Global Trade This Week – Episode 201
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Keenan Brugh 0:00
Doug, you're watching global trade this week with Pete mento and Doug Draper,
Pete Mento 0:07
Hello everyone, and welcome to Global Trade this week. I'm Pete mento, and it's bring your son to work day. So we have Keenan with us joining our my co host, Doug is off enjoying a very much deserved vacation. He is not that far away from me and not that far away from where Keenan was just vacationing himself. I am reporting live from the bustling metropolis that is Winona, Minnesota. So wonderful to have you with us this week, Keenan filling in. I get a lot of positive feedback when people say that you fill in for one of us. I tell them that clearly they've been doing the drugs before they watch the show. But it's always lovely to have you, Keenan. You bring it very fresh attitude and fresh perspective to things, and you are very bright, bright guy. So welcome Keenan to your the Joan Rivers to Doug's Johnny Carson,
Keenan Brugh 1:04
fantastic. Well, thank you. I always love getting to learn from you guys, and it's an opportunity to get to learn some new things when I get to fill in on the show. And yeah, definitely seems like a Midwest summer just getting back from those states myself. But let's go ahead and dive in here. Topic number one I wanted to share today was about the Panama Canal. I know you and Doug have talked about this, and in Episodes past, however, it seems to be kind of out of the consciousness for most people that I'm hearing now, just because there's so much other things, news, happenings and economics and politics and especially trade, but the Panama Canal is really important for global trade, and they have been facing rain and drought and infrastructure issues and ownership challenges. And so the news I saw just this week is that the Panama president seeks support for vital, vital Rio India water project. And so this ties back into the story you guys have been talking about for a while now, but there's been less rain than normal. You know, ships are bigger than ever. There's more ships. You know, we have maybe a little bit of downtrend right now with trade uncertainties, but the overall trend is for more people to try to want to use these canals. And then when we have uncertainty or rate limiting, things that are leaving ships out, waiting longer, times more expense, uncertainty of ownership or potential geopolitical things that can exacerbate the uncertainty. So just wanted to bring back up Panama and the importance of water in order to make that canal work.
Pete Mento 2:40
Yeah, the canal is there's so much we take for granted. Keenan, like we we take so much for granted when it comes to logistics. I think we've gotten kind of used to it, sort of like you go to the grocery store and you pick up that pound of hamburger, you don't really think about what went into raising the cattle, teaching the farmer how to actually farm, processing it, getting it on truck, keeping it cold, all the work that goes into it, right? And with regards to ocean transportation, it's very recently, because we had those problems the Panama Canal. We're having problems right now with the Red Sea and Suez. I think we're getting a little more to it. But this is a very delicate and you know, I'll go so far as to say volatile area of the world because of climate changes that have been happening, either there wasn't enough water, there was too much water. It's been a pretty rough year and a half, two years for that part of the world. I've transited the canal. It was, it was fascinating and incredible, but not nearly as high tech as I thought it would be, and we've, we've grown to appreciate its need. Now, the problem with the canal is it's not big enough for some of these larger ships, and I think that that's what might end up hurting their international call for help here is the Chinese generally benefit from larger spaces, more water, access to it. It's the smaller size ships that are owned by the Korean carriers, the ones that are owned by the European carriers, whether owned by US carriers, the US Navy, that really do benefit the most from that part of the world. I think it might hamstring their call for international help, buddy. But all the same, I imagine help will come and show up on the way. Did you read anything at all about, we've seen anything at all about what the initial response has been.
Keenan Brugh 4:26
You know, need to support not only the users, but also the international community. I have not seen the response was using grok today and doing some research, and it seems like grok has had some issues this week and has been forked a little bit, but it seems like it's following similar appeals, kind of emphasizing the urgency of building the reservoir. Yeah, you know, it's one of those things that I have not seen people jumping onto it, but it is, it is pretty critical. So. Uh, some of the other stats, I guess, that came out of the
Keenan Brugh 5:11
seems like there's been increasing in freight costs. So even as from what I've been seeing elsewhere, uh, international, overall tonnage and shipping stuff is down, but the rates are going up, and if there's no water, or, yeah, it's not going to work well for international situations then, and maybe, maybe problematic. So, yeah, definitely going to be definitely, definitely problematic. And it's one of those that I think us. You know, we do a lot of US domestic type shipping, but we do international and so it's an area that I think is important and I would like to learn more about. I've heard some people. I'm not sure if you're aware of the book by David McCullough, the path between the seas, but it's kind of about the construction of the Panama Canal, which is a whole section of history that I don't know, but might tie into what you were saying. It's not all that high tech, because it was built kind of a while ago and has been critical ever since then.
