Global Trade This Week – Episode 152
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
3:03 -Red Sea Shipping is Down 90%
6:03 -East Coast Dock Workers Walk Away
11:22 -Halftime
17:37 -Replacing Income Tax with Tariffs?
20:00 -Chinese Ecommerce Prepping for Peak Season
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0:00
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper
Welcome to another edition of global trade this week. It comes to you every single week, hence the name of our show. My name is Doug Draper. I'm coming to you from Colorado. I'm only half of this podcast group. The other half is actually somewhat stable in his corporate offices in the District of Washington DC, Mr. Pete mento. Pete, what's going on, man?Pete Mento 0:35
Hey, buddy. Yeah, I'm on the phone this week, people? My new iPhone 15 Sure. That just means team and so angry hearing me say that. And I was having a hard time with my laptop. So we're doing it. We're doing it. Old school here from the phone. So you'll have to excuse me if I don't have the landscape. Beautiful camera. Just me kicking it old school here on the phone. But yeah,
Doug Draper 0:59
looks good. It's good. You got your shirt open a little bit. So it must be a casual Monday there. DSB. You're all buttoned up.
Pete Mento 1:07
I like to give the disco vibe. You know? I like the way
Doug Draper 1:10
you play it. You play it off.
Pete Mento 1:12
Yeah, yeah, I just need to get my little gold. My little gold horn for my chain here. Then I feel like one of my family members.
Doug Draper 1:19
Nice. Love it. Love it. All right. So anyway, before we get started, what's that?
Pete Mento 1:26
Are you a jewelry guy? Now when your wedding ring? No.
Doug Draper 1:29
There's my wedding ring.
Pete Mento 1:31
Oh, wow. Wow. Yeah. So you don't wear like a chain across on your neck or anything? No,
Doug Draper 1:37
no, I have nothing. Yeah, what about you? I don't see you wearing much jewelry. Oh, well,
Pete Mento 1:42
I you know, it's funny. So I got my chain with my st. My St. Michael here, you know, keep me out of trouble. And sometimes I'll wear my classroom from Harvard, but not really. No. I mean, I don't even wear a watch anymore, buddy. Because I just look at my phone.
Doug Draper 1:56
Yeah, that's true. Yeah, I gotta here's my watch. And it's got duct tape on the back of it because the little plastic thing that you tuck this into so it's a swatch you remember swatches back?
Pete Mento 2:09
I love swatches. Yeah, I used to wear to back in the 80s. Oh, that's the thing. Yeah, for sure. One was set to the time in London, because I thought I was so cool. Spoiler alert, Doug. I was not very cool. I was not very cool at all. Yeah.
Doug Draper 2:24
Yeah.
Pete Mento 2:26
That's that's that's our global trade this week Rolex that Doug just showed you.
Doug Draper 2:30
Yes. Yes, watch with duct tape to make sure it doesn't flap around. And
Pete Mento 2:36
you and I, you and I are very flashy. Now that I think about it. You don't want this.
Doug Draper 2:41
We have pressed collared shirts on today. So that's all you can ask for on our show.
Pete Mento 2:46
It's pretty big for me to actually have a shirt on and don't have a hat on backwards. But I'm in the office. So I gotta bring it. Yeah. Well,
Doug Draper 2:55
speaking of bringing it, you get the the kickoff for Topic number one. It's like it's gonna be a good show. So let her read.
Pete Mento 3:02
Yes, sir. So you know, this, this particular topic is one, file it under? No way captain obvious, right? Like this is, this is something that should be so easy for all of us to understand. And to know, but it took someone actually putting out some statistics to really get everyone's attention. So the ongoing Red Sea crisis has reduced the amount of shipping through the Red Sea by 90%. And that's inclusive of all carrier types. So that's container ships, that's LNG carriers. That's, you know, large Crude Carriers. 90%. And then the ongoing costs to global trade has been positively incredible. So as you as you're seeing rates rising everywhere, that's only part of it. The end of the end of the unavailability of my words are escaping me today, unavailability of certain types of inventory has also been taken into account. And, you know, globally, this is having a pressing concern, particularly for Europe, they're the ones that are being the hardest hit with the amount of time and length it's being taken to get to European ports, and then into China, with stuff going into China, from Europe, particularly large equipment involved in Project cargoes. So yes, file it under Captain Obvious, but now we can give you an idea of just how much of an impact it's had for global trade. And with no end in sight. Currently, it looks like this is going to be kind of our default setting for I don't know, Doug, you know, at least the next six months, I would imagine. Yeah, but I know when we did our our prediction episode, you and I were pretty sure this is gonna kick the world in the ass and it looks like it really has tough.
