Global Trade This Week – Episode 146
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
1:36 -Trade War is Coming Hard for EVs
6:18 -Amazon Logistics Surpasses UPS Volume
12:32 -Halftime
19:57 -The Northern Mariana Island of Tinian
22:50 -FTC Banning Non Compete Clauses
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Keenan Brugh 0:00
You're watching global trade this week with Pete Mento and Doug Draper.
Doug Draper 0:10
Hello, everybody, and welcome to another edition of global trade this week, I am one of your hosts, Doug Draper coming to you from the great state of Colorado. And on the other side of the coast is my co host and good friend, Mr. Pete mento. So Pete, two questions. Number one, where does this podcast find you? And number two, how's your 401k? Doing?
Pete Mento 0:34
Oh, you had to do it. I am in Georgia at the moment. And my 401k is miserable. I mean, it's, I don't know if it's ever gonna be big enough, frankly, with inflation and all the rest of it, Doug, I mean, at this point, I'm gonna have to work on 85. I think so. I try not to think about it too much. It just depresses me, buddy.
Doug Draper 0:55
Yeah. Well, you know, I have friends that look at it like every single day, and they're always talking, I'm like, Listen, my perspective. I'm not going to use it or touch it for like a while. So the ebbs and the flows and the daily swings, who cares? Right, maybe that's a naive comment, but I don't even go and as long as I'm putting money into it, and life is good, and I'm not even worried about it. Am
Pete Mento 1:18
I getting more money than I put into it? I guess that's the way I look at it. Is it better than a savings plan? You know, it's tough.
Doug Draper 1:27
Very cool. Yeah. All right, man. Well, I know you had an early go at it this morning. So let's get this party started. What's your first topic?
Pete Mento 1:35
Well, Doug, talked a lot about electric vehicles, you certainly do. And the news has been just overcome with information about Evie companies, edX exposure, Evie liability, and where they're going to end up in the next 10 to 15 years. And it's funny. There are people who are electric vehicle futurists who just can't imagine a world that isn't going to have nothing but EVs. There are people who are kind of in the middle more like you and I. And then there are folks who are like over my dead body, it's never going to happen. But here's the reality of where we're at. The world is kind of making a decision regarding trade, whether we like it or not. So the first part of it is the incredible adoption of electric vehicles in China. And what's turning into a brand war between the locally manufactured versions, which are significantly less expensive, and the more high end American ones that were more comfortable that we see all the time. Tesla rivian, Pollstar, those are in America, I don't think but they're Swedish. But we see those more here. But in China, there are a number of pretty inexpensive cars that people are flocking to, because of the Inexpensiveness of it, the lack of the carbon emissions. Well, now that's coming to trade. So two pieces of that, first of all, Tesla's earnings came out, I think, last week, and they were less than flattering. And that's even after they were slashing the price of the cars, and now it appears that Tesla is going to do a joint venture with a Chinese company, which is a bit of a shock, given the allegations that have been made about the theft of electric vehicle technology. On another plane in the United States, doesn't matter who you talk to what side of the aisle, there is a real I guess zeal for going after inexpensive Chinese imported EVs on the President Trump side, he's talking about 100% tariff on all of them. So it doesn't matter what size it is, what the battery is, if it comes in from China, he's gonna walk in with a pretty high tariff, and the batteries as well. And that causes a host of problems. Because a lot of the material needed to make these cars is coming from China, and a lot of the material inside of the batteries is coming from China. So on one side of it, we can understand right? The protectionist attitude towards protecting American industry, protecting North American jobs, because it is North American in scope, it is Mexican, Canadian and US. But on the other, getting people to adopt these cars would probably be a lot easier if they were significantly less expensive. You probably see a lot more people driving them. I'm a big American car company guy, I don't drive foreign car, don't think ever will again. So for me, you know, the idea of supporting those jobs is great. But I'm also very concerned that how this could touch off what could frankly be the beginnings of a global trade war, because Europeans also have a number of cars they're trying to export around the world. So this could really end up biting us in the backside. Again, regardless who the president is, because of what appears to be our desire to be as protectionist as possible regarding these, these electric vehicles. Yeah,
Doug Draper 4:43
yeah. It's a good angle on the Eevee thing, and it's ever evolving and ever, ever changing, right? I mean, the bottom line is that there's two things one, we are part of a global consumer, right. And so some of these evey cars that You and I have never heard, we spoken about a few of them before. They're selling them all over the world, not just in the United States. And those three brands that you just said, by far and away, are the most dominant here, here in the US. And so it'll be interesting to see what happens with the tariffs, it could be another barrier to entry, because the I'm trying to think of the terms, it would be the distance anxiety, and then the accessibility for charging stations is still a big deal. It all boils down to that. So yeah, those anxieties from the US consumer, you have tariff challenges, what are what's the consumer going to do? I could potentially just shut it down and and go back to good old American cars that are fueled and move with gas? Well,
Pete Mento 5:45
I don't know, Doug, I mean, that. There's a lot of people who'd love to drive an electric car, they just don't want to spend the money. You know, there's also people that question the safety of these vehicles. And I don't know enough to comment one way or the other. But that seems to be the usual American sticking point, talking point direction that we take with any sort of competitive foreign for manufacturers. Well, the safety is not up to snuff. You know, I guess we're gonna find out.
