Global Trade This Week – Episode 144
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
1:38 -World Population Projections
8:48 -Possible Punitive Tariffs on China
11:14 -Halftime
18:32 -Laundering Imports through Mexico
22:41 -Baltimore News: General Average Claim & FBI Investigation
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Keenan Brugh 0:00
You're watching global trade this week with Pete Mento and Doug Draper.
Pete Mento 0:10
Hello, everyone, and welcome to another exciting edition of global trade this week. I'm Pete mento. And with me is my good friend and colleague Doug Draper. Doug. I can tell you're in California buddy.
Doug Draper 0:24
The blank walls. Yes, I am in the great city of Fresno, California. Having a good time. weather's great out here. Geez. We talked about weather again. Can we just start this thing over?
Pete Mento 0:37
No, we're gonna keep it buddy. Because it's going to remind us when we hear it again that we got to stop doing that. Yeah, I'm here limits. I'm in Plymouth, Michigan, where I'm giving a seminar tomorrow for DSV at a wonderful hotel. However, as I mentioned before, duck, I don't have a window in my hotel room, which it doesn't seem to bother me. I don't know. I close the curtains and open the curtains. No window. No problem. I'm okay.
Doug Draper 1:10
Yeah, what? What they didn't tell us that every other room in the hotel opens up to birds, blue sky and green trees. And they're like Mentos here. Stick them on the inside.
Pete Mento 1:21
They saw me come a dude. Yeah, they gave me the room, you know, the concrete floor with a drain in the middle and a cot? Yeah. When they saw me. Right. Well, we have some great topics. But we have some extra topics. So why don't you go ahead and kick us off? And we go?
Doug Draper 1:38
Yeah, we'll put this one on speed cycle. The show what I mean by that. So there's something that popped out to me, Pete, you know, world population projections in 2072 070. And I'm like, yeah, yeah. Usual Suspects. It's one of those deals that's going to draw you in? I don't know, it's clickbait or, or what? Maybe close to it. And there was one country on there that was like, whoa, wait, what? Hold on, where did that come from? So here's the top five. And I'm gonna leave number three out. So number one is India. Number two is China. 1.7 billion for India. 1.05. For China, Pakistan, excuse me Pakistan number for 440 million million. And then the USA is at 386. The third one, Nigeria, right. I was. And maybe I'm naive and not following. I think that we're pretty dialed in with global trade on like, what? Nigeria, their population is skyrocketing right now. And it got me interested to say, Okay, what's going on in this country? It's still a long way away. But the trajectory on this thing, the bell curve is just through the roof. Right? So here's a couple of statistics on Nigeria. peatonal, get your read on it. So highest birth rate in the world, this is crazy. 50% of the population is under 19 years old. They are just just cranking it, right. And so the other things that are that are going on there is that they're concerned about. So anyway, that's what's going on. There's a lot of kids being born. It's a young population, there's a lot of runway to have success, or potential failure there, Pete. But here's some of the challenge, right? So what happens whenever the young start becoming a little bit more educated and look for something to challenge themselves a little more, a little bit more are the young going to leave? Right? That's a big deal. It's emerging. It's coming around. But as you know, in this day and age, if there's not opportunity in their country, there is a chance that they're going to leave. So that's a big concern is yeah, they're cranking out babies, and that population is skyrocketing. But what happens if the support systems don't go there? The other thing, shocker on this infrastructure, the three C's congestion capacity, and cost to not just made that up as far as the three C's go, as far as getting their, their ports and infrastructure set up. Right. So here, here's two final comments. Pete number one is Loggos, their main city on the port or excuse me, on the ocean, lots of potential lots of congestion. And the infrastructure is just horrible, right? So are the roads and the connectors that go into the port, but Nigeria is going to bet on oh, by the way, let's have the Chinese come in and fund the growth of the port. It's the deepwater port outside of Loggos 75% of this project, it's like 1.5 billion is supported, financed by the Chinese. So that is very interesting. The other piece that is interesting on this is like okay, what's going on in Nigeria? What are they exporting? What are they making? So Here's the top exports, crude petroleum, petroleum gas, fertilizers, refined petroleum, and let's kick in some gold for good for good measure. If you look at all of those, the top three of the top five, petroleum petroleum petroleum. So there's it's right for potential fraud. I don't know. It's crazy. The potential with this country is unbelievable. I didn't even see it on the radar. Is it similar to what China was decades ago? I don't know. I always say keep your you know, don't don't sleep on India. Nigeria is an interesting one. It could go one or two ways, right? Good or bad? Have you heard about Nigeria? Pete? Are you on everything? I just? Oh, yeah, yeah.
