Global Trade This Week – Episode 222
What’s going on in Global Trade this Week? Today Pete Mento and Doug Draper cover:
1:02 -China’s Trillion Dollar Trade Surplus
9:30 -Halftime
14:32 -Cargo & Marine Insurance
Mentioned on the show:
Grit, Spit, and Never Quit: A Marine's Guide to Comedy and Life
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Pete Mento 0:00
You're watching global trade this week with Pete mento and Doug Draper, everyone and welcome to a Pete has a giant head on the camera. Edition of global trade this week. I'm Pete mento. With me is the CO hostess with the Moses. Mr. Doug Draper, how are you buddy?
Doug Draper 0:19
Hey, Pete. I'm doing well, don't worry about your your head situation. It looks pretty similar to past episodes, so I think our listeners will not have any problems or distractions. My friend,
Pete Mento 0:30
my noggins pretty distracting. I got quite a melon on me, so hopefully not. All right, we got a tight week this week, so we're gonna tag team two topics, do a little half time and give the people what they want. So Doug, you've got two great topics. Why don't you go ahead and kick us off,
Doug Draper 0:52
pal, awesome. Yeah, we cannot not have half time. So I'm glad that we decided to kill the important topics of the show and just run with two. But this, this is good. I'm sure you've heard this because you have your nose to the grindstone on global trade. But they just, gosh, what's today when? So earlier this week, maybe over the weekend, they talked about how China, here's, excuse me, China sold way more stuff this year to the world than they ever have before. So the trade surplus out of China is off the chart. And people throw around billions pretty happy, you know, like it's millions. From 15 years ago, China has a trade surplus of 1 trillion with a T dollars, and that statistic came in the end of November, so there's also one more month to transpire, and that got me thinking that over a trillion is insane, right? That's never happened before in keeping statistics and trade deficits and surpluses across the country and what that immediately came to mind Pete, is that, hey, the US tariffs didn't stop the world's factory. It just redirected the products that they were making. And we've talked about this a little bit specifically with Africa and other Southeast Asian countries and Europe, right? And so although in our world, the day to day, it's tariffs and challenges with imports and people are not their purchase orders aren't as large as they were in in in years past. Take a grander step and and look at literally, a global perspective. And what this statistic shows is China's still, I shouldn't say kicking ass, but I'm gonna say kicking ass because they're still making stuff. They're selling it to the world, and we are just part of that world. I'm looking down here a couple of key statistics that I saw, China to the European Union up 15% China to Africa, the subcontinent down there up 28% and then Southeast Asia was about eight, eight and a half percent. And so that, just that you know, the world that China continues to produce, the world is consuming. It proves that the US is part of the global economy, not the necessarily center of global economy when things shift. So two additional comments on that, Pete is that, what does that mean for Americans? Number one, it means that global trade lanes are shifting. Right product is not coming across the Pacific and bumping the west coast and the East Coast of the United States. Those vessels are still moving, and they're going to different parts of the world. So when things pivot and we settle down with the tariffs and the trade policies and companies start to import, those vessels are not going to be positioned where they were in the past. And so there's going to be delays, potentially increased cost to get those products in the United States. And then the other thing is that I was thinking that this validates that what's the word I'm trying to think like it China plus, maybe that's the best word I can come up with, a China plus sourcing strategy, not a China exit strategy, in the sense that they still have speed to scale, they still, you know, the cost in order to manufacture there those, those things don't pivot or change. And so this really caught my attention, and I think us needs to take notice that they should look at sourcing strategies that are China plus not China exit. Be very aware that when things start to move, vessels and shipping lanes have changed, and although we see it on a daily basis here, the world is still consuming and China is still producing.
