Global Trade This Week – Episode 250
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Keenan Brugh 0:01
You're watching Global Trade This Week with Pete Mento and Doug Draper.
Doug Draper 0:07
Hello, everyone, and welcome to another edition of Global Trade This Week. My name is Doug Draper. I am only one of your co-hosts. The other one is joining us from the great state of Louisiana, and Pete, this is a special episode for us. I'm going to let you explain to our audience what I mean by that. It
Pete Mento 0:28
is a 250th episode of Global Trade this week, and that just happens to coincide with the 250th birthday of our great nation. So, here's the 250 weeks of kicking ass, Doug.
Doug Draper 0:41
Yeah, it's.. I was looking at that, maybe a month ago, and was like, if we keep these in cadence, we'll be right there with America's birthday. So I'm not sure that we'll be around for the 300th anniversary of our country, but we will be around for the 300th episode. So I'm stoked about this one.
Pete Mento 1:02
I'm pretty sure that my employers will have my brain somewhere in a jar with electrodes in it to make sure, you know, can we just get Pete on this team's meeting real quick? Can they just, you know, they'll have my consciousness somewhere in a server, it'll be an avatar of me, like Tupac and Bonnaroo, that's what it's going to be like.
Doug Draper 1:21
Yeah, wow, that's interesting perspective on that one, for sure. So, all right, let's hammer through this one. I know we had to adjust our times a couple times today, but let's give the people what they want on global trade.
Pete Mento 1:34
You got first off this week is on the Board of Trade idea, this concept that think today might be the last day to make comments on with the Bureau of Industry and Security, where China and the United States have agreed to a formal board with members from both countries to talk about focusing on trade issues that do not affect strategic items, so semiconductors, pharmaceuticals, aerospace, those are still going to be dealt with a different way, but for commercial products that maybe won't have a big impact on national security, pardon me, or a long-term trade strategy. They're saying that, you know, we can hammer those out amongst ourselves rather than upending the Scrabble board every time we don't like the way someone spelled something. And I think it's a beautiful idea. I think a lot of things are beautiful ideas. I just don't know if I believe this is ever going to happen, Doug. So, I'm encouraging people to put their comments in about the Board of Trade. I mean, it can't hurt, and try to show that it would matter to us, that it would be a great thing if we could have it, but we forget that both sides have to agree to this, and whatever China comes up with may not be amenable to our friends in Washington, so I'll believe it when I see it, but I'm hopeful it'll happen, you know, kind of like true love and the Saints winning the Super Bowl again, or the Red Sox not sucking. They're all things that I truly believe in, but I'll believe them when I see them.
Doug Draper 2:56
Yeah, that's funny. I guess we're somewhat aligned with this one, when I, when I first saw this on the, on the show notes, I'm like, this thing is DOA, right? It's, it's a cool
Pete Mento 3:10
optimist, Doug Draper, everything optimist.
Doug Draper 3:15
It's a cool story, and a cool sound bite, and I like it, but you know what's a priority right now, give me my MF and money back, right? So I don't know, you know, Cape, and the challenges that we've had, and the successes. There's my positive spin that we've had with Cape. This is just another thing that I don't know is just out there for a distraction, maybe. But the other piece I said is that this China has to play. It takes two to tango, as my dad used to say, when my brother and I would get into fights. And I don't know, I mean, sound bite nailed it. Good story, absolutely. I just don't think anything's going to come of it. It's just an idea floating out there. There's a lot of things that have to come into play before it even has any legs, let alone any form or function.
Pete Mento 4:05
It takes two to tango, Dad would say, back in Kansas, before he'd take us out to the back 40 to go out there and, you know, take care of the fences that need to be mended, and this could turn into such a folksy yarn if you just let it done. No, I completely agree with you, it takes two to tango, and neither partners really up for dancing these days, so I'll believe it when I see it.