Pete Mento 5:45
So first, I'm really the demographic studies now as they relate to economics. And there are people that believe that China already has less than a billion people. But the the general feeling amongst academics is that China will be the first country to have over a billion people and then under a billion people. And that has to do with birth rates, which you just discussed. The United States has a similar problem. Most Western economies have a problem with it. China is particularly bad. In the US, we have about 1.9 children to 1.8 children, depending on the study being born. For every woman in America, we have to be at 2.2 to replace the people who die. So we're and our numbers appear to be declining, and that younger people aren't having more kids. So what makes Nigeria one of the most fascinating places is, it has some built in infrastructure because of the Chinese who we talked about that beautiful new port there. It's gorgeous. I mean, it's it's one of the most beautiful state of the art ports in the world right now. Because it's brand new, and it was built by Chinese money. And China sees Africa, particularly that part of Africa, as America's version of China, it will be China's version of China to America, it's going to be a place with inexpensive, very easily available labor. And when you talk about energy, right, it's one of China's biggest problems is getting energy in order to keep up its production cycles. Well, energy will be a problem. Unfortunately, for our friends in Nigeria, they need better power production, power plants and easy electricity to get where they want to be as that massive exporter. Last thing I wanted to mention. You know, I've been to Nigeria many times, it's a fascinating place. One of my most interesting cultural moments, is being at dinner with seven people I think it was when your phone rings in Nigeria, it's not rude to just pick it up and start talking. So you and I could be in the middle of a conversation. And your phone would ring in the gaps going on. Like you don't even say excuse me, you just answer it, right? Because there might be money on the other side of that phone. So you know, they're very, very, very enterprising people. But corruption is a real problem in that entire part of Africa. And American companies have had a very difficult time managing that Chinese companies don't care. So it is it is set up pretty well for that relationship with China. But let's not forget much of that oil, much of the existing infrastructure, much of the oil exploration is being done by Western companies. It's being done by by British, and German and French and Dutch, and American and Canadian companies. So you got a little bit of one another here, pal. Yeah, but great. Take Take.
Doug Draper 8:30
Yeah, yeah. It'll be interesting. For sure. I hope they don't get taken advantage of that loss opportunity. But anyway, all right,
Pete Mento 8:38
I think being taken advantage of as part of every country's growth projection man.
Doug Draper 8:44
valid, valid, good way to end that topic. What do you got for yours?
Pete Mento 8:47
Well, my first topic is about how now in the news cycle, we're starting to see more and more about possible punitive tariffs on China, by Mr. Trump if you were to be reelected. And some of them are downright terrifying. So the first is a proposed 60% tariff on nearly everything from China 60% On top of that, additional tariffs, so imagine paying 60% on all steel and steel products, and then an additional 15% On top of that. So that goes for parts finished goods. One of the really scary ones is 100% tariff on certain types of automobiles, and automobile components, mostly focused on electric vehicles. So the US labor movement is very concerned about flooding of cheap, which we've talked about cheap electronic cars, electric cars coming into America. Without them taking the opportunity to sell these cars they put so much research and development into both of these sound ridiculous are all three of them. You know, someone who, who watches global trade, you know who pays attention to it, but a 25% tariff on about 40% of the entire HDS sound be ridiculous before President Trump's first term, Doug, I think if he's elected, that he's going to do it. So I've been telling everyone that will listen to me. Be prepared for it. It's a coin toss, coin toss plus 1%. I think it's more likely to happen than not happen. And people should be prepared for it. Because there is a legal way he can do it.
Doug Draper 10:21
Yeah, so we dabble. We talked about not getting into politics, but we just kind of steered off the road, we got the one of those things called the rumble strips on the road. We just kind of hit that for a second there. So
Pete Mento 10:34
yeah, don't do it. Don't do it, Doug.
Doug Draper 10:38
interesting topic, Pete.
