Global Trade This Week – Episode 150
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You're watching global trade this week with Pete Mento and Doug Draper.
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Hello, everyone, and welcome to What to us is an early morning edition of global trade this week in a incredible switch of circumstance. I am the one waking up super early to do this instead of Doug, who normally will be in California while I'm sitting somewhere in DC. So now I'm in Phoenix, Arizona, I think I'm going to spontaneously combust. No human being should have to live in these conditions. It is absolutely a point here. Like a couple of days. It's awful. Yeah. Well, they know how to run a see out there and in Arizona. So I think yeah, it makes you it makes you definitely appreciate the air conditioning. I'll tell you that. Yeah, yeah. Well, you you are up early. And just for our listeners, I'm in our Harrisburg, Pennsylvania facility, which over my shoulder. Next, I think you can't see it. It's up here. But a red eye from Denver left at 11:30pm landed in Philadelphia this morning, at 5am. Got a rental car drove two hours, and here I am. So I was up late with sleeping in
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21 F against the window and in Europe at 6am and Phoenix. So this is there going to be a great show or a really bad show.
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Yeah, it's gonna be a one way or the other. We'll find out. Yeah, that's right. That's right. So why not? And let me kick it off.
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And I will jump in at something you may have been hearing and like anything else in the news, I think it may be a little overdramatic, not necessarily this particular story, but just in general and how the media just makes everything monumentous and it's related to NOAA and oh, a they're hurricane prediction season. Right? They just came out with it. And I'm gonna get some quotes here. They're basically talking about hurricane season. And here's some some buzzwords be frightening forecast. Atlantic hurricane season, unlike no other what to know about the alarming hurricane forecast for 2024. So that got me thinking, all right, well, what does that mean for us on global trade and transportation? And I think that
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carriers, nobody in particular, right. potentially could take advantage of this. this coming season one because that industry has been so deflated. Recently, I'm talking about primarily domestic full truckload LTL as well. But I'm thinking more towards full truckload and what a great way to boost revenues and maximize an opportunity then in, in strife, and, and where you need relief. So it'll be interesting to to see what transpires. So what I mean by that Pete is, all right, there needs to be really if there's going to be a national disaster call in
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the forces to take care of damage, and we'll carry yours take advantage of that, I think the answer will be yes. Will it be enough to have ripple effects across our economy depends on how severe they are. I remember a story Pete,
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Hurricane down in in
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New Orleans, where they were trying to get ice down there to help help the folks and there were truckers that got contracts through
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through the government to deliver supplies and things down there. And there were trucks with ice that would sit for days, and not do a darn thing. But wait till they get marshaled into the areas they needed to get into. And they were just crushing it with price gouging, for lack of a better term, right? You just sit there and you're idle all day long. And you're just cashing checks from the US government. And so if the hurricane season is what they are predicting, I think there will be carriers that will take advantage of that situation. And depending on how bad the the season is, it could see ripple effects. Now I'm speaking more of the independent, maybe smaller guys who are just trying to put put a meal on the table, but are looking for the opportunity. So maybe that's a negative take on Pete and certainly hope it doesn't happen because that means people are in despair. But I think it's a real
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potential, especially if the actual hurricane season is what they predict. So I don't know maybe a little bit doom and gloom on the human condition but want to get your thoughts on that. First.
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It was funny when I was looking at the topic, I just mentioned the other day that tornadoes. Just the crazy number of tornadoes we're seeing in America
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record right now. And that has an impact. In effect, there are a lot of warehouses that were hit roads are impassable. It does cause delays. But the second half of this is, we are big believers at global trade this week in the concept of supply and demand. You know, if you need space in a warehouse, and I've got it, nobody else does, well, that's gonna affect the price now, isn't it but in the other direction? If no one's using space right now, and I have it, I'm probably going to do something with my, with my rates. So as as much as the inner conspiracy nerd in me, you know, wants to look at like the rising prices of ocean freight right now, we're pretty ridiculous. And, and, you know, what's, what's going on with air freight, I got to kind of rein it in a little bit, I got to keep reminding myself, you know, the companies that are moving this are only going to put out as much capacity as as they feel they can control and make a profit on and they're smart enough to know not to put overcapacity ever in a market. But the smaller companies, like you mentioned, you know, they're, they're out for themselves. And that cost can trickle down. But I think they run on the same principles, supply and demand, you know, what we had back in COVID. But I agree with you, I think, you know, these natural disasters, and what is probably going to be an awful hurricane season, it's going to always, they always have an impact. But imagine now, it's gonna be on a broader scale if we have more of them. So I agree with you, I think it's going to have a pretty ugly impact on rates and capacity. And, you know, someone with a lot of friends and family in the Gulf Coast, I just hope we don't get a big nasty one again. Yeah. Interesting. perspective on it, for sure. But it's a reality.