Doug Draper 4:39
Yeah, yeah. I love the statistics, right? Because everybody can talk about it. You know, the talking heads. You and I are part of that group of like, Hey, here's what's going to happen. And the fact that we spoke about it and now there's statistics and data that 90% is amazing. And I think they said like 10 or 15% of the time Daley world commerce moves through there. So you take that number and say 90% of it's no longer. And then there was another stat that I saw that it's 100 or excuse me, 11,000 nautical miles that's added when you go around. Yeah, that's insane. And then the fuel price to chase that and do everything else is that it? You know, it was talked about and predicted now it's it's happening and those numbers are staggering. It's just crazy.
Pete Mento 5:29
And 65 countries are now being negatively affected by by the crossing, I thought that was a pretty, pretty terrifying number. It's not just hitting the United States. It's hitting everyone. So if you've ever had any doubt about how very little it would take to disrupt global commerce. There you go, buddy. You know, it's another million dollars in fuel costs. One of the ships that was in that statistic, too. But yeah, it's absolutely incredible. Man, it didn't take very much to up end the entire global commerce. Just a bunch of people with a different mindset and a bunch of rockets, I guess.
Doug Draper 6:01
Yeah. Yeah. Well, that kind of dovetails a little bit into my topic. And maybe it's Captain, My Captain Obvious 2.0. But I think people need to really understand that the supply chain is going to get nutty. When it comes in. I was thinking about the second half of the year. So I was thinking about one of Kevin Bacon's first first movies, he was an animal house, right? And it's all chaos at the end, and he's screaming, remain calm all as well. Right? And it's, uh, he's saying that, but there's this chaos all around them. Right. And it may not be that we may not have a Kevin Bacon moment coming up. But Gosh, darn it, if people aren't ready for a plan B. And we've spoken about this real recently, there's just more. And the reason I'm bringing it up again, Pete is there's more and more things that are just like, check that box, that means it's gonna get crazy. Check that box, that means it's gonna get crazy. And just last week, the, you know, the Longshoremen Association, was kind of pulled out of talks. They're like, Hey, we're walking away from initial contract negotiation discussions, you know, and people say it's kind of a shout or a shot across the bow. Right. So there's a couple things to that number one is that that group represents three dozen 36 ports from Maine down to the Gulf of Mexico, that is being impacted. So are potentially impacted, right. So you look at the West Coast, you got basically three, maybe three and a half LA, Oakland, Seattle, and maybe throw in Portland, as the point five. Right. And so, but you look at the East Coast, 36. Right. And a lot of them are smaller, but those are the the the second tier ports that people are redirecting, hey, Baltimore's, this crazy thing happened in Baltimore, will this redirect, you know, down the coast or will redirect up? This situation covers all of those ports, right. So if something goes crazy, it's going to be a huge impact. It's, it's, it's nuts. The other thing is that ocean freight and air freight rates are starting to creep up a little bit, right. I heard this morning that they're saying it could be 20 grand to get to California. And that's just, you know, I'd have to really look to see who that you know if it was CNBC or something like that. But you know, that's going to come into play. So you have the Red Sea that you just spoke about. You have the Longshoremen situation that covers a dramatic amount of ports that could be impacted. Right, and then you have people just kind of kind of freaking out a little bit, but wildcard on this one specific to the ports beaten, then I'll wrap it up is that 23 was kind of the year of labor, right that we spoke about how many different entities had their negotiations, and the union pretty much won out on every single engagement. So the question is, is the East Coast longshoremen? Are they kind of late to the party? And things have changed in 2024? Or are they looking at this and saying, This is our chance to, you know, to get what we want? So I don't know, that's another maybe topic for a different show. But did these guys miss the year of labor in 2023? Or are they smart enough to know that they control a heck of a lot of ports from Maine down to the Gulf? And they're gonna get what they want as well. So I don't know what's your take on that? Oh,