Pete Mento 6:07
Well, here's a fun fact. Keenan, the guy that did baseball and did all those documentaries. Why can't I remember his name? He's a big deal. He's a very big deal. Anyway, he had thought about doing one about the Panama canalic. It's on his list of documentaries to do, but he's just gone down burns and burns. That's it. He's down this rabbit hole right now of the American Revolution, I guess. And so he's thinking it's going to take him, like, a decade to come up with the next one, American Revolution, in the years leading up to American Revolution, and questions about whether or not that really is American history. But it was us that built it. It was us that put the money into it. I think it's very much between, you know, the Monroe Doctrine and the rest of what we're, what we consider to be Western Hemisphere trade. I think it'd be a fascinating thing to watch. Also, Keenan, I've decided that when it's you co hosting, we're going to call this the Beard boy show global trade this week with the beard boys, well, my topic is a little a little less a little less interesting, because we're sick and tired of talking about it. But it's, you know, it's my life this week, unfortunately, there was another shaking of the Etch A Sketch by Washington regarding trade. The first thing that happened we were all very excited about was this Vietnamese deal that was reported. I did a webinar about it yesterday. You know, this Vietnamese deal is wonderful to hear, but it's, it's so undetailed about we've gotten back. So a 20% on practically everything that a 40% of stuff coming in from Vietnam that isn't made in Vietnam, it's transshipped. All right, cool. Well, if you're not really into international trade, you're like, great. So if you send something from China into Vietnam and send it to America, okay, that's obvious. But think about this, every free trade agreement has something we call a regional value quantity or regional value content required. So for NAFTA, as an example, you got 50, 60% it really depends on if it's automotive or not. So are we going to say that if a product is made entirely of Chinese components, which I gotta break it to people, is a lot of the stuff that comes from Vietnam, it or or it's coming from other parts of of Southeast Asia, and it doesn't reach a certain percentage of 60, 70% will it be subject to that 40% tariff? We don't know. There is no further detail coming out of our friends from Vietnam or Washington, we're not hearing anything. Added to that frustration the second half of my talk today is the letters that went out. So I don't remember the last time I got a letter from a friend, but the letters were certainly not friendly. That left Washington on Monday at 12 o'clock that apparently went to 18 nations saying, our talks have stalled, or our talks never happened. And rather than waste everybody's time, here's your new tariff. Now there are two particular countries, South Africa and North South Korea, which we really have been talking to. I mean, in Japan, partly three that we really have been talking to that walked away from this with massive new tariffs. We don't know everything that was in all the letters, a couple of them are coming out. I know I saw Singapore's today, Thailand's as well. So there are, there are bits and pieces of information that are coming out of this, but the negotiation is practically over with. And they've, they've said the pause will continue till August 1. All right, cool. Well, on August 1. Does that mean that, if I have goods that have been on the water, so they left on July the 20th, but they get in on August the sixth, does that mean I have to pay the tariffs because they were on the water? We don't know. And my inbox is stuffed with people, you know, well meaning people with a big question. It might is my. Stuff gonna be hit with tariffs. And really the point I'm trying to make with all this Keenan is the lack of credible guidance and insight. They're great at the shock and awe, but they need to understand that they are massively impacting supply chains and markets, and it would be much more responsible to give people direction rather than just causing all this chaos.
Keenan Brugh 10:24
100% Yeah, if you would be able to have where you're trying to get people to go and push it that way with a little more clarity, maybe he'd have more buy in. Are they the US Trade Administration at writ large, all the negotiators. Uncertainty is very expensive, right? I think that's maybe why we're seeing certain shifts in supply chains, of people not shipping things or, you know, we were expecting a certain amount of maintenance and turnarounds and power and generation oil refinery. So sorts of things, uncertainty is expensive, and people just push stuff off until, well, maybe it'll be more certain next year. That type of stuff, which can add up and impact a lot of a lot of industries. That's interesting about the origin percentages, and, yeah, it's not, not really clear, let alone the dates. And, I mean, we're hearing new dates, right? I've heard August 1, and I've also heard China August 12, but then, yeah, what does that mean? On The Water landed, all those sorts of things. Really clear.