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All right, what you got for your first one there, my friend? Well, you know, I couldn't come on the show and not talk about the 301 Tariff expansions. But I'm looking at it from a different side. Trying to be more open minded, Doug, you know, all these years of therapy have taught me to look at the condition of other people that are being impacted, not just myself. So today, I'm going to talk about China, and what this means for China. So the expansion to the three of ones into 100% tariff on electric vehicles, the 50% Tariff on semiconductors, and then the additional tariffs on all these other things like aluminum extrusions.
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Yes, if I were a Chinese company, so let's look at them first. This could be a real pain. But remember the subsidies that they got, were the reason that these tariffs are in place. So there's every opportunity for China to just give them more cash to keep things going and lower the price to make it more appealing to an American buyer. But the second half is, how do they respond? You know, there's a lot of tit for tat that goes on, when it comes to tariffs, the issue we've got is we don't export that much to China. And what we do export, they've already kind of beat the hell out of for the most part. But there's really two areas they've decided they're gonna focus on. The first is the chemical industry. You know, lots of speciality, chemicals, things that go into pharmaceuticals. And the second, of course, as always agriculture. So they're going to end up going after things like sorghum, and barley and wheat. Certainly rice, the definitely going to come after livestock, you know, frozen frozen livestock that goes over there. Again, the US government might just jack up subsidies to farmers to make it better. But one way or the other, they've got to find things that they can impose their will on. Another might be the,
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you know, import licensing and export licensing to America have certain products that we need, we can't get anywhere else. So there, there could be more complications and getting things out. But there will be a response. And that response is going to be a lot heavier than it was last time, because they have fewer things to hit. So I think they're gonna hit them harder.
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Yeah, the two things on that one, as they absolutely will hit him hard. We hit hard with 100% tariff on the EVS.
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But the one piece, and the good thing about this show, Pete and the fact that so genuine, is that you and I don't know exactly what we're going to talk about and the retort but the very first thing I thought of is, where do you hit home, the American farmer, and who takes care of the American farmer, the US government? So I was absolutely going to say that I think you're going to see some tariffs imposed there. And the reaction is going to be more subsidies that the US government is going to uplift those farmers as they should be. And middle American guys, you know, you'd be in from West Texas and myself from from Kansas, you take care of the bread and butter and the and the central part of the United States that is impactful, but I think that is going to be a big one that we're going to see. So I agree 100% that the Ag
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always is right. No farms, no foods to get to the farmer. Man, it drives me crazy. But that leads us to Doug's favorite part of the show. The part where we don't talk about trade and transportation, we talk about whatever we
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If you like and that is brought to you by our good friends at Capitol logistics, we want to thank them as always for giving us this platform and providing us the necessary resources to do it. By resources. I mean, Keenan
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we appreciate all that of course, and you can learn more about them at www dot cap. logistics.com. So, Dougie, you want to first Yeah, we usually come up with some funny topics and banter around but I think both of ours today are pretty legit. Before I jump into it, I want to give Keenan a a shout out he did an endo on his mountain bike this weekend before you jump down. We are talking he's got a little bit of a sore rib. So it's transition from snowboarding season to mountain biking season. And and Keenan has already got a sore rib to show for it. So Keenan, appreciate you being on the show. That I don't know what an endo is Doug. So it's basically you flip over your handlebars. Oh, that sounds painful. Yes, exactly. You can talk to Keenan about it afterwards. We don't need to you need to have a concussion.