Pete Mento 9:39
they know, Doug. Yeah, that's like first, I believe the kids use the term get that bag. That bag of money. The east coast port, the unions that are associated with the dock workers, they might have missed out on their opportunity, but they're chalk. They're walking into another one now with the Red Sea. And people well remember what COVID was. like. So I think they're, they're in a tremendous position to negotiate from leverage add to the fact it's an election year. So, you know, you talk to a lot of the pundits, and the people that know a lot more about this than I do. And they say, Well, President Biden is definitely going to get in there. Okay, well, that doesn't mean that there's not going to be a good wall of being between then and when they finally make a decision, you know, to labor forward, the administration right now. So odds are, he's going to be trying to push the opportunity for labor. And the ocean carriers want more automation, man, they've been begging for it, particularly on the east coast. But the thing, no one's talking enough about Doug. And we talk about rail all the time on the show all the time. If stuff ends up being just rerouted to the West Coast, because of a real strike, we still don't have the rail capacity to manage that stuff moving all the way east, it's gonna cause a blip. And that blip is going to hurt. And everything is so interconnected. There ocean over the road rail, it's going to end up impacting everything else. So this is probably the first pull on that sweater that we'll see through the peak. That's going to be a pretty difficult year. You know, q3 q4, for finishing up the year for transportation. It just takes one domino to fall for all the rest of them to be impacted.
Doug Draper 11:18
Yeah, yeah. Great analogy on the sweater. Love it. So cool. Well, that brings us to halftime is brought to you by CAP logistics. They give us our platform every single week, and we can't thank them enough for that. And they also give us a halftime which is where I can just talk about whatever we want to talk about. And I look forward to that. Every single week. Sometimes it's my favorite topic.
Pete Mento 11:42
Usually is your favorite topic. Yeah,
Doug Draper 11:43
usually is yes. So yeah, well, what you got I kind of liked yours when you shot it over a couple minutes ago, buddy.
Pete Mento 11:51
Yesterday was Father's Day. You and I are fathers. It's it's a very wonderful filling noble thing to get to be a father. But on Father's Day, you compare it to Mother's Day, right? We get utterly shafted my friend. It's no other way for me to put it. Go to breakfast yesterday morning. About what 930 My favorite breakfast spot. Just go ahead and sit down. plenty room reservation, are you crazy? Have a seat Doc, you know, we'll get you get your eggs, no sweat. You. You could probably get a reservation for any restaurant you wanted to go to yesterday, the. And then of course, there's the gifts and all the rest of it. I just want a card. I don't want gifts to my money anyway. Why are you spending it? As opposed to Mother's Day? Which is this all out financial assault for mothers? And I think honestly men, it's because they demand it. I think this is because men, you know, we're told on Father's Day go grill for everyone for dinner like Oh, so this is my restful father, just Father's Day, I gotta go put some steaks on the grill. Nah, we don't put our foot down and demand some type of, of, you know, love and affection on that day. Most of us just want to be left the hell alone for the day. And I think that's why it's so vastly different. one versus the other. And I think it's time that we put our foot down, Doug. Yeah.
Doug Draper 13:12
Yeah, that's an interesting take. I think it's just the nature of males and females, right. Dudes are like, Hey, I've been doing it and just leave me alone. I did three and a half hours. I did three and a half hours a yard work while the rest of my family went on a bike ride. And I loved it. I loved it. That was what I wanted to do.
Unknown Speaker 13:32
You got left alone to do what you wanted to do. Yeah,
Doug Draper 13:35
you want to go on a bike ride. Now catch up with you later. It's Father's Day. I'm gonna go cut down on shrubs and trees and stuff like that. So my car? Yep, yep, yep. So good. And then we went out to dinner and of course, you know, it's coming from my my pocket but fine. We got some family time and it's good. So nice. Yeah,
Unknown Speaker 13:57
buddy. All right, what you got?