Pete Mento 10:45
Yeah, it's tough to talk about this without getting into politics. But I think just the factual side of it, you know how likely it is to happen. I think, factually, it's pretty likely. If he were to be reelected, I think, factually as well, it would be detrimental to the overall health of the global economy. So I'll just leave it at
Doug Draper 11:01
that. Yeah, I truly don't want to get into any of that or make any comments. So one way or another. So fair enough. All right, my man. We I know we're zipping through the show. Halftime brought to us by CAP logistics. Please check them out at cap logistics.com. They give us this opportunity every week to spend time with our listeners. And this is the time where we get off the rumble strip and we talked about whatever the hell we want to talk about for a few minutes. So Pete, yours is kind of irrelevant for the timing. So I'll let you rip it. Oh, yeah.
Pete Mento 11:34
Well, it's one of my favorite times of the year. It's the NBA and NHL playoffs. Fabulous time of year for both sports. You know, it's more exciting. There's much more at stake, and I actually start to care about basketball, which I don't for most of the year. I always care about the NHL playoffs but being a Bruins fan. I'm just expecting disappointment. But the two teams that people are expecting to make the finals are the Denver Nuggets and the Boston Celtics now now, you and Keenan are Denver guys, and I don't know if your nuggets fans. But I think it would be a good idea for us to have a kind wager where I'm proposing if whichever team makes it farthest including if they both make it to the end. The loser has to buy the winner lunch. I think that's fair. So I didn't know if you guys were up to it or not. It's two against one but the odds are even so I'd be happy I'd always buy you guys lunch, but I think this would make it a little more painful if I lost it in a bet. And you guys absolutely stuck it to me with a very expensive lunch. So are you to up for the bet you can speak on behalf of Keenan I mean he's underage anyway, so he needs an adult.
Doug Draper 12:48
I'm all in. I'm all in right so big a big basketball fan with the nuggets. Right So Jay Hawk by by born and bred my daughter's there she's a rower the whole nine yards. So Kristen brown ever follow that guy? It's just a kind of anyway, what love the nuggets.
Pete Mento 13:05
The nuggets? Yeah,
Doug Draper 13:07
he plays with the nuggets every once in a while. We'll have some amazing highlights. He had a couple of dunks the other night posterizing Rudy groped go go there, I think. Anyway, I'm all in. That's a great idea. And you know, the nuggets lose $5 footlongs at Subway all day long, my friend. Oh,
Pete Mento 13:27
yeah, buddy. I'm in. That's
Doug Draper 13:31
all right. All right, well, just kind of like you it is officially music festival season. Coachella, which caught a wave a couple of years ago just got over. And so being in California, everybody's chirping about Coachella, yada, yada, yada. Best thing ever. But it kind of kicks off the season because it's down in Palm Springs, but so I never understood so here's a couple that are going on in case you want to make it right. And some of these I've heard of and some of them like well, whatever. So Newport Jazz Festival. Obviously I've heard of that one. Hopefully most of our listeners. Austin City Limits different than South by South southwest. But that that's coming around. See hear now festival Asbury Park. It's kind of in your neck of the woods. Springsteen, Bon Jovi, stone Coney, those kinds of accounts. The Boehner the Bonner room Music Festival in Manchester, Tennessee. Have you heard of that one?
Pete Mento 14:31
Yeah, that's pretty popular.
Doug Draper 14:34
Yeah, I don't even know where Manchester Tennessee is. So I'm going to buy this one I actually one of my son's buddies drove to this thing, the Electric Forest in Rothbury Michigan. I think it's an EDM show. And it's in the forest. It's in the Sherwood Forest, which I don't even know if that's real. But yeah, that one's going to be pretty, pretty crazy. is a lot of early 20s type of folks Monterey jazz festival we know that one island hopping song right festival in Fort Myers that's pretty much a Jimmy Buffett festival. CMA fast which is more country. The Bristol rhythm route reunion, Bristol, Tennessee seems like Tennessee has got a lot of these things. And then the last one Joshua Tree Music Festival in Joshua Tree, California, I think what Californians just want to hang out in cool areas, right? And they don't really care who who's playing. But last comment on this is that my wife has a couple of friends. They're like adults, and they spend the summer going into these shows. And they're like, where do you get the money? These things are not cheap. You have to travel. This is all man and me. Where do you get the money? How do you get the time off? You know, it's insane. And they just spend and go to 788 shows. But anyway, it's music fest season. There's a lot of good ones out there, depending on what type of music genre you like. So, enjoy, listeners, go grab one. And if there's a particular one that you're fond of let us know in comments, and we'll be sure to call it out on the next show.