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Exactly. You and I will end up being blurry and the camera will start tilting to the side. Yeah. So anyway, my halftime I had to get that on went out to Keenan. But my my halftime is about D Day. And it's coming up on Thursday 80th anniversary. And I think everybody's probably seen some news about
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in the veterans back to normalcy and seeing everything. And the crazy thing, Pete that I wanted to talk about this one is I heard that there is about 60 World War Two vets that are still alive because if you think it was 80 years ago, and even the youngest ones that were in their 20s Every single one of these people are centenarians. Now that's the right word. Cinterion. Think so. Yeah. So they're, they're over 100, which is absolutely crazy. And the the group is dwindling, right. And it's such a monumentous occasion, I'm so proud of the United States for celebrating all of the the veterans out there. But to me, it feels like history is like slipping through our fingers. Because at I don't know how many of these vets are going to be around for the 85th. You know, and so the word on the street that I've been reading that this could be the last final big celebration of the day, and it's just crazy, like, the history is slipping through our fingers. And I hope as time goes on, when these veterans are no longer with us, that the memories will remain. And the celebration maintains as well. So anyway, I just wanted to give a shout out, bring attention to that, and talk about, you know, the amazing, amazing event event and the amazing military that has helped our country. So anyway, there's my DD well, two pieces on that Doug, one. If you've ever been in Normandy before, if you've gone and gotten to see it,
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it's an amazing, that's an amazing thing to go see. And they've done an excellent job of giving it the reverence that it deserves. But there's a lot of cool history. And if you're into the whole invasion and what happened in the planning and you know, the amount of work that went into it, they do a really good job there. Normandy is also where Calvinists comes from, which is an apple a cord that I love, so I big fan a big fan enormity. But it's something if you ever have a chance, take the train from Paris and go, it's it's amazing. And second, my, my, my daughter is great grandfather was in the Navy in World War Two, then he passed away a while ago. And he was in his 90s I think was 93 when he finally passed away, so and that was like 10 years ago, or more than that maybe like, like 15 years ago. So yeah, I mean, they're getting up there. And it was really when you said there were that few I was like, wow, you know, I seem to remember when we were kids, everybody's grandpa was, you know, did something during the war, right? They do. Everybody had some story. So it got me thinking like when did the last person in World War One die? You know, we were probably alive. I bet when it happened. And I bet for some of our grandparents, they might have been alive when the last Civil War person died. Like it's so it's just crazy, man. Yeah, but that I love that we're doing better oral histories. We're sitting down with these people and interviewing them before they pass away and getting the stories of what it was like serving them. And not just the nostalgia that goes along with it, but just the personal history, what they saw what they went through. It's It's pretty awesome. Yeah. Last comment on that Pete then you can jump in years. But the the opening scene of Saving Private Ryan.
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I mean, that just runs the emotion. I mean, I think that's a 25 minute scene. And if that doesn't speak to the strife, the mental position that people ran or whatever, I just think of that opening scene every time I think of the day crazy. What a great movie and then all
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So if you if you've seen Banda brothers the HBO show, that was, that was another one, you know, it really brings it home.
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I won't stretch too long into this, but talking to people that have had to suffer through war and the PTSD and what they go through coming back and trying to normalize their life, they you know, those people did it after World War Two Vietnam after the Gulf Wars, and there are people still doing it today in the various conflicts that Americans are out. So all the respect in the world tone.
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So I have a lighthearted, more lighthearted, I guess, man, Tina would love to talk about this. So
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roaring kitty, for you, if you don't know, roaring Kitty is, he is
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kind of a Dauntless cat, right? He he would get out there on the internet, and he would talk about things that he felt you could invest in. And he's found he's a famous guy that was in the movie dumb money, where he got everyone to buy GameStop. And that, of course, created this term meme stocks where people were making memes of, you know, Warren came to the moon, all the rest of it, you know, all that crazy stuff. But they had an impact. You know, all these individual small investors getting together and deciding they weren't gonna let someone short stock, they weren't gonna do this. They were gonna stick it to Wall Street. They won. They really did. They did quite well off of it in the past. But now we're seeing it again. Roi kiddies back, baby. He's back on the internet talking all his trash. And these meme stocks are back, specifically GameStop. And you've got Dave Portnoy also out there talking about it. So the difference now is yesterday, it turns out, they're talking about taking them off of the platform off of the financial platform that he invests on. I mean, if that's not just total skullduggery and trick fuckery, most foul dog, I don't know what is right. So are they going to, we'll let them get away with that. And then it really made me understand right, you're not going to stick it to Wall Street twice, they're going to figure out a way to get you the second time. So I am not invested in any of those stocks. But I will say that as a dyed in the wool hater of all things that are the norm, and
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I really hope these guys pull it off again, just because I, I want to see it, I want to see him stick it to the people who stuck it to us in 2008.