Doug Draper 14:00
Well, mine is related to I don't know if you saw that the Board of Directors at Tesla. Last week is topics a little bit late to the game but if you remember he had like a $50 billion paycheck comment I'm gonna keep this super simple and I know that there's some other things that are in play but something that was set up pre COVID Time to pay the piper and then the judge I think in Delaware struck it down. And then the you know, the board the the shareholders were like, Nah, we agree $50 billion. Right so and then Musk you know, he's got some crazy quotes he did on on on x and everything else. That guy is just amazing. Love him or hate them. Right. And I do both relatively frequently, but it's like he's got a cult. He's got a cult with Tesla. And the people that love Tesla's his SpaceX its neuro link like it's just crazy and And now he's getting $50 billion from his shareholders, because I think that there's value. So I don't know if there's pink Kool Aid grade Kool Aid, or if he's just a mastermind of a cult, but it's just not I mean, $50 billion. That's insane. That is absolutely insane. So what's your take on that story?
Pete Mento 15:19
Well, I love it being, you know, a to the core capitalist, if you can negotiate a great deal like that, and then come through, you bet on himself, and the guy one. And then if you read the other comments from last week, he said that their robotics should be ready in the next couple of years. Yeah. And that Tesla robotics is gonna catapult them into a trillion dollar valuation. So he'll easily be the most wealthy human being in the history of the planet, if that's the case. So I'm all for it, man, I think you should get paid. And if you can negotiate it, you follow through with it, you bet on yourself. Good for him, then good for him. I don't drive a Tesla. And I don't own any of their stock. So I could care less. I'm just happy for Elon.
Doug Draper 16:00
Yeah, yeah. It's like, well, what's that worth? It's worth what people will pay for it. Right? Exactly. Once your house has value, it's really valued at whatever, nobody's gonna pay for it. So what's his value? I guess, at this stage of the game, it's $50 billion. But the last thing on this piece, then we'll hit our second half. At what point it's going to happen. And I think it may happen in our lifetime. Somebody's going to be a trillionaire. Right? It will be him. I mean, the heat fluctuates between, you know, gates and him and a couple other folks. I can't think of the name straight away. Louis baton. Oh, he's
Unknown Speaker 16:41
always number one. Yeah, yeah. He's gonna be
Doug Draper 16:44
you know, it's just like compounding interest, right? It's just gonna go like this, and then it's just gonna skyrocket. I think there will be a trillionaire before he'll be the first one. Yeah, so
Pete Mento 16:53
these robots, buddy. They're gonna cost $20,000.10 grand to make $20,000 to put in place, they'll do your laundry, they'll clean your house, they'll drive your car to go do stuff. Are you kidding me? 20 grand for that. I might buy to, for God's sakes, right to run in my house for me. And you know, the expectation is there'll be 10 humanoid robots for every person living on the planet. He is going to make so much money. So much money. He'll be the first trillionaire there'll be the one.
Doug Draper 17:24
Yeah, cool. All right. Well, that won't be you and I anytime soon, but we will know. We have this, this great show. And we're about to start the second half of it. So I'll let you get us kicked off my friend. Oh, buddy.
Pete Mento 17:38
So last week, he came out in the news that President Trump is here, throwing out there the idea of eliminating the income tax, just eliminating it right. But replacing it with tariffs. So in order to completely eliminate the income tax, yeah, you would have to put a tariff on all imports of around 100 to 130%. And that's everything right? So what if he just did China, and then cut it in half? You know, you begin to look at all these numbers. The knock on effect of this is something we learned from Smoot Hawley way back in the day, you dramatically increase tariffs on goods coming into America, people are going to buy less foreign goods, well, okay, fine, whatever. But that means those people in those other countries aren't going to have jobs and money to buy American exports. And that's really what drives our economy. So what I'd be fascinated with the idea of increasing tariffs to decrease income tax, of course, because I think, you know, taxes are theft. But the the, the ongoing part of this is, if you play around with this too much, you could wreck the entire global economy. The entire thing. Yeah,
Doug Draper 18:46
no, I agree. And I pulled a quote, when I saw this, I was like, okay, that's Smoot. Hawley from back in the late 1920s. Right, it's almost 100 years ago. And this was the quote, it said, this is an act of to provide revenue, to regulate commerce with foreign countries, and encourage the industries of the United States and protect American labor. That quote, could be the billboard for what he's talking about right now. I mean, it's the same thing. And you talk about the damage that Smoot Hawley did at at the time, and nothing fixes problems, like a good war. But, you know, to light like you said, it's more interconnected now the globe and the economy than ever, ever before. And it would be interesting, to say the least, about how that would impact I don't know, it's crazy.
