Global Trade This Week – Episode 204
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Pete Mento 0:00
Foreign you're watching global trade this week with Pete mento and Doug Draper, hello everyone. Welcome to another exciting edition of global trade this week. I am Pete mento and with me as usual, not always, but as usual is my intrepid co host, Doug Draper, Doug, how are you buddy?
Doug Draper 0:23
Hey, Pete, I'm doing excellent. I'm doing excellent. I have nothing really to complain about. Things are going well. Actually, I do so, Pete, let me ask you this. So when, when the show happens, and cap posted on their on their site, which is awesome. I always repost it right, and put some comments or whatever, and I usually are not, usually I don't use chat GPT, right? That's just free form from Doug Draper, chat. Doug Draper,
Pete Mento 0:50
it's the raw feed. Doug Draper, raw feed,
Doug Draper 0:53
yeah. So anyway, I showed my wife last week, so I'm like, I'm pretty proud of this one, because a it made a reference to Animal House. It made a reference to Boston, Red Sox baseball, and then I dropped a rhyme that was really cool at the end of it. And I'm like, she read it, and she's like, okay, that's nice. And I'm like, don't you get all those references? And she's like, she's like, No, I'm like, right here. Pledge pin, you know, Animal House when they were going through and given and then big, big Poppy. He's, he's the pitch hitter for the Boston Red Sox. If you anyway, I the reason I bring that up is I just hope that I get excited about my post. And I'm hoping that some of these obscure references that our audience and people are reading, they're like, hahaha, I understand what he's doing there. Otherwise it just goes into the void of of, you know, www.com, and people are like, these guys are bizarre. So I don't know. I'm gonna keep doing it. But you think those, those references are too obscure, all the random stuff that we talk about?
Pete Mento 1:59
Course, I don't I think this is one of the fundamental differences between men and women. Men remember in an ordinate amount of really trivial stuff, like, like, one of the things that I'm constantly reminded of whenever I'm in a large group professionally with with women that I work with is they don't remember all these stupid movie lines that we remember. I I was at a dinner once, and one of my colleagues was getting really fired up, and I said, lighten up, Francis, right? You know, from from stripes, and I thought it was funny, and my male co workers all thought it was funny, but none of the women were like, but we mean his name's not Francis. Seminal work Bill Murray, 1978 stripes, one of the funniest movies ever made. I've seen that like the thing you don't remember it. So I just don't it's not like, it's not the top of my mind. I have much more important things in my head, and I think that I can speak for myself, my brain is full of completely meaningless crap, like, did the did the Germans give up? But do we give up when the Germans brought Pearl Harbor? You know? I mean, I, I remember all that stuff. So Doug, I'm with you, but I think it's more of a gender specific thing than
Doug Draper 3:16
anything else. Good. Well, you make me feel a little bit better. Yeah, buddy, when your coworker said his name isn't Francis, you should have said, Hello, McFly. What's up?
Pete Mento 3:27
Yeah, I think they might have gotten McFly, but No, probably not. No, I will say Doug, that my daughter, when I showed her back to the future, loved it. I think that's that's a film that stands up like, what? 40 years later, yeah,
Doug Draper 3:42
yeah, it's good. Yeah. I did the old John Hughes movies. We watched Breakfast Club with my kids, and even, uh, pre and pink. And they were like, This is so slow and boring that they literally, literally got up halfway through the show and like that. I don't this is dumb. I don't get it. It's too slow and walked out the audacity. I know.
Pete Mento 4:04
Have you shown them Uncle Buck also a John Hughes film? I didn't
Doug Draper 4:08
know that. No, they I haven't. I personally have not seen that. Oh, dude, I know it's John Candy, right?
Pete Mento 4:14
Yeah? Brilliant, brilliant, funny, funny, funny movie. Yeah, definitely. And that's family friendly. I would 100% show that to, I think I showed it to my daughter when she was like nine. In one weekend we watched that and we watched the one with Chris Farley with the reworks for the auto parts
Doug Draper 4:31
company. What is that? Tommy Boy. Tommy Boy, yeah,
Pete Mento 4:35
in one weekend, I thought she was laughing so hard I thought she was gonna go into seizures. She laughed so hard at those two movies made me feel good as a parent, you know?