Pete Mento 16:15
Well, there's three dogs that I love. The first of course, is the New Orleans jazz and Heritage Festival in New Orleans, which is not just jazz. I mean this year, they've got Foo Fighters. I mean, huge, huge bands and I went a few years ago really had the most wonderful time. Another one in New Orleans is called Essence fest, which happens probably at the worst time to be in New Orleans. It's usually in the beginning of July. It's hot and nasty. But the whole thing is in the dome. So essence fest is all it's by Essence magazine, or it used to be I don't know if it still is. It's all r&b and hip hop. And a huge part of that is going to be old school, r&b and hip hop. So all the folks that we grew up with all the old hip hop that we listen to. And then the third one, Doug, I'm going and I'd love for you to come with me. It's called Riot Fest. And Riot Fest is in Chicago. huge announcement last week. They got Slayer. So they have Slayer Metallica, poison. I believe Motley Crue is playing, but also like really big headliner, metal speed metal bands, and I guess it's over 310. So if you want to go bang your head and get a concussion, they've got that. And then if you want more of the old school bubblegum, you know, metal that we listen to in the 80s and 90s. They're going to have a ton of those bands too. So I'm telling you, but I think we should go to Riot Fest together. I'm definitely going because I don't know how many more times in my life. I'll get to see Slayer. I'm fired up.
Doug Draper 17:43
You wondering I was just thinking right now and we're talking Where is Lollapalooza on that list? That still goes on? Right? That's been in Chicago.
Pete Mento 17:51
I went to the first one Doug Lollapalooza, with Jane's Addiction, Nine Inch Nails and Rollins band, and revenue, I think no thermals for actually, it was a fantastic time, I'd say it was in Chicago. I had such a great time. I was also 21 years old. So I don't think that I could handle that many people in that much madness all at once anymore. So like I can do it.
Doug Draper 18:14
Yeah. Agreed. We'll kick to your Monterey Jazz Festival. And a little bit more your speed nowadays.
Pete Mento 18:19
New Orleans, New Orleans, New Orleans.
Doug Draper 18:21
All right there. There you go. There you go. So
Pete Mento 18:26
all right. Good topic.
Doug Draper 18:27
Yeah, you go you go my friend.
Pete Mento 18:29
Oh, no, you're your first. Go ahead.
Doug Draper 18:32
Go ahead. All right. So Pete, I'm wondering if China is laundering inventory through Mexico, and using de minimis and the 321 tariffs to skirt the system. Right? It seems so obvious when you break it down. But with I mean, basically, China's importing goods into Mexico, they're setting up all kinds of warehouses, literally within miles from the border. And when you're buying things on tick tock, tick tock, tick tock shop, and things of that nature, they're just cranking it across the border and entering into the parcel supply chain and getting it out there. So it caught my attention, like, and there are large multinational companies that are supporting these warehouse services and infrastructure. So I think it's popped up so quickly. It's happening so fast, right, with the fast casual concept. And you know, when you're buying stuff online, that it takes two to three weeks. Well, that's not in a warehouse anywhere in the United States. And so, I think it's going to grow in popularity. This is right up your alley. So I wanted to get your read of setting up shop right next door, taking advantage of rules and regulations that are set by the US government that are now being circumvented in an effort to basically launder inventory and not pay duties and taxes. So, I know you have comments on this one. Pete is a softball I just threw out there.
Pete Mento 20:05
Yes, yes. So the BDI weaseling. Me That's a trade compliance consultant loves this, because there are so many ways you can take advantage of it, in order to increase profit, and lower that time of delivery, you know, I mean, you put in a truck, cross the border into Laredo and drop it off to the post office stare and dare to, so people are getting their stuff faster. Labor is so cheap in Mexico right now, you're saving on warehousing distribution, one of the problems you have is finding warehouse space and places for production close to the border. Now, the part of me that's worried about commerce, is very worried about this. So Ted Cruz and a bunch of other people actually have a bill in place to eliminate the 321 exemption for all Chinese imports. And the reason for that, we've talked about this a lot. There are a lot of these fast fashion companies, and a lot of other companies who are bringing in counterfeit goods, they bring in stuff that's been made by child labor and forced labor. And because they can't inspect everything, to stuff slipped through the cracks. So on the one hand, love it. Love it, you know, think it's great. On the other hand, I could pardon me, I can understand the dangers that people are so concerned with, because I've read too much and talk to many people we all have, right? That have seen it taken advantage of Doug, so you want to talk about a double edged sword. This is a scary one. This is a scary one, the more it grows, and with China putting so much money into Mexico right now. It's just a layup for them.