Pete Mento 19:37
And it's an economic pipe bomb, buddy. I don't think this is the right way to go. I would rather see a domestic consumption tax, like a VAT and I hate taxes. But I'd rather see we were we were hit on consumption rather than what we earned. Anyway. I'll leave it at that. Yeah, no politics. No politics. Yeah. Yeah.
Doug Draper 19:56
I think unfortunately, we're going to cross that line a few times before before November. All right, so my last topic, man, is I want to know, who the heck's getting ready for peak season? And I'll tell you who is it's the Chinese ecommerce companies, there has been so much press related to the fast fashion world. So getting their ducks in a row in order to support third and fourth quarter and the holiday season, right. So cargo jet, which is a Canadian company, they just contracted to do three flights a week at a China and a second tier airport near Shanghai, right. Hong Zhao, and all of their customers are ecommerce, Shin. Teemu, the whole bit. And there's a, it's contracted with a company called great vision Express. And that is the powerhouse that supports all of the fast casual companies. And so they're like, let's just get this stuff over here as fast as we possibly can on air freight, the whole supply chain solution that those type of things have have come up and you got the three Oh, ones that kind of had some some bubbling up last week with 3d
Unknown Speaker 21:10
Wondering what 320 ones.
Doug Draper 21:13
Oh, sorry, what would I say?
Pete Mento 21:16
The three of ones the Chinese tariff. Trump, but you've talked about chapter 86. de minimis. Yeah.
Doug Draper 21:20
Yeah. Yep. Yep. So anyway, thanks for that correction. So the interest, the scrutiny, the review, of de minimis just coming in, you know, there's the fentanyl and the ozempic, that's been smuggled in, I get that, right. But the interesting thing is that these companies are starting to own the rails, you know, we spoken about it in the past, it's like, we're not going to contract out, we're not going to be in a position where we're going to be impacted. We're going to develop our own links via air freight to support our customers, and the fast fashion industry, to make sure there's no delays with product to get from China over to the United States. So I think you'll see a lot of partnerships coming up in the news about how those companies are going to protect their best interest as fourth quarter comps and all the chaos that we're talking about that our listeners need to understand a Plan B, coming in q3, and q4 because we will continue to talk about it but I'll tell you who's getting ready Pete, Chinese ecommerce companies in the service providers, they they partner with, agreed
Pete Mento 22:24
buddy and again to go back to my street hustler lingo, hate the game, Don't hate the player, right? So the, the environment that they're in is forcing them to pivot, based on race and all the rest of it. And they're gonna do that. And they have the buying power to do that. And we might not like it as people who sell air freight to consumers, but the market is what the market is. And when you have that much volume, you can easily move the needle. And you can take capacity out from one place and put into another because you're demanding of it right? You have customers that want it. So I see this as possibly a point of evolution, where Chinese ecommerce companies begin to see if they buy it enough volume, they can buy at a cheap enough number where they can do it via air freight instead of ocean freight. And I think Buddy, this could be a real big crack in that evolution, right that that butterfly coming out of the cocoon of a new type of ecommerce attitude towards supply chain where airfree becomes the more the more used mode rather than the notion for it.
Doug Draper 23:26
Yeah, yeah. Who would ever thought that comment would be somewhat realistic 10 You know five years ago Hey, we're gonna airfreight in E commerce from China. They're
Pete Mento 23:36
gonna airfreight in your your, your $6 of soggetti $200 to 200 pairs of socks for six bucks on Timo because it's just it's we're able to do it based on the volume that we buy. And because of the amount that American consumers have decided to buy from these companies. Like I said, you can you can you can hate the game. Don't hate the player. God bless him for figuring it out.
Doug Draper 23:57
Yeah. Agreed. Good way to end it. Well, that's gonna
Pete Mento 24:01
do it for Doug and I this week on global trade. This week, a shout out to Keenan and our friends at CAP logistics, more cap logistics and Keenan, but we can't do it without them. And we thank all of you for listening to us week after week in telling your friends and if it happens next week, or we think it might happen somewhere down the line. We'll be talking about it on global trade this week. Take it easy. All right. Take care. See you buddy.
Transcribed by https://otter.ai