to be in Colorado this week, so I'm comfy up here in the mountains, but we can't thank you guys enough for listening to us. Please make comments in the post about our topics. And Pete, as you say so eloquently, if it's happening global trade, it will be talked about on global trade this week. Global trade this week. There we go. Made it through in 27 minutes. Pete,
Pete Mento 27:16
we'll see you next week. We'll chat you later. Good luck tomorrow. Thanks. Bell, you.
Transcribed by https://otter.ai