Doug Draper 6:10
Yeah, yeah, we're fixing to find out their fix into fixing what you got for us. But all right, well, I touch on parcel from time. And again, that's how I got my start in this industry was working for airborne express those of you that are old enough to know and remember that company, so I just had this affinity to parcel and I saw a Pitney Bowes parcel index thing come out last week, where Amazon logistics, right, they didn't refer to it in the article as Amazon, but it was Amazon logistics, surpassed ups on total volume, not revenue, but total volume, how many shipments did you actually deliver? These are for under 70 pounds. And here's some statistics, right? So there's like 21 billion packages delivered and 23. And it's 50 million less than the crazy time during the roaring 20s. And during COVID, which means we're almost on par. Right? 50 million, when you're referring to billions is is pretty nominal. But here's the top guys, right? You'll be happy to know Pete that USPS move 6.6 billion parcels last year, and that was pretty much flat from 2020 to Amazon was 5.9 billion with a 15% increase ups 4.6. They're down 10% ish, that x 3.9. They're down 6%. And then there's an other category, which are probably, or excuse me, primarily, you know, regional regional players that you and I may not have heard of, that are just doing parcel in geographic areas, kind of like Super Regionals, they were up 28% increase to like 650 million packages. So what happened? So one of the things that some of the economists have said and folks are doing the analysis is that the fast fashion and the Asian ecommerce, right, those shipments are lighter, the commodity is cheaper, and they're more frequent. And what the article indicated is that UPS and and FedEx are kind of steering away from the really, really light packages, and the revenue that those can generate. So the fast fashion casual or industry has really spike. The uncertainty of the UPS labor situation back in the summer. Absolutely. FedEx took some of that business. But so did some other folks. Primarily those those super regionals and the one piece. So what that did is there's there's now this tug of war, right? This this tug of war, where UPS lost in business because of business concerns. Annex Got it, thanks, is trying to keep it ups is trying to drop back and forth, there's a little bit of a little tug of war going on there. Both of which are trying to maintain their margins and things that we've read about. The bottom line on this Pete is, is is another example of how the tech industry is just allowing a competition to come to the surface, right, because I remember in my airborne days, they had standalone systems, it was called a Libra. And we would come into a company and we'd have this big desktop thing that we'd set up and then right next to it would be the UPS machine and right next to that would be the FedEx machine. And you had to navigate between the three and figure out what weight break and location it's you know, an individual operating and had to make those decisions. Now there's this this technology overlay that you could just you know API into and doesn't matter if you're Pete and Doug shipping company that handles a 500 square mile radius outside of Boston. I can give you our rates. And you can, you can select US. So really, the fast casual has been a big impact. And then the technology overlay, which gives the power to the individual to not choose two choices, or three choices with the post office, but a much larger variety. And so it'll be interesting to see with Amazon skyrocketing with their, with their volumes to see what happens in the future. So I don't know if you got to take on that if you've been following that one. Pete, but what do you think?