Doug Draper 4:26
Yeah, yeah, good call. All right, well, my first conversation speaks to several things that we've spoken out, spoken about during our 250 episodes of Global Trade this week, so I know you saw this one, Pete CMA, CGM, the Steamship Line Holding Company, just acquired FedEx Supply Chain Services, FedEx Trade Networks for $1.4 billion and to put that not into perspective, but to give somebody some. Some perspective, I should say, Seva Logistics is part of that organization already. I think it was like right before the pandemic, maybe 2019 or 2020 So this is essentially adding to the Seva Logistics North American primarily contract warehousing footprint, the statistics I show, or I read 20,000 employees added, 240 locations, 150-ish new warehouses brought on board. But here's the one piece that is kind of the subtext to this one: FedEx and CMA are going to enter long-term partnerships for air freight and ocean freight, which is interesting to me. Right, I don't know if that's going to be beneficial, detrimental, a little bit of both, but it validates that owning the rails, which you and I spoke about during Covid, the tail end of Covid, is that vertically integrating your supply chain is something that the big boys are starting to do, and this is an example of that, but then tying the air freight and the ocean freight to it is pretty interesting. It's not really just a company acquisition or a warehouse acquisition, it's really a vertical integration that we'll have to see what transpires, so that was the one thing. The other piece is, I know we normally don't give people shout outs here, but there's this guy I've been following on LinkedIn, and we swapped a few messages. His name is Britain Ladd, L A D D. Have you ever heard of him or seen any of his posts?
Pete Mento 6:40
Yes,
Doug Draper 6:42
I I, he, he's with Lad Strategic Advisors, and he did a post, maybe a week ago, that talked about potential acquisitions coming in the next calendar year, and it was very interesting. This one was not called out on there, but he has some other interesting takes on acquisitions that are going to be coming down the pike from his perspective, but anyway, big merger. I think 1.6 billion in this day and age is, I mean, I'm not a valuate companies or place valuations. Seems like it's a pretty small number for FedEx trade networks and their whole supply chain strategy, but I think the air freight and the ocean freight piece of the of the the acquisition is something I'm wanting to look at.
Pete Mento 7:26
Well, Doug, you talk about it all the time. The room full of accountants with their green sun visors on with their shades on, and they're adding machines from 1930 There's like 500 of them somewhere in Memphis, sitting in a room, they're well fed, they're well cared for. People don't worry, and this is a hypothetical idea that we have, but there are just rooms of people that are running numbers on where this makes sense for them. Anytime I hear, I've been through some acquisitions, blah blah, I mean, in my life, I've been through some acquisitions, and they're never flawless, and they're never easy, but they're always successful when you retain the customers. Whenever I hear FedEx, I wonder, you know, are there assets involved? Because they're not a non-asset company, but when it's a company like Robinson or DSV or Siva or Kundanagul, the list goes on and on. These non-asset companies are to some degree, possibly super light asset companies. They're hoping to retain the customers in the business of these people, as well as their volumes, and if they can do that, then it makes a lot of sense for them. Then they're going to clean up because of it. So, you know, FedEx has a long history of retaining customers through an acquisition, and they also have a long history of cut and bait. If it doesn't look like it's working, and doing the best they can to recoup that investment if they're not getting what they want out of it. I'm done second guessing companies like FedEx on these acquisitions. I think, in the long run, you know, I haven't heard Steve's name much. Just being super honest, I don't hear much about them in the marketplace. If anything, hopefully this redirects that they're still a fresh company, fresh lifeblood in them out there, trying to, you know, acquire as much business as they possibly can. So let's hope it works for
Speaker 1 9:07
them. Yeah,
Pete Mento 9:08
so glad I don't work in that business anymore.
Doug Draper 9:11
Well, never say never. You still have some runway left in your career, my friend.
Pete Mento 9:17
No kidding. Oh, come on, dude. So broken and old, we crazy, we'll see, we'll see, we'll see.
Doug Draper 9:24
Yeah, cool. All right. Well, that brings us to halftime, brought to us by Cap Logistics and Kenan, our friends over there. The show wouldn't happen without them, so please check them out@caplogistics.com which takes us to halftime. My friend, I'll let you kick this sucker off. I on your show notes, I didn't quite really follow what you're going to say, so this is 100% new to me.