Pete Mento 11:23
Yeah, for those you listening, I just threw my hands up. We don't, we don't know. We absolutely don't know. That's another comment I get to Keenan is people say, remember, I'm listening, not watching. So I don't get a nuance of the faces and the silly things you do. So yeah, what are you gonna do?
Keenan Brugh 11:39
Yes, absolutely. I mean, lots of people are out there in their cars or just listening. So good, good enunciation of that well, so
Pete Mento 11:47
you announce half time, right? This is a gift from Doug loves halftime. I'm letting you announce it.
Keenan Brugh 11:54
Well, Doug is out on assignment. I believe he might have said Wisconsin. That's correct, and that goes into my first topic here halftime, brought to you by CAP logistics. My first question to you, similarities, differences, what do you prefer Minnesota or Wisconsin? And why
Pete Mento 12:14
Keenan? This is such a softball for me. So I lived in Minnesota for a period of time, and it was actually a pretty good period of time. And there's a number of factors that ruined Minnesota for me. So my first winter here, my my ex wife, because she has a brain in her head, packed up everything and went back home and took my daughter with her. I wish I could have gone with her, but I spent my first winter here, kind of new to the area and alone. And I didn't realize that there was all of these things happening in wintertime in this part of the Midwest, which, for those of you who don't know, is brutally, I mean, it'll kill you, kind of cold. It is pretty awful in Wisconsin and Minnesota, particularly Minnesota. So it's just terrible. I have a very awful relationship that originated in this state, so that doesn't help either. But it was more for me, being a dyed in the wool East Coast guy, that people were just way too nice to me. I get it right. It's part of the whole schtick with Midwest nice. There's a story about me. I would go to the same quick stop every morning on my way to the office, and I grab a couple Diet Cokes, and the guy would try to talk to me, Oh, hey, how's it going? Fine, going on your way to work. Yeah, yeah, all right. In here every day you should probably just grab a bunch. And I would just leave after about a month of this and going through a divorce, I finally snapped on this guy, and I said, I don't want to talk to you. I want this is a transactional relationship. I bring the cans of soda to the counter. You take our money. We don't have to talk. Okay, it's all good. And that guy hated me for the rest of my life, living in Minnetonka, uh, Wisconsin.
Speaker 1 14:00
Sorry, I believe that. Yeah, yeah. I
Pete Mento 14:04
learned that the worst thing you could do to a Minnesotan is when they say good morning to you, don't say anything back, because they're going to spend the rest of the day saying, Oh my God. What did I do to make Pete angry at me? And I wasn't angry. I just wanted to mess with them. Why do I like Wisconsin more than Minnesota? Very simply put, I just drove here from Chicago, okay, all I saw were signs for cheese and fireworks, two of my favorite things. Also, it's not Minnesota, okay, I'll just say it. I have a pre existing condition that just disallows me to like this state. Now, all that being said, some very dear friends of mine live here, very, very wonderful, wonderful people that live in the state they do anything for you, very sweet, very kind people. And I think that comes from generations of having to live through winters that if you were the jerk in town, you were going to die. So I think that's really where it comes from. So that's it for me, buddy. What about. You, what's your perspective?