Pete Mento 10:30
Well, a couple of comments. First of all, yes, Doug, the post office is almighty and undefeated and bless them, bless them so much. But, you know, back to a serious note the the complexities of small package, and the volume that's going through it, the overlay of technology that goes along with it was just bound to happen. I think that American consumer habits are probably going to be what's gonna drive the evolution of that business. For a long time, people wondered if, you know, UPS can be bought by Amazon, right? Could could an Ali Baba buy an Amazon or a FedEx? or Amazon or Alibaba by FedEx or UPS? I don't know if from a regulatory perspective, they never let that happened. But they're moving so much, so much, that it begins to make you wonder at what point are they going to be tired of handing the profit over to these companies and begin to do something themselves. And really, again, it's the American market is going to push this there's, there's only a couple of countries in Europe that have a higher gross domestic product per person than American state. So there's, there's three of them. I think it's like Denmark, Ireland, and I remember the third one that have a higher GDP per person than like Arkansas, or Mississippi. I mean, our consumption in this country is driving a lot of this. So it makes me wonder if if they would, they would find some way to co op technology, Co Op, capacity and just try to do it themselves, at least into this country. And maybe that's a pipe dream, or it's, you know, me just talking crazy. But at some point, given that delivering this stuff has really become Amazon's business, not producing it, not warehousing it but delivering it. At what point? Did they decide they want to have one of these things as their own toy?
Doug Draper 12:14
Yeah, yeah, I think the regulatory the regulatory nature of it is going to be the big, big hurdle. And it may never happen. But what you just described Amazon is doing, it's pretty amazing. Their trajectory, right? That's transpired in the last decade. We love cheap stuff in this country.
Pete Mento 12:33
And that brings us to halftime, everybody brought to you by our good friends at CAP logistics. To learn more about them, do visit them on their website at cap logistics.com. This is the portion of the show where Doug and I get to talk about whatever's on our mind. And it can go in all kinds of bizarre directions. Doug loves this part of the show. I'd rather just talk about trade this week.
Doug Draper 12:55
Well, I love the trade discussion to Pete. So I don't want to you know, we always have four topics on trade. And just two topics on halftime. So I'll keep this one kind of short. But I woke up on Sunday. And apparently the White House Correspondents Dinner transpired on on on Saturday, and you hear about it for 124 hour period once a year. And I was like, What is this thing? Right? You get the president up there chirp and everybody makes fun of everybody. So I wanted to do a little history of where this came from. So it started in the Woodrow Wilson presidency. And basically, he was kind of irritated and tired of all of the questions that the press at that time was asking him, right. And so he was going to shut down all press conferences. And so there was a group of kind of regular press people that wanted to get together and they formed kind of a group that was called the White House Correspondents Association. And I'm going to read their original message messages to expanded its mission to pushing broader access to the White House and supporting vigorously on the presidency. So anyway, there's a bunch of oppressed folks that were getting shunned by Woodrow Wilson, and they kind of collectively got together. And here's the things that Wilson didn't like about the press. And I'm not talking about today, but it's funny how common these are right? First, the questions are boring, and they're taken out of context. All right. 2024 Check. It's kind of a free for all with people fighting and clamoring to try to get the first scoop on a topic 2024 Check. Very evasive in the personal life of Woodrow Woodrow Wilson at the time 2024 Check. A lot of irrelevant questions, check. And that's kind of how it got started, right. And then it morphed into the parity where this group was, you know, wanted to have some levity and some, some dinners and stuff. And then Calvin Coolidge was the first actual sitting president that joined this event in 1924. So that's the history of the White House Correspondents Dinner. And Woodrow Wilson was really the catalyst to threaten to shut down press conferences and a group of people band together to prevent that from happening.
Pete Mento 15:27
But it's turned into a roast that let's call it what it is. And it's normally emceed by a comedian. It's usually also a comedic writer. So you know, we just had Colin Joe's who was very funny, he was very funny. There was a Michelle wolf year that that got a lot of attention, because of the things that she said. But you know, you've also had Steve Cole there, you've had a lot of fascinating people go up there and act as the emcee, I think it's important that we have leaders that are able to have, you know, fun poked at them, you'd be able to take a joke. And there's nothing wrong with going there in a good hearted way, at least giving people an opportunity to poke fun at how well or how poorly your administration is going. Maybe it's, it's good to hear, right, that there are people that can still do that in this country and not enough in prison. So I do like it. I always watch the highlights. And normally every year it's a good, right. Colin just did an excellent job this year, he he equally made fun of everyone. So was fun to watch.
Doug Draper 16:22
Yeah, it is. All right. Good deal. All right. Halftime is always two topics. So what's yours?