Pete Mento 9:47
Every year, every year in the fall, there are a group of scientists who get together and they give out awards called the IG Nobel Awards. This is for science that if. Appears to be preposterous, and the scientists who did the act. This is like peer-reviewed research. Okay, these are scientific studies that were done by honest to God scientists, and they're peer-reviewed. And here are the rules: it has to be published research, so that means that other people looked at it. It was probably done under the purview of universities, might have been funded by one. When you win, you get a plaster cast of a Nobel Prize laureate's foot, that's the award. And they actually, you can watch the awards on YouTube, where the person who wins has to explain their research. Doug, here are some of the winners of the Ig Nobel. Are you ready, buddy? Because you're not going to believe,
Doug Draper 10:40
yes, I'm sure. Where this is gonna go, but let it rip.
Pete Mento 10:45
Can mammals breathe through their anus? 2024 physiology prize went to researchers who found that many mammals can absorb oxygen through their rectum. So, here's the thing, Doug. Someone said, "You know what? This needs a definitive answer, and we're going to put the collective mind power of this university to figure this out. Let's fund it, let's review it, let's do it. And then someone's like, I'm gonna slap my name on that. I'm not certain I would slap my name on that. Can a cat be both a solid and a liquid?
Doug Draper 11:17
Wow.
Pete Mento 11:19
2017 Physicist Prize went to Mark Antoine Fardin for applying fluid dynamics to cats. Yeah, roller coasters may help pass kidney stones. All right, why wombats make cub-shaped poop, cube-shaped poop. Wombats have poops in the shape of little square cubes. It's somehow dug again. I can't get my research funded, but these jackasses did. But nano peel friction, the 2014 physics prize went to scientists who measured the friction between a shoe of an an appeal and the floor. The cartoons were right, and academia eventually caught up. Casio and Pepe, the 2025 physics prize went to a researcher studying the phase behavior of pasta sauce and why Caccio and Pepe clumps. It's a type of Sicilian delicacy.
Doug Draper 12:12
Okay, this is the most
Pete Mento 12:13
Italian to physics. I only got a couple left. Painting cows to look like zebras to prevent fly bites in 2025 biology process. Prize went to researchers testing whether zebra-like stripes painted on cows reduced biting supply attacks. They
Doug Draper 12:30
do, oh, dimes, wow, I like that one so far.
Pete Mento 12:35
Teflon is a zero-calorie bulk food. Crocodiles and gambling behavior economic prize went to experiments on whether holding or interacting with a live crocodile affects gambling risks.
Doug Draper 12:49
What was the answer to that one?
Pete Mento 12:51
I don't know, but I've got to believe they do, because I'd be scared as hell.
Doug Draper 12:55
Yeah, I know about saying that the answer to that one, nobody has to pay me for this, is hell yes.
Pete Mento 13:00
Now this might be my favorite. It's the last one. Frozen human feces knives do not work well. I'm going to say that line again, Doug. Frozen human feces knives do not work well. So, this assumes that there's a feces knife. We can start with that, and then it assumes that someone said, "I wonder if the temperature of that feces knife is any more, any more useful or delicate, the 2020 Material Science Prize confirmed that knives made from frozen human feces are poor cutting tools. I'd like to mention again that all of these studies were peer reviewed, funded, and published.
Doug Draper 13:42
Wow. Well, it's there's a lot of poop in these scientific studies, and I kept thinking of ice cream cake on that last one that you mentioned,
Pete Mento 13:53
Doug. I'll say again, I've never once thought to myself, I wonder if I could make a knife from human waste, not once. Then I never thought to myself, I wonder if I could make that knife, if it was frozen, if it would do its job better.
Speaker 1 14:07
Yeah,
Pete Mento 14:08
science is crazy, man. Science is crazy.
Doug Draper 14:12
That one is that one is nuts. So, well, thank you. Been enlightened today. Not really sure where the money comes from, those funding, but hopefully it's not from our taxes.
Pete Mento 14:26
Well, think how much money the two of us have put into universities over the course of the past, I know, 810, years, and yeah, so that money might have gone to funding. Why do cats always land feet down? Why, you know, what percentage of the time does buttered toast land on buttered side? And then why these were other ignobles that were handed up.