Doug Draper 4:43
Yeah, yeah, look at that. You're raising her, right? So, cool brother, I'm gonna kick this thing off and get this party started, right? So here's my first topic, and I want to call out that we spoke about this. It may not have been the first i. Across the country. But as far as bringing it to people's attention, it was last week we talked about the Norfolk Southern and the up merger. Right? Literally, in the last five days, you can't read an article without talking about it, so I wanted to call out that we spoke about it before it became popular, and it looks like it's going to get positioned to possibly happen, right? And just like anything else in the world, a flashy headline draws people in to read an article, right? So anyway, I'm sure people have heard UPS by Norfolk, Southern I think it's, I don't know, $85 billion you know, I thought I wrote this down here. Oh yeah, it's 85 billion. And, you know, enterprise value of like, 300 billion is something insane, first transcontinental railroad. And I was looking on LinkedIn, and there was this one guy that was just commenting time after time after time on this post that said, Hello, McFly. Like this transcontinental railroad happened 156 years ago? So it's not necessarily new. But anyway, the industry impact, you know, it's a good story. Hey, we're connecting the world, you know, coast to coast type of thing. So a couple of key things I caught on this. Beat. Number one is, once you combine these two companies, they're, they're going to control 40% of all rail freight in the US. That's pretty big, you know, operational efficiencies, I guess, right? I mean, it seems like the railroads are always talking about efficiency plans. So there's still connectors, right? Yes, it's, it's coast to coast, but there's still you got to connect in Kansas City, you got to connect in Memphis, you got to connect somewhere, right? And those aren't miraculously fused together instantly, right? And then the one thing Pete that I don't think has hit a lot of press is that don't forget about the unions, right? And I Googled this morning, how many, all right? Chat, GPT, how many unions are in the Union Pacific Railroad 1313, different Norfolk, Southern 13. So you don't think there's going to be some pushback and some some challenges there, and then obviously the regulatory compliance right? The Surface Transportation Board has to approve this, and you know, it's going to be a big deal. So it's a flashy headline, which I can appreciate. There's talk about synergies, cost savings, benefit to the consumer. You still got unions. It still needs approval. They say this thing isn't happening until 2027 so yeah, it's good. I want to see what Warren Buffett has to say with his railroad and how they're going to respond with the CSX, if all of a sudden, the Big Four merge into the big two, it happened to accounting firms decades ago. We'll see now,
Pete Mento 7:50
you know Doug, I think unless there is a podcast that is specifically focused on the railroad industry, I don't think you'll find a more pro railroad group of guys than global trade this week, we are, we are big believers. You know, we're big boosters of the railroads. And that being said, I want to echo what you just said a moment ago. I Is this too big? Is this too large of an organization? Are we running into the risk of taking away the opportunity of choice from consumers by really only having at this point, it'd be what, like two major railroads. That's all it would be, right? Yeah. And is that? Is that going to be an antitrust issue? Is that going to be a problem with, you know, certain services only being for certain geographies, with one company and they can lock that down. Are there questions about infrastructure? And you're talking about an industry. Would you say was 80, $80 billion this merger? Yeah, 85 you and I couldn't go out to San Francisco and raise $80 billion to start a railroad. You know, the the cost of getting into this to create new competition is next to impossible. So I wonder, I wonder if this is going to be a regulatory nightmare for these two companies to merge, and if that's not necessarily a bad thing. So pro railroad, whatever it takes to make it more efficient, whatever it takes to make them run. But I am a little concerned about the lack of choice that this is going to give transportation consumers if it goes through.