Pete Mento 16:28
Well, Doug, you know, you always get on me about being too serious and too down. So I'm gonna do it again. Anyway. I was waiting for it. Sorry. The, the world of AI is creeping into human decision making. So there is article upon article about people saying that a board of directors should have an artificial intelligence. So you'd have, you'd have you know, 10 people, and then this AI, and the AI would give you the most logical, straightforward, you know, in perspective and answer, regardless of personal animus, regardless of internal politics, it would just be logically, this is the decision we should make as a company. And that's interesting. And now they're saying, why don't we have a member of Congress, or a member of the Senate, or someone on the president's cabinet? Who's AI? Who will look at something and say, logically, regardless of political animus, this is the decision you should make? If you decide to make a different one, well, then you're gonna have to say, Well, I did it because of politics, or I did it because of, you know, personal relationships, or whatever the history might be. It got me thinking, you know, do I want an AI? Do I want an AI? Who says no, Pete, don't do this, do this, don't make this decision to that decision. And I think that's kind of my conscious, you know, that's already in my head. I don't think I need another devil, an angel on my shoulders, like an animal house telling me what to do. But it's, it's fascinating. I don't know, Doug, when you think about all this?
Doug Draper 18:06
Yeah, when you start this over? I think that they the AI in the boardroom has been an observer observer is kind of how they're pitching it. But I think it could lend of perspective, the first company that embraces that and has an AI bot, if you will, on their board will be interesting to see if they're gonna publicly admit or announced that they're doing that. But yeah, I think it's interesting. It's inevitable, I think, interesting and inevitable. And, yeah, the last comment on that, as I Googled Hal 9000, right, so I'll know about how 9000 And here's a quote, from how nice says, and he says, Let me put it this way. The 9000 series is the most reliable computer ever made. No 9000 computer has ever made a mistake or distorted information.
Pete Mento 19:01
But it did. That's a movie. Yeah. The whole AI thing, right? It's like, who made it? Who am I? Who's programming decisions in my trusting with these difficult decisions? How went haywire man like how how went rogue and started making decisions based on its own survival? You know, I mean, think about it, right? What if they want to vote the AI out is like, That's the dumbest idea ever. You don't want vote me? You can't vote me out of changing the bylaws, you know, who knows how it would work. But it's a weird thing to think about that. We're considering a computer mind replace a human mind on a board making decisions for politics or commerce. Just crazy.
Doug Draper 19:41
It'll, it'll happen. It'll happen so well, that's halftime, brought to you by CAP logistics. appreciate them supporting us every week and visit them at cap logistics.com. So second half of the show. Pete What's your second topic?
Pete Mento 19:57
Well, there's a place everyone needs to learn about. It's a little tiny island in Micronesia. And you know, it's part of the Eastern Marianas, it's called Tinian. And it's not too far from Guam, it's not too far from sight pan. And it's really the leading edge of the Western Pacific, it's as far a reach as America goes, which is pretty far, if you think Hawaii is far away, keep on going, baby, if we wanted to fly to Tinian, it would take us 34 hours to get there with the shortest flights. And it would be a pretty roundabout way of getting there be crazy getting there. But Tinian and Guam, the Solomon Islands, and places like Diego Garcia, are becoming the border fence, if you will, for a possible war against China. And we're moving a ridiculous amount of stuff there. If you're in this business, and you do anything with government contractors, you're going to be called upon at some point to bid on moving, you know, a $200 million project to a small island that really used to be just a base for B 50. Twos to fly from, in order to attack Japan. And there's that's called the first line, there's a second line behind it, which is another group of islands. And then the third line, which is Hawaii. So all of these islands that had become American, I guess their territories right, or possessions, we don't really count them as states. But they we do consider them to be defensible in our name. They're becoming giant places where we're going to put a lot of Marines and a lot of equipment to deal with the possible outcome of an actual fighting conflict with China. So if you're in this business, I don't know, we're going to learn a lot about Micronesia. And here's a fun tip duck. I don't think there's a single transportation company or freight forwarder, who has an office on Tinian.
Doug Draper 21:42
Yeah. Yeah. I googled it to figure out where the hell that place was. And it's just like Southwest of of Guam. But it makes sense. And the other thing I did is okay, there's an airport there. An International Airport, obviously. What about the, you know, the port, and it's there. It's, there's an infrastructure that, that I saw the Navy was throwing at it, maybe six months ago. So you're right. It's like this sleepy little frontline defense out there that's starting to get get some momentum. But yeah, hey, I have a, you know, an ocean container or, even worse, you know, four pallets is something that needs to get there ASAP. And it takes three days getting data
Pete Mento 22:27
flight there, and the expensive and as well, you know, the hardest places to get, try moving a container to pay go PAYGO, folks? It ain't easy, right? You know, there's just getting stuff to go on. isn't as easy as it would be. So I don't know. Do you think it's going to be a challenge, but one that will rise up to and someone's gonna make a lot of money supporting it? Yeah.