Pete Mento 4:59
So. Yeah, so when you first sent this over, I was like, according to, who, right, like China's China's exports, but according to, I'm always, I have big, skeptical, dubious hippo eyes whenever I see numbers about about China. But these numbers came from US Customs, so the statistics are relative to the exports that China makes to the US, those numbers are down, but the reporting comes from China Doug. It's China's numbers of their overall exports. Do I think that they're wildly off? No, I think it would be. It'd be pretty stupid to think they'd be wildly off. The important number to me is that imports to the US are down to the 20% to 29% depending on who you talk to. Who you talk to, but yeah, the rest of the world is buying their stuff, and that's great, but they're not buying it at the same prices. The US is a ripe market for a sucker. With their money, we're paying more than anyone else because we have the money, which means that that profit is down. The number that I'm focusing on the most is growth. China expects to have their GDP grow by less than 2% possibly just a little bit more than 1% and this is a country that has to maintain an 8% growth in order to keep their unemployment numbers where they want them to be. Their economy is in the garbage man. There's no other way to put it. Yes, they're exporting more and more, but they're doing it at lower margins. They're doing it on credit, and they're selling it to places that aren't going to just consistently and constantly buy it. Sure, they bought the surplus this year, but are they going to have the money to buy it next year? So this, this is an important statistic that proves China truly is the export manufacturer for the world. Still is, with a couple other countries coming up close behind, but they still maintain that dominance. You can't lick their supply chain, but you just can't. They're so damn good at bringing in all the parts to make something and shipping it back out. So I don't want to poopoo this news, but I don't want to also give it too much credence. I'm not ready to wave my little red book with my green hat with a star on it saying, yay China. I'm not sure that this is quite the windfall that it's being that it's being made out to be, but good on China, they found people to buy their stuff when America decided not to, which is precisely what they said they would do.
Doug Draper 7:12
Yeah, valid. You know, the point that you bring up Pete is, what is the value of the goods that they're selling? Right? They're making a widget and selling it to the US for 10 but they're still making that widget. They're selling it to the rest of the world for seven, $10 and $7 you can spin numbers to look however you want them to be interpreted. So that's a very valid point that should not be overlooked. So Good on you for that. Well, the
Pete Mento 7:40
one I want people to not overlook for sure is just their supply chain, dammit. I mean, we've all been there. Have you been over there to a port before? Doug to watch their ports in China?
Doug Draper 7:50
It's like that. I'm a host for this show. Yeah, I'm a host for the show. And I have to say, no, no,
Pete Mento 7:55
no, it's bro. It's like a beehive meets an ant farm of efficiency. You know, they're just, they're so damn good at moving stuff. And it used to really get on me, like we invented the concept of containerization. These guys have taken it to a whole new level. It's like, we're the Beatles, and these guys are nirvana. It's just, it's a totally different song. Music is not even the same. They're so damn good at it. And whenever I have meetings with clients where they say, Yeah, we're thinking about, you know, carving China out of our supply chain. Like, right? Let's do the numbers. And a lot of times, it turns out that just the the advantage that they have on pricing and their ability to find ships, to move stuff, it's really what's keeping them in the game. And I don't think it's going to change anytime soon, pal, until Africa, I'll be dead when that happens, but until Africa becomes a place where all these exports happen. Yeah, Doug, it's a great statistic, and I'm sure we're going to be hearing a lot about it on the news the next couple of days.
Doug Draper 8:52
Yeah, yeah, for sure. Well, when you're sitting with your multi billion dollar clients, feel free to use the term China plus, not China exit,
Pete Mento 8:59
yeah, I'll see that they usually how we talk about it. China, plus, yeah, yeah. All right, take it to halftime.
Doug Draper 9:07
All right. Well, you know, halftime, as we know, is always brought to us by CAP logistics. Keenan is a little under the weather. He was around a bunch of Rugrats this past weekend and got got sick. So he's just not his immune system isn't six year old proof, so he's a little under the weather. Regardless, he's still here, which means cap is still here, and they're helping to support the show, and we can't thank them enough. So check them out at cap logistics.com. This is your time. This is your topic. Pete, so I'm going to flip it back over to you. I love the topic. I'll let you start Saturday Night Live.