Doug Draper 14:43
Love it. Yeah. Well, God bless America. All right, so here's my halftime. Right, I saw a an article pop up, and it was linked to Bloomberg, and it's behind a paywall, and I said I like. Like this topic, but not enough to pay for it, so I did some more research, and kind of have some high levels, but the article was was basically saying America is going through a fun fu n shortage, essentially saying that there's fewer places to hang out, socialize, and engage with other humans, they said. Basically, people still desire experiences, right? But the places to have fun that you and I used to know about have been - they use the term deleted, right? So think of, like, sports leagues, whenever you're, you know, hey, we're going to do a softball league with a bunch of buddies. I said bars and beaches, movies, bowling, and that because those are being closed, because it costs a lot of money to run these things. They made a reference to the fact that insurance is a big deal, which I can completely understand, and that because the desire, and you just kind of spoke about this a second ago, because the desire to have the experiences is still there, but there's less places to go and enjoy them. The cost goes up, right? Scarcity creates demand, which increases cost, and so now you're in a position where I want to have some fun, but there's not enough bowling alleys open, so the cost to play a game to bowl around is double one point x 1.5x the cost. So basically, kids still want to have experiences, kids, adults, whomever. There's not enough places to engage with that. That scarcity is creating greater demand, which is pumping up the prices, and you know, fun used to be something that you and I just stumbled across. Now it's something that you got to schedule and pay for a little bit more. So that was just a comment. I caught it this morning, was real interesting. I thought it'd be something to bring up on the show today.
Pete Mento 16:57
Doug, in the words of my dearly departed mother, Sonia Mento. Most people wouldn't know fun if it bit him in the
Speaker 1 17:05
ass. So,
Pete Mento 17:06
we can start with that. The fact that there are grown men who spend their free time playing video games. The fact that there are grown men who would rather sit on their phone and bet each pitch of a baseball game than go to a baseball game with their friends and bet on it by the line like a normal human being. Truly bothers me. You want to have some fun, come on down. Right, there's plenty of fun to be had. There's plenty to be had. I think that people are becoming more and more antisocial. A lot of it has to do with the magic box in our pockets, and another has to do with fear, we're terrified species. Went that way for a long time, you know. It's I don't have the index numbers off the top of my head, but the last time I read it, this, you know, fear index that children have, the anxiety that they have from things that we never would have worried about. You know, I mean, when's the last time you saw a six year old on a mini bike, or you know, an eight year old building a ramp in the middle of your cul-de-sac was normal. Do a dumb shit was part of growing up and learning how to bounce. And now we do everything we can to shield people from that. I, I have plenty of fun, Doug, but I live in the fun capital of the known universe, so it doesn't bother me. You know, I'm doing tonight, I'm telling you, I'm doing tonight. I'm gonna go watch Belgium play USA, a sport I don't much care for, but I'm gonna go with probably 20 other people at a bar owned by a Belgian gentleman, and I'm going to have, wait for it, fun while I'm there. Gonna drink beers, I'm gonna watch games, I'm gonna talk to other people, I'm gonna socialize, and when the game's over with, I'm gonna go to bed, which, by the way, also fun to do. So I'm not so worried about fun, dude. For people who feel that there's just no fun to be had, get the hell out of your house, you'll find plenty of it. This would burn my ass when you sent that one to me, Doug. I was aggravated people don't have fun. This is fun. Find a couple of friends of yours, and do a podcast, for Christ's sakes. I have fun doing this every week. It's one of the highlights of my week. God,
Doug Draper 19:07
all right, shake it off, my man, shake it off. You good?
Pete Mento 19:10
We're good, we're good.
Doug Draper 19:11
All right. Well, let's, let's wrap that up. Halftime, Cap Logistics. Thank you very much. Check them out@caplogistics.com Topic number two, my friend.