Doug Draper 22:46
Yeah, for sure. So all right. Yeah. So my my comment is related to a ruling last week, I know you heard about it, we didn't really get a chance to talk about it. Because it happened after we, we taped the show. But the FTC is really on banning non competes, right? And if you've been in this industry at all, especially on the service provider side, and the sales aspect of this industry, like you and I are both the non compete things a big deal, right? There. They're saying like, why did they ban non competes? Well, the FTC said it impedes the fundamental freedom to work stifles innovation, things of that nature. But basically, it's like 120 days after the ruling. And that was last week. So it's like end of August ish, when it's gonna go into effect. And the one thing that well, there's two things that caught my attention. One is if you're a C level and a policymaker, you are still, you know, it still applies to you. But that, you know, 99.95% of the people out there that have a noncompete, that doesn't fall in that category. Yeah, and then it's retro. It's retroactive. So if you have a noncompete now, at the end of August, you're good to go. So it's interesting. I can't think of how many people Pete that you and I met along our journey, especially when we were starting out. Young men and women wanting to get in the industry don't know what it's all about. They have energy and excitement. And they sign up with some multibillion dollar company. And on the welcome packet, slipped on the back page in the 25 documents you're signing as a non compete and then whenever you get a little bit of, of knowledge and expertise, you try to leave and they pull that piece of paper out. So I really think it's been a big impact in our business and I'm not a lawyer, things of other industries. So I don't know how would impact those directly but from personal experience, non competes have been an issue. I had a really good friend that left ch Robinson after like 20 years and he was out of the game for two years. All right. So it'll be interesting. We'll see if there's innovation that pops. And I think what we'll see the one takeaway on this way, Pete, since we're always forward thinking is, there's gonna be a lot of truck brokerage, it's an easy barrier of entry. And I think we're gonna see an increase of that at the second half of this year. And in 2025, where you and I were successful, we got a book of business, so to speak, let's go out on our own. So I think you're gonna see a little spike in specifically to truck brokers, not necessarily freight forwarders, the regulations a little bit more challenging. But I think that'll be the result of what we'll see on this one. So what's your read on that non compete situation?
Pete Mento 25:38
Well, two sides of it. And I completely agree with you the number of people I know, that have stayed in a job, that was okay, but they didn't want to stay there. They wish they could go someplace else, where they've, they've actually interviewed and then offered a position somewhere, but then been told that the non compete from where they were coming was just too hard to overcome. That's stifling, you know, we're in the business, you and I are in the business of selling opportunities. And to consider that we just couldn't take those relationships somewhere and try to build it again. It can be truly crushing for a salesperson, I think it's going to end up in courts. You know, I imagine people are going to argue over it, we'll see what comes out of that. But the other side of it is if if all it takes is a salesperson to steal the business, you got to ask yourself about how well you're servicing it, how good your access to capacity and rates are, and whether or not it was ever yours to begin with. If all it takes is someone's relationship to move something, it really wasn't your customer to begin with. So hopefully this is going to have people focusing more on service, not just our industry, but But everywhere. But yeah, I got a feeling there's gonna be a lot of lawyers racking up a lot hours fighting about this. But I applaud it, I applaud it. I don't think that just some simple sales guy should have to stick with one company and then put himself on the beach for two years because he decides he wants to do something different. Yeah,
Doug Draper 26:57
yeah. The lawyer aspect. You nailed it. We'll have to see how that transpires. So it will be a topic in the news multiple times throughout the summer, for sure.
Pete Mento 27:07
Absolutely. All right. Well, that's gonna do it for us this week, the global trade this week. Thank you all for joining us. As always, please do subscribe, and leave us comments. We're more than happy to maybe maybe not, I guess, take action on what you think we ought to talk about. But thank you again to cap Bucha logistics and our good friend Keenan, who between sessions of playing with his coloring book and to Speak and Spell manages the production and engineering of the show. And if it happens in global trade, you'll hear about it next week. Trade this week.
Doug Draper 27:38
Excellent. All right. Thanks, man.
Transcribed by https://otter.ai