Doug Draper 21:33
Yeah. Yeah. It's crazy. The one thing that caught my attention there is if you insert it into the USPS system, it's not going to take one to two days be
Pete Mento 21:41
No. Oh, you had to be smart. You
Doug Draper 21:45
want yeah, a little bit more if if the delivery is going to San Diego, possibly, but anyway, had to get the jab in for the post office. Anyway,
Pete Mento 21:55
I believe in the USPS, I believe.
Doug Draper 22:00
Good deal. But I love it, this topic is going to get more and more attention. And it'll be interesting to see what happened. Can the US pivot enough to control it and protect themselves with duties and taxes? I don't know. Meaning can they solve this problem in the next six months to a year? I don't think that's possible. But anyway, I don't think
Pete Mento 22:19
it's the duties and taxes done that they're worried about. I think it's the products and the safety of those products, and how those products were made. That's what they're most concerned with. So, to me, Theresa taxes are a tiny part of our budget, honestly. That anyway, I could talk about this all day,
Doug Draper 22:35
I guess. Yeah, that's surprising that comments surprising to come in from you with a lot of revenue. It's true.
Pete Mento 22:40
Yeah. So my last time with Buddy is a burner. So the the terrible incident that went down to Baltimore, two big pieces of news come in over the weekend. The first is, it's a general average claim now. Right? You want to talk about pain. So general average for people who don't understand, it's when the vessel owner says, Hey, listen, everybody with cargo on this ship, until we know what went down, we're gonna hold you responsible for part of the damages and the cost of repair and all the rest of it. Wow. So they've done that, which means that the cost of that is going to be Peanut Buttered over everybody's cargo. So if you want to get your containers off, you'd have to put up a bond for the amount that you have responsibility. Or if you have a general average writer on your marine insurance, you're good to go. The second one, though, really blew me away, the FBI raided the vessel. So I would have loved to see like, guys on helicopters, fast roping, but it wasn't like that. They raided the vessel because it's now under a an actual investigation, a criminal investigation by the Federal Bureau of Investigations. I don't have a lot of information on this. But the FBI wouldn't get involved if they didn't have some good, good information. So I wonder if they're holding the ship's owners responsible for what we've talked about in the past a history of issues and a history of, of maintenance issues. I can't wait to find out more about this one. So I have a feeling we'll be talking more and more about this as the week's go on duck. Yeah.
Doug Draper 24:11
The general average insurance is something that nobody talks about, very often because it doesn't happen and it's a killer. Right?
Unknown Speaker 24:20
In the face.
Doug Draper 24:22
Yeah, there. There's executives popping up right now saying what is general average and why are we getting screwed? And the the only comment I have on the FBI investigation is there has to be somebody to blame for this situation. And it's unfortunate. Stick it's an accident, right? You did something wrong. When you backed out of your garage today, right? I did something wrong. When I probably went through security and you went through security to get on a plane. Things happen. But in this day and age, there has to be somebody to blame and it'll be interesting. Need to see how this transpires and unfortunately feel somebody is the fall guy, right? It literally an individual because everybody's going to push it off. And it's unfortunate that we have to get to this piece, but there has to be somebody to blame. And well, that'll shake out it can't do this and then say, yeah, it was just an accident. Something's going down an individual, a company or somebody. And it's unfortunate that this is the approach.
Pete Mento 25:26
Agreed, buddy.
Doug Draper 25:27
Yeah, cool. All right, we're gonna wrap this bad boy up. I'm looking at 25 minutes on our clock. I think that's a record. And, Pete, I know you're in basically a room with no windows in the basement. I don't think you have hot water. But I appreciate you being here. Always. We appreciate our audience engaging with us. We just love doing the show every single week, global trade this week. We'll catch you again. Please comment on our topics. We'd love to hear from our audience. So, Pete, good luck tomorrow. It's always good to see us. So that's it, man. Take care.
Pete Mento 26:01
See you buddy. See you next week.
Transcribed by https://otter.ai