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Yeah, it's crazy. I've had a lot of conversations is that market manipulation?
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You know, but but then you think about all I mean, you go to MSNBC where they just all day have the stock ticker going on the bottom and the Jim Cramer's of the world and everybody that just hypothesizes about what's going to happen. He just threw a me map.
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meme with somebody with a game controller leaning into the computer, and all of a sudden the stock just blast, you know, to the stratosphere. So is that just general comments or market manipulation? So I think that'll be a topic for a while too. But really position yourself no one you have that power to position your investment? True, make a comment, crush it financially and then eject, right?
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Duck, you could just run for Congress and win. And
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yeah, if people watch us don't follow the Twitter feed for unusual whales. There's a I think it's one person who just goes out there. And it points out, you know, this is when a member of Congress bought the stock. This is when they saw it so that here's how much money they made. Here's what their financial net worth is today versus when they came into office. It will make you just, you know, it'll make you want to scream watching this stuff. So what's that called, again? Unusual Wales. Okay. Yeah. And another great website for all of you that maybe are, you know, politics adjacent. It's called opensecrets.org, I believe. And it's an organization that compiles all of the financial of the financial donations that are made by individuals, corporations, and
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you know, states, and it puts it out there so that you can you can remind him and you can see money that I've given to people in the past year and Doug's name and you can read anyone's name because it has to be publicly made available. And you can find out what political parties your company might be giving money to or individuals for that matter. And most people don't realize they can do that.
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Interesting. Interesting. All right, man. Well, it's a nice halftime I liked it, it wasn't too outrageous. And again, brought to us by CAP logistics can't thank them enough. So going on to the back half of the show here. You made my second topic. You made mention to it here at the very beginning related to ocean freight rates, starting to skyrocket. I was talking to a friend who's in the freight forwarding business the other day, and he was pulling his hair out, related to spot market pricing, non contract related stuff where
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there are blank sailings. What is quoted today will be different on Friday.
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I think he said it was like 10 grand to get an OSHA container Chicago
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and all this is starting to boil up and we haven't even hit peak season yet as far as the peak of peak. So I think that things are gonna pivot and may not be so much manipulation from the steamship line cartels so to speak, it just could be. Well, let me let me backtrack that a little bit. They could be positioned it with a blank sailings and things of that nature. But
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it's going to happen if you're in the spot market for ocean freight, spot market for air freight. You better have a plan B and put your bootstraps on because it's going to be a wild six months. While this thing transpires I didn't realize how dire the situation was until I talked to my friend. And he said that he hasn't seen any anything like this since since the heyday of COVID, which wasn't that long ago. But still, he was blown away about how fast things have pivoted into the situation we are right now. Yeah, I go on a lot of sales calls with with one of our our sales executives. And it's all it's coming. It's coming up in such a big way. Every single call, we spend a lot of time talking about how there's been this just like you said stratospheric rise and the rates and what's causing them what can be done about it. And a lot of people had decided that they were going to put a bigger part of their volume in the in the spot rate basket, because of where rates have been going the last couple of years. And it turns out that might not have been the best decision. But this is a kooky businessman, like it doesn't take much to give a reason to do blank sailings doesn't take much to give a reason to manage capacity one way or the other. And the ripple effects, you know, that butterfly effect and how it hits our entire industry. It's just undeniable.
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Yeah, well, it'll be interesting. Like most of our topics beat we're forward thinking and so it'll be interesting to see what transpires in the next quarter. Yeah, dumpster Dominus.
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Yeah, my last topic is sure to make Doug angry.