Keenan Brugh 15:01
I think you're right. I think in Minnesota, with the cold and the history there, it's a little closer to the evolutionary pressure of how ostric being ostracized from the group leads to death. So you kind of have that collaborative you know, sometimes it's rural, but even Minnetonka, Minnetonka is not all that rural. Or we have cities in Minnesota. Yeah, you definitely have that collaboration drive, or the talking, you know, talking, but not facing each other, kind of off in the distance, lots of weather just to, like, check in. All right, cool, cool. The weather is deadly. I had to change a tire in Minnesota in negative 30 degree weather before wind chill, and so I had gloves, but then I'm like wrapping extra like fabric and things around my gloves in order to change this tire on the side of the road in the middle of nowhere. So I also have more history in Minnesota. Grew up camping there on the North Shore. So I love the Boundary Waters the North Shore. I just got back from mountain biking in Duluth. Great trails. Lots more oxygen than Colorado. So it makes me feel like I'm a much better mountain biker than I normally feel like I am out here in Colorado. But there's something alluring to me about Wisconsin. One, I love the cheese. It seems more like a frontier to me, like when I was in college in Minnesota. You know, they were the ones who sold alcohol on Sundays. Or if you wanted to go skydive, you go across the border into Wisconsin like that. Kind of seems where, like the American Dream freedom is still alive. And I'm not an expert, but I've heard their taxes are lower in Wisconsin. So it seems like that's kind of places where people are creating, creating their homesteads or future. But both of them have great mountain biking, great people, great food, great culture, yeah, definitely a Midwest, North Midwest summer, all three of us being there pretty much the same time.
Pete Mento 16:47
Kind of wild, crazy. It is kind of crazy. Well, my half times a little bit different. So I travel a great deal, a great deal, and I am shocked every month when I do my expenses at how often I order from Uber Eats. So another door, dash guy, Uber Eats guy. And there have been times Keenan where I could have just gotten into my rental car and drove a couple of miles and picked something up, but I'm just, I just order it. And this has bled into my personal life. When I'm home in Virginia, I am more than happy to just have groceries delivered, have everything delivered. So it's a two parter. Keenan, first, are you a guy that has stuff delivered often, like food stuffs groceries, and then, second of all, do you think it's a good thing? Do you think that it's a good thing to have it this easy to have a cheesesteak delivered to your hotel room at two o'clock in the morning?
Keenan Brugh 17:47
Well, that complicates it, because I love cheesesteaks, but no, I am not someone who orders delivery food. I think I probably ordered delivery food more before the Uber Eats and all that dash era type stuff. I get delivery pizza, but no, I it could probably help people in certain areas and different things. You know, I'm imagining like a Tokyo situation, cool some like bike delivered ramen. That sounds great, but a bunch of people putting things in cars. I've just heard horror stories of, you know, the drivers don't like how it makes their car smell, so they just spray, like perfume, whatever deodorizer into people's bags of food, and then, like you're eating that. So it's just like the chain of custody. It's already processed food. It takes a little bit longer. I'm sure some setups are fast and fresh and delicious, but it's already, like, kind of commoditized food products, and then you're like, making it wait or, you know, going into some unknown individuals hands that may or may not spray it with Febreze. Yeah, I don't know. I think someone has given me gift cards, and I just, I don't even use it, like, I just, I don't use the services
Pete Mento 19:01
well. As a guy that orders a lot of really funky Indian and Thai food, I feel bad for whoever is driving the car when I when I ordered, and the inconsistency of them screwing up, right? Just, you know, I'm in a hotel, put a put a knife and a fork in there, take it, and I tell you in the instructions the amount of times that I don't get what I ordered and there's nothing they'll do. They just say, well, here's your refund, bro. I'm sitting here eating, you know, super hot chicken vindaloo, and I've got no Diet Cokes, all right, kick rocks. I hate all of you, and I get it right. I can't imagine what doing that service must be like, driving your car around, big bills, crap up, dropping it off. I'm sure it's not a fun job. Get it right, like Joe Pesci said, you know, they f you at the drive thru. Well, they're after me on my UberEATS lately. But so I don't know, I love it. It's easy for me, but it's gotten me to the point now where I just buy more groceries and cook for myself. I don't want to deal with
Keenan Brugh 19:57
those people. Yeah, I definitely, yeah. Five. Or cook for myself. And obviously, if you're traveling, that's a different situation. And I agree, you know, you'd want them to do it right, or don't do it at all. And I almost feel like, with my limited experience, I get better service when it's integrated with, you know, a specific Bao bun kitchen or something, and they do it themselves. It seems to be more ownership and a better service than when, you like, pass off to the intermediaries, and there's a little Chick fil A over there, and there's a little Wendy's over here, and whatever. And you know all that it seems like it's not, not the way to ease.