Pete Mento 19:21
Yeah, this one really perplexed me, buddy. Everywhere we look, there appears to be numbers that show a static downturn in imports, maybe not from one particular country that starts with a chai and ends in a nuh, but for a lot of places there appears to be a lower lowering of volume. It doesn't appear to be the case for air cargo, where we've seen a return to statistically high volumes for a while, that wasn't the case, and everyone's saying, well, does this mean e-commerce is coming back? What does it mean? I have a news flash for freight waves, and, you know, all those other people that are put JOC, it's data centers, you knuckleheads, it's data. Centers and pharmaceuticals, and it's people trying to avoid tariffs before something else crazy happens. Those are the three reasons these are happening. Data centers are moving incredibly expensive, very sensitive, vital equipment into the United States to this growth of AI, and they're not going to do it on a ship crossing salty water for a month. They're going to put them on a plane and they're going to fly them here. So that has a big piece, but the second is every time the president wakes up with Ajana, you know, before he does his plot, plop, fizz, fizz, and tries to get his heartburn down, we all hear about it days in advance, and we worry about, you know, tariffs happening, and us being slapped with a new tariff that drives air freight as well, and then the weirdness of what's going on with ocean freight, with how expensive it is, so gotta believe people are doing the math in their heads about, well, should I get it in now and maybe avoid the ocean freight madness that's happening on a per kilo basis. No, Doug, this is one of those areas where I feel like the Logistics Press failed. This little deeper dive underneath the onion would have told you exactly why this crap is happening.
Doug Draper 20:58
Yeah, yeah, the construction of data centers made me think about, you know, I started in the, in the small parcel racket, then I moved into freight forwarding. Never worked for a large multinational, just kind of some smaller regional players, but one of the companies I worked for was crushing it when you needed to get fiber optics in the ground, and they worked with, I'll say, these companies, because they don't exist anymore. Level three, which was based in Denver, 360 Networks, which was a Canadian-based company, and then Quest, right, which is now Lumen, the phone company. All three of those guys were bringing so much air freight in, and the contract we had was cost plus 15% and you want to spend $10,000 to air freight something. Hey, that's great, because we're going to make 15% on a larger number, and it was, you know, champagne and cocaine for like a year, right? I mean, there was so much money, and it was such a fun time, but everything came to an abrupt stop, and I remember walking through the warehouse and seeing huge crates that had air freight stickers all over it, but you had to, you had to kick off the dust to see the air freight sticker, because they spent all this money to bring it in, because they wanted to beat the other guy to get fiber in the ground, and so this is kind of the 2026 version of that to some degree, where you just, the faster you get a dead or center up, and the sooner you can, and if you own it, you're going to be the winner on that. So I just thought that the thought was an appropriate story to share with the audience about how that transpired. I think that was probably in the late nine or 2020 2000s 2000s I guess.
Pete Mento 22:43
But anyway, I bet it was like 9897 through 2000
Doug Draper 22:48
yeah, something like that. It was late 90s for sure, but yeah, early 2000s Anyway, it was a funny story. Whenever you set that over, I'm like, oh man, what a wonderful time. We had box seats to the Nuggets and the avalanche, and I mean it was just a faucet of money that was coming in, and it dried up as fast as it started.
Pete Mento 23:09
Always happens in this business. I had two fiber optic stories, real quick ones. The first is a friend of the show, Greg Nichols, who's the global head of customs at DHL, kind of a big job when we were at AEI together, another company that doesn't exist, Greg was deeply involved. I think he was like a global account manager. He was a young guy, really. He still has his crap together, but he was like one of those young, impressive dudes I worked with. With the rest of us were just total screw-ups. Like, Greg had his crap together. Greg was managing Corning, and that was just, I mean, whatever they could pack on a plane every day to get that fiber optic over, it was, it was amazing, and you did a damn good job, but I remember the stress, because everybody wanted it sold, it was already sold before it even got on a plane, it was just wild, and the second is, you can't find fiber optic cable right now, because they figured out to use drones with long fiber optic cables instead of using Bluetooth or radio signals, that way they can't, they can't jam. So now it's really hard to find fiber optics.
Doug Draper 24:10
Interesting,
Pete Mento 24:12
crazy. Yeah, see if there's still any of the warehouse, but we can probably sell it to someone in Kyiv real cheap.