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There, there was a new few weeks ago, China, unveiled and launched its latest aircraft carrier. And what's fascinating about it is is nearly all of the aircraft that are on it are drones. So they are, they are unmanned drones. And they are connected drone swarm drones. And the reason that this aircraft carrier was built was to deal with American aircraft carriers are American Navy, or aircraft carriers are badass, there's no other way to put it. But they are not, you know, they're not unsinkable, there are ways that you can get around them. So what China has done is they've built just gigantic clusters of connected drones, that they will move against chips that will maybe possibly overcome the Aegis system, and overcome these very sophisticated radar systems. So they're out there, we've also got,
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you know, China has been pointed out, again, by the Pentagon, again, there was a Wall Street Journal article yesterday, coming out of it. So the tip top people in Space Force in the Air Force, and Cyber Command saying, again, that China appears to be ramping up a possible way to
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first strike the cyber capabilities of another country, namely us, and they will be doing it in the outer reaches of our defenses in the Pacific. So it's clearly, you know, it's a way for them to be able to knock down our networks throughout those three, the three line strategy starting out in places like
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Tinian, and Samoa, and,
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gosh, what's the one caribou, the other one sigh pan, and, you know, moving in the islands back from there in places like, you know, Hawaii, all the way to Hawaii? So this is, this is maddening to me, because what's being done? What's being done? You know, we're looking at all of this, this type of warfare, this new type of warfare, and we're not really putting the necessary emphasis on trying to fix it. And then secondly, what about trade, you know, so how much of this is going to be the infrastructure of the supply chain that they're going to come after? Again, and again, every report you read, if it's not the power grids, if it's not water, it's transportation infrastructure, we are so dependent on foreign inputs, that going after ports, going after customs, going after freight forwarders is an excellent way to disrupt the American economy. What the hell are we doing? So are we going to legislate something? Are we going to come up with some sort of regulation, that's going to require a heightened awareness and heightened defense against cybersecurity, or we're going to continue to leave it up to companies who until they get hurt, aren't going to do a damn thing about a dud. And our industry has been absolutely just wrought with peril with regards to this companies that have had incredible impacts and individual companies that use those freight forwarders that got impacted by it. something's got to happen, Doug, and I think it's going to come down to a regulation.
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Well, like I always say, Pete, I'm from the US government, and I'm here to help
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View?
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We'll see.
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Man, that's a tricky one part of me is just the what if, right? I mean, if these drone vessels would actually be deployed and used, I mean, it's world war three, right. And so it's just sitting there, look what we have, we're going to show you enough, but not too much. So you get concerned and react appropriately. And the fact that you can show a little bit and then pull it back, talk about what you could do, then pull it back, means you have control. Right, you have control. And it'll be interesting to see.
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I mean, other than just rolling out these massive kick ass, you know, carriers that we already have in place, you know, muscle against might, it'll be interesting to see the legislation piece of it. I look, what would they legislate? I don't know, what do you think they would have to legislate some kind of bare minimum for cyber for one. And then, you know, the conversations about AI China and America got together in the fall and had this big kumbaya moment about not using artificial intelligence for warfare. I don't believe a word of it. I mean, there's the there's a video you can watch it right now. There's a new Chinese dog drone, they put machine guns on the damn thing. So you know, imagine like you're getting chased by this mechanical dog and it's shooting at you. And it has all the necessary, you know, computer assessments to make sure they don't miss. That's terrifying. You know, some some aluminum Doberman Pinscher chasing you down a hallway. No, thank you. gunned up to the teeth. It's it's, it's changing right in front of us stuff. And the ability to use possibly autonomous, autonomous robots to fight wars. It's Terminator, baby, you know, it's coming. I'll be living in caves. Right? Well, I think Lebanon caves are living in cages. A great way to end this show this week, sir. Yeah, I know. What's happening. Go ahead. I was gonna say, you know, I'm ready. So bring it on. Yeah, no, I think our listeners will have to determine if the show was a good one or a bad one with the sleepiness of the both of us. But I think we did pretty well for minimal sleep and up early. So anyway, as I said, with the listeners, we appreciate you engaging with us every single week global trade this week wouldn't be here without you wouldn't be here without the support of CAP logistics, and Kenan even with his sore ribs. He gets the job done. And we appreciate that. So until next week, Pete, I'm not sure where you're going to be. I think I'm back in Denver. I'll give you some feedback on that. Actually, I'll be in Steamboat Springs, Colorado, because I've officially moved up there. And as of now, but that is for another day. Another story. We want to thank you for listening to global trade this week. Have a good one, buddy. We'll talk to you later. I'll see you next week. Bye bye.
Transcribed by https://otter.ai