Pete Mento 20:31
I agree. I agree. All right, well, that was half time from our friends at halftime. Kept logistics. Doug is going to hate this halftime. I'm sure he's gonna listen to it on some link somewhere and just be seething about the topics that we talked about. We'll probably hear about it during the pre show next week. But do check out caplogistics.com that's Keenan employer. I'm sure they would appreciate that. And with that, we'll get on to the next topic. What is it?
Keenan Brugh 20:56
Keenan? All right, so with all the news on trade deals. There's been a lot of attention with the US. This next topic, I wanted to talk about the EU and coaster Mercosur trade deal. Mercosur, yeah, thank you. Trade deal facing collapse with the agricultural dispute. So I did fact check grok on this, but yeah, it looks like France and Poland are having some of their constituents, farmers and other related industries, not wanting to agree to the current terms with the South American exporters, which is critical for the South American exporters. So maybe bringing up the key points about this one, and then kind of the more broad trend of this so Brazil and Argentina facing $10 billion dollars in export losses if the deal fails. So it's the importance of deals, right? But then also, oh, you have all these competing interests, and if protectionism is back on the table, well, we want protectionism. Well, we want protectionism. Well, we want to export. Well, we don't want you to export. There's going to be a lot of that. So I guess both the specific topic is on this, this particular trade deal. But then also, in a world now where there's less one set of rules for everybody all over the place, and America making more bilateral Hub and Spoke type trade deal models, are there going to be more groups like this kind of chunking EU with South America and the Asia and like different blocks going around, and then, will they be successful? Or are there going to be protectionist issues like that? Or is this just a temporary thing? They'll figure it out eventually.
Pete Mento 22:30
Well, these blocks negotiating with each other, Keenan is it's just a more efficient way to handle it, right? You You come to an agreement internally about what you're willing to give and take, and that you negotiate as a block, rather than these bilateral agreements, which every little piece of it is being negotiated with an individual country. And also there's the leverage side of it, if you're a large portion of South America, or, you know, a go ago, agora, agora, yeah, the one in Africa, same thing. You can negotiate these deals with a lot more leverage and be able to make a bigger deal with what's going on, hopefully more lasting, the agriculture one, it's so fascinating to me. Every country wants food independence. We don't want to have to rely on anyone else. And we're very fortunate in North America, in Mexico, Canada, in the US, we do a very good job of making our own food, making it available. It's not the point, not the way in the rest of the world, China consistently has a difficult time creating enough calories for the people to consume. And they, they're, they're a massive import of agriculture, because they're really focused on other parts of their economy. I mean, we literally, in the US Chinese agreement, we sold China rice, which used to be like a joke. He's such a good salesman, he could sell China, right? So guess what? Rice in China? They they need all the rice they can get right now in China, so that so selling them the basmati, a Texas basmati, Louisiana basmati, that comes out of our country is a pretty big deal. Now, if we're exporting that, it's going to mean scarcity for domestic rice. Fortunately, some fabulous rice companies that do a very good job of importing inexpensive rice to the US, where we pay a premium dollar for it, because to us, it doesn't seem like it's that much money, but that kind of price in other nations would be absurd for such a staple of what they eat every day. Then there's also the food safety piece of it. We've talked about this many times on the show. There are whole swaths of the planet that will not import certain food stuff from America because of our agri science, whether that's hormones or chemicals or whatever it is that we do genetic engineering, they just they don't appreciate that coming into their their world. So you have the food security side and the food safety side, and those two things together come up, come together as a huge deal that most consumers, wherever you are in the world, don't really think about. They want cheap eggs. They want they want cheap staples of their diet, and they're not they don't really care where it comes from, because their lifespan is small. But these deals, when you look at them on the face of them, they're long lasting. Usmca, which used to be NAFTA, were coming up on. On. You know, what is it now? 33 years, I believe, since been in place, and you can see how agriculture has shifted from the Sun Belt, from parts of the United States into Mexico. You can see where we are now rather dependent on them for a lot of fresh fruit and vegetables. They can make it cheaper and have the same quality that we can, it's a big deal, and people need to pay attention to it if you want to understand the broader impacts of the trade agreements and what's
Keenan Brugh 25:30