Pete Mento 9:41
Saturday Night Live is funny again, everybody. I'm happy to report that watching this season in particular, I never miss Weekend Update. You know, I have an attachment to it. I never miss Weekend Update. It's so it's it. I do love the two co hosts, but the rest of the show, man, I would give each sketch maybe 27 Seconds, and then I'd fast forward it to the next one. I don't watch it live anymore. I do watch it on the peacock app, like a lot of people, but when I was little Doug, I would regularly wake up or stay up to watch reruns of the original cast in the next couple of years on TV, before I went to bed. And my parents were fine with it, because I was so enamored with Saturday Night Live. The reason I'm saying it's better really has to do with the fact that they have they've walked away from taking political stances, and they're more concerned with making people laugh. They have an excellent cast, a lot of newcomers that people don't know about, and they've really broadened the writing to be a little bit more. I hate to use the word offensive, but offensive. Doug, like they're not afraid to offend everyone equally again, and they're having fun with it. Mostly musical guests. I have no idea who the hell they are, but a couple of times, yeah, I've enjoyed it. So Doug, I think the the headline here is, if you haven't been watching SNL, give it a shot, you might find yourself surprised.
Doug Draper 11:00
Yeah, I would agree. I think the Weekend Update is phenomenal. I would imagine most people watch the monolog intro, all the sketches between. This is, this is me, Pete. This defines how old I am. Watch all the sketches from the monolog. And then when the musical guests come, I bail out and go brush my teeth and and get get ready for bed, and then I come back and watch week update, and then I turn the TV off. So usually the back half of those sketches are pretty, pretty rough. The only but I agree with you, we have laughed out loud my wife and I several times. The one thing is, I think they have too many cast members, like you're just watching the intro, and they can't. I don't think that there's so many that you can't pull out the true funny in some of these cast members, because they are hilarious. And the one guy that I absolutely love and I forget is it Marcelo. I forget his. I don't know if that's his first name or his last name, but he plays a lot of different characters, tons of energy. And I think is, he is hysterical, but that's the one thing. There's too many cast members. Because it's there's sometimes when I'm watching it, I'm like, is that a cast member? Or is that just like a filler, or is that the guest? I don't really know who that is. So too many cast members. Let's that thing up. But as far as what you said about funny, again, 110% agree.
Pete Mento 12:20
Yeah, everybody. Money is a comedian. Said here. You know, the reason why that these cast members are so good is they're mostly comedians that have come up in the age of social media, so they're constantly doing skits on YouTube and on Tiktok, and they're very comfortable coming up with that and being a great writer as part of being a member of that cast. And you're 100% right. Doug, the viewership after update goes, and it's like, you know, if you get a if you get a sketch on AFTER UPDATE, it's like, okay, well, it's sort of the booby prize. It's not quite as good as being ahead of it. But this weekend, I think, is going to be my it's either this weekend or next weekend. My favorite update when Shea and Colin write jokes for each other and they have to say them live on the air without ever reading them, it is comedy gold. It is not for everyone. It is not for the light hearted, but the way that these two absolutely destroy. It's positively fantastic. It's my favorite, my favorite one of the year.
Doug Draper 13:13
Yeah, yeah, I love it. Hey, last topic on this, and I got a name drop a little bit here, but my college roommate used to be on Saturday Night Live. Who was it? So, yeah,
Pete Mento 13:25
Rob Riggle, I love she was your roommate in college,
Doug Draper 13:30
yeah, yeah, yeah. He was my roommate in college. So, yeah, it was always, it was always fun to see him on The Daily Show, and then seeing the progression of his his career. And if anybody likes Rob. Hilarious. He just came out with a book, just dropped on Veterans Day. So go check it out.
Pete Mento 13:49
Absolutely love him. I love his style. I love the way he works. I think he was incredible when he was doing the NFL stuff. I don't know if he still is, but I think it was, was it Fox? He did NFL for for one of them, he was incredible. I love him. And he's a marine people don't know that. You know, the guy was a Marine Corps officer. He was the real deal. So big ups to Rob Riggle,
Doug Draper 14:10
yeah, yeah, for sure. And the last thing on that one, because I could go on forever, but like some of the characters, the nuances in his tone, that's he was the same way in college, like I remember him doing that voice and that acting. So he is genuine. He is a super good guy. And I would go check out his book, because it is all about his career and including the military. So yeah, anyway, we got off track on that one. But I had to name drop a little bit. Yeah, let's get
Pete Mento 14:37
to the next topic. Go ahead, man.