Doug Draper 24:17
I love it. I love it. Well, my last topic is a real short one, but we spoke about it before the holiday, right? And it was the USMCA July 1 review, right, to get us, Canada, Mexico together, and they were going to decide, are we going to keep the, keep the USMCA in its current form around for another 16 years, and a little bit of a shocker, and I'm joking when I say that, that the US declined to extend the current engagement for another 16 years, which means my understanding, Pete, I want to get your take on this as well. It kind of now, now enters in. To like annual reviews, right, for the duration of those 16 years, so I'm not going to get into the reasons of why or whatever, but the bottom line is that just another level, or excuse me, lever of uncertainty that just got cast into the global trade network and supply chain and logistics and transportation, right? So it's going to impact investment. Let's say you're, you know, auto is a big, a big industry that uses all three of those countries. If you were going to drop and build another plant, you can't build it in a year, that's a five, seven, maybe 10 year investment. You're like, oh, hold on, I'm just going to hold on and see what's happening, so the nearshoring ideas may be paused, right? Hey, we're going to go full bore because we got this USMCA, and now things are potentially changing every single year. I think it's going to be a little hunkered down, right, when there's uncertainty in your life, and your immediate world, you contract, you make very conservative, if no movement at all to protect what's valuable to you, which is generally family, right? And I think we're just another thing that is having businesses do the same, right? So it's like surplus, like hesitation, right? Like all this stuff is happening, and I see it in my day-to-day, my, you know, the job I do to pay my mortgage, I see it day in and day out, where people are just contracting, and they're waiting, they're not sure what they're waiting for, they're waiting for this, that, or the other, but there's hesitation, and making a decision is just challenging, and you know, nobody wants to be the first penguin to jump in off the boat, right? So it's an interesting comment, and resolute, you know, a resolution that we decided not to extend it.
Pete Mento 26:58
Doug, you couldn't be more correct, right? All the uncertainty around one of the globe's most important free trade agreements, and when I get asked this question every week, a number of times every week, should we be taking the start seriously? I say yes, should absolutely be taking it seriously, but I think that, you know, on the other hand, taking it seriously, you can't let it get in the way of your plans over the next three to five years, simply because it's going to take a long time to unwind, and this administration wants to see a fast resolution to the problem. I would just not, I would not be overzealous in my treatment of this negotiation. I would not say shut it all down. I would say, proceed with tremendous caution, and have one hell of a plan B. These are parts of the world that are continuing to trade with the rest of the world. The question is, what will that activity and interaction look like with us? So, the best thing you can do is hedge that bet, but not give up on that bet completely. I still believe in USMCA. I still believe in what's going to look like, even if it doesn't exist. There'll be bilaterals between Canada, Mexico, and the US, so odds are we'll find some way to still make it work, just under what conditions and what we're working like. It's a bad marriage right now, dude. It's bad marriage, and you know you can get it back together again, but the trust is gone, if you know what I mean. So, I don't know what this is going to look like over the course of the next three years, and who knows what the next executive what it's going to look like, but we have, with intention, told two of our most important trading partners for winding down this partnership, and that's scary.
Doug Draper 28:27
Yeah, I was about to say that you were the positive aspect of this show, but just on that last comment, Pete, I'm not so sure about that.
Pete Mento 28:36
I have deep concerns about what this all looks like afterwards. I think there'll be a great relationship with degrees of free trade between those three countries. I just don't think it's going to look like it did before USMCA. It's not gonna look like NAFTA ever did, and I think USMCA is gonna get tighter and scarier too. So, it'll be there, just won't be the same.
Speaker 2 28:53
Yeah. All
Pete Mento 28:54
right. Well, thanks for that, buddy. Want to thank all of you for listening, watching. Thank our friends at Cap Logistics for their unwavering support. Thanks for Kenan, who produces this to the best of his ability every week. And thank you, Doug, for being the best co-host ever. Like we always say, if it's happening in global trade, we're talking about it. Global trade this week. See you next week, buddy. All
Doug Draper 29:14
right, you guys.