behind. Yeah, it's interesting. Having the trade offs in economics. There's always the trade offs right of having the food security, but then also the food safety. And you know, you often, I often, think of the EU being ahead of the US as far as food safety. Even though there's good innovation in what we're doing with certain genetic modifications or certain things, there's also critiques of why someone might not want that in their food. Yeah, that's a fascinating we're fortunate to be in America. I know driving back from the Midwest, Illinois, Chicago, Minnesota, Wisconsin, Nebraska, Iowa, there's a lot of corn. I just drove past a lot of corn in the last 24 hours. What
Pete Mento 26:05
I loved about driving through Wisconsin today was the diversity of farming. They grow trees there. So, yeah, there was it was not just like driving, like you said, through Iowa or Minnesota an endless sea of corn. There's a lot more to it. And not to say that that Minnesota doesn't have a diverse agriculture, but diverse agricultural base, they certainly do, but it's not as visible when you're driving the major highways of that state. All right. Well, that brings me to my final topic, which I think is very insightful, and people need to listen to this, because one of the questions I always get is, why is this taking so long? Why is this so hard for us to do. It's simple. First of all, trade deals are supposed to take a very long time to accomplish. They they do 10 years, five years, they don't happen in 90 days. That's just not how this stuff works. And then, second of all, the negotiating class of us, political infrastructure was summarily fired in the beginning of the Trump administration. They were all let go. So these people that had 1020, 3040, years of experience negotiating trade deals, who are dealing with people in their counterpart countries with 1020 3040, years of negotiation experience, they're gone. It's one of the reasons that Lighthizer didn't take the job to come be the USTR again for Trump. He's like, so you're gonna get rid of everybody that I can depend on, all my under secretaries, all the people that do this work, and I've got to use this new crop of folks that have a totally different way of looking at negotiations. And I might not agree with that way. No, I'm out, and that's why his his number two is protege, Jameson Greer took the job. He's like, Yeah, I'll give a shot. I'm young. I put the work in. But we're having this problem because the people from the US side are negotiating with very old school, you know, very stated folks that have done this a certain way for a long time. We're not so everything that we're pushing and how we're pushing it is completely alien to the process. Will this be the new way that it happens going forward? Oh, dear God, I pray it's not. But it's been fascinating from an purely academic perspective to see what's going on these past few months, but it's been absolute Bedlam from the perspective of someone who deals with importers every day, so maybe, as someone who really isn't a big fan of government, maybe there's something to be said for keeping folks on with that institutional knowledge when you're gonna do something so big as this,
Keenan Brugh 28:35
yeah, but it kind of reminds me of the tech industry, right where they'll have massive layoffs and then, like, oh, talent goes, goes elsewhere, and all of a sudden, like, Oh, you're inside secrets or somewhere else. Or then like, Oh, now it's booming again. We need to hire them, but they don't exist, or they're all gone. And there's costs associated to that. And it's a good point you bring up about the timescales. People asking, Why is this taking so long? Because it's painful and uncertain right now. Rightly fuel it. But yeah, compared to how these deals are normally done, this is much faster, and there may be some things broken along the way or missed, or just disagreements. And so yeah, although there's been some signs of the optimism of China and UK and different countries, but there's also now signs of, Oh, this isn't actually done yet. And so if it's not done, you can't count the chickens. You know
Pete Mento 29:24
it's true. And you brought up a great point, Keenan, so think about it. In the tech industry, if you and I are like big time innovators, and we get whacked, we're gonna go to work for another tech company. If you're a negotiator that's been dealing with a particular region of the world, and you get let go in the US. You've got very limited places to work. But let me tell you, it pays super well to consult for the Chinese as a US former trade negotiator or negotiate for the Europeans, etc, etc, etc, and we've just built this infrastructure to add further hurdles to getting these things done, because it's. They can be paid obnoxious amounts of money to be part of the opposition's work. Now,
Keenan Brugh 30:05
fascinating. Wow. Yeah, okay. Well, with that, chew on there.
Pete Mento 30:10
Yeah, with that, that's going to do it for our topics in halftime and Keenan, I'm going to give you the honor of closing out the show.
Keenan Brugh 30:17
Well, thanks everybody for joining us on this, the 201st episode of global trade this week. Thanks for joining us and catch us again next time. Doug should be back from the Midwest, and we'll have more insights on transportation, trade, economics, politics, things happening around the world that could be impacting you and your business. So thanks.
Pete Mento 30:39
Thanks, buddy. You
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