Doug Draper 14:40
All right? Well, there was one gentleman a couple, maybe six months ago that had said, why don't you guys talk more about insurance? It's a huge part of global trade. And so we did once. He was very appreciative of us bringing that up. But I think it's important, again, specific to to. The tariffs and the value of goods that are starting to come in right the marine insurance and making sure people understand the higher insured value that their goods now handle when they get landed because of all the expertise and the duties and the taxes and understanding the implications is, is really important. It's an added cost. It's an added indirect consequence. That's the right I don't think that's the right word to use, but it's something that is not necessarily on the books, or somebody that would look at to say, What's it cost to make this widget and get it into the store so our consumers can purchase it? The other piece on the insurance is that I have seen in the warehouse business that some clients are having smaller purchase orders, and some clients, especially earlier in the year, were doubling their purchase orders because of the uncertainty in bringing product into the US, and then your inventory sits in a warehouse. And so you need to make sure you understand how that is insured and what that means to the bottom line and the carrying cost of that inventory. And the last thing I'll say, and this isn't a plug, because, you know, I'm a service provider, but you really need to take a perspective of partnership whenever you're dealing with any carrier, service provider in the supply chain, because if you treat it like a transaction, and you're chasing the cheapest dollar here and there, and you're not developing partnerships when push comes to shove and you need help, those type of deep relationships may not be there to provide additional assistance. So I would say, make sure you understand your land and cost. Make sure you understand the implications of the additional insurance you need to carry, whether it is in motion, or whether it is sitting in a warehouse while it waits to be sold. And then I highly encourage you, it has nothing to do with me. This is not a plug for my company. Partner, with your service providers, you're going to have more success in the volatility what's going on in the world right now.
Doug Draper 17:03
Nice. Did you hear anything?
Pete Mento 17:06
Yeah, I did. I heard all but yeah, we'll pick it up from there. Have have success in a partnership with your providers,
Doug Draper 17:12
yeah, yeah. So that's it. That's my comment.
Pete Mento 17:16
What I'm going to comment on this is, I think, a little bit more general than the details that you gave and that people forget that insurance is about replacement value. And think about it. You export something to American importer, and they get it and it's all wet, or you can't do anything with it. The thing about tariffs that people don't realize is you got to replace this thing, and I've got it Post Entry, I've already paid the tariffs on it. Yeah, I'll fight with getting all that paid for, but I still have a customer who's expecting this stuff, and I have to replace it, and part of that replacement value is the tariff. So I think a lot of actually, I don't think I know a lot of the importers I deal with, they kind of looked at insurance as set it and forget it. You know, they went out, they got a marine insurance policy, they set it up the way that they wanted to set it up, and they just sort of let it go on autopilot. It's not a good idea. You should be constantly talking to your providers and having a conversation with them about how your business has changed, how your supply chain model has changed. Maybe you're doing more airport air freight and then ocean freight. Maybe doing more stuff over the road. Maybe you switched warehouses. You know, there's all kinds of things that could impact how you buy your your insurance and how your insurance covers your imports. So Doug, brilliant. Fall in for this week, we don't talk about insurance. It's true because it has a bad reputation of being boring, right? It is not boring, particularly when you really need it. And we had a huge story last week where a ship got got a general average claim on it. People are learning the hard way that they don't have general average riders on the marine insurance policies, and now they're paying the price. So for everybody who's listening, put it on your to do list for 2026 sit down with your insurance providers and figure out whether or not your coverage actually works, because the way you usually find out is the hard way that you didn't have the money in place to take care of what you needed.
Doug Draper 19:08
Yeah, yeah, that's spot on. And then people just start lobbing haymakers to figure out who's who's fault and whose problem. Yes, sir. All right, well, we had to keep this one short and sweet, and sweet. And I think we did a pretty good job, Pete. I appreciate it, and I want to let everybody know that we appreciate them listening every single week to global trade. This week, I wouldn't be possible without cap logistics. And we thank them tremendously. And I think that's a show that is a wrap. And please remember, as Pete always says, if it's happening in global trade, we are going to be talking about it here on the show. We look forward to seeing you next week. Pete, take care of my friend. Thanks, buddy. You.
Transcribed by https://otter.ai