Doug Draper 9:19
Yeah, I think that's the bottom line. That's the bottom line for for folks and people we support and represent. So anyway, you got some good ones, Pete, what's your first
Pete Mento 9:29
well, I'm going to channel my inner Doug for for my first one here, because I, you know, I'm normally the the pie in the sky kind of, yeah, you know, four year old mentality of isn't everything possible. And I don't know if I agree with this one. So I was on a call with a wind power company who had told me about another wind power company called Radio, R, A, B, I a radio. And they're in your backyard, Doug. They're a Colorado company, and they they're based on the genius of a job. Woman who owns it, who more, more or less pioneered the idea of these bigger, more powerful wind farms, just and he also was very involved in the offshore side of things, when he realized that it was possible to make even larger turbines that generate more power and will probably have a longer service, but the issue that they have is moving these things. So if you live in the Midwest, or you live in the Rockies, I'm sure at some point in your driving life you've gone past these convoys of trucks that have parts of these, these wind turbines on them, and you when you drive past them, you don't realize how big they are. They are enormous machines. And now, in order to get them where we want to get them, they're moved modularly. They which, which creates stress issues and engineering issues, but we see them over the roads. This new company is saying, because of where we want to get them and the cost to serve, we're going to build our own airplanes. And it's called the Win Win writer, I think is what it was called, Windrunner. Windrunner, Windrunner, and it's a brand new aircraft that would dwarf the Antonov dream. It would be, it would it would make it look almost comically small in comparison to this new aircraft. So here's, here's where it gets me, Doug, right? There's the part of me that read way too much science fiction as a child and too many comic books that says to himself, this is wonderful, right? You don't have the solution. You make the solution, you build the solution, you find a way to do it, and it creates renewable energy, which is better for everybody. You know, I'm all about it. But then there's the cynical part of me that's been in this industry for way too long. Who knows how difficult it is to engineer new aircraft? Who knows how hard it is to come up with a new design? Who knows all the regulatory problems that they're going to have? And I gotta say, Doug, I don't know if this is possible, and also creating your own masterpiece of transportation, just to move your thing. It's been done on the ocean side. But for air freight, I can see some utility. If these end up having military end use, right? If you can find some way to think of all the cargo you could move, it became a regular cargo craft. But if it's this big, how's it going to take off? Where the hell is it going to land? And you know, what's it going to mean for the future of air freight? If there's only a couple of them, how do you keep it working? Things on aircraft? I don't know. Doug, if we were doing an in or out on this, I think I'm out. I think I'm out on the idea. I don't know if I would put my money into this idea.
Doug Draper 12:46
Yeah, it's when I first read about this. I was picturing like a pickup truck, right? That has a that has lumber that's sticking out the back, and they put a little red flag on it, so you know, if you don't. So I'm picturing this plane with this wind turbine and this little red flag on the back hanging out of the airplane. Make sure nobody bumps in the back. But yeah, the one thing, when I did a little research on this one, Pete, apparently it's non, you can't it's transatlantic, like, there's no transatlantic range on this thing, right? So the Antonov could go all over the world. I've seen one once at DIA I was able to see I didn't go on the tarmac or anything, but I was out of the airport and was there, so I got to see it. But if this thing only is domestic, and go basically North and South and North America, I think there's some limitations there. But even beyond that, like, to your point, it still has to navigate the existing infrastructure of runways, etc. And any runway, in my opinion, that is close to a wind farm is, you know, going to be like a runway they set up at Burning Man, where it's just a piece of dirt, they're just trying to get things in there. So you know, you gotta have to land it like at DIA. I know they would have long enough runways, one of the longest runways in the country, if not the world, that that's there. But the wind farm isn't by dia. It's like an hour and a half drive in eastern Colorado, right? So you're still going to have that, that over the road, piece of it. So I, I think it's a moon, you know, a moonshot idea. I think the infrastructure is going to limit its use in the fact that it can't fly over the ocean. So, but we'll see. I don't know, but
Pete Mento 14:35
what if that's the plan, like, what if they think they can land it on out in the middle of a plane somewhere, you know, Pl? Pl is that, no, it's still playing PLA, any like, like a, like a large desert rather than what it maybe that's it. But here's the deal. Doug, I'm putting it out there. All right, the gentleman that runs this company apparently lives in Boulder. That's that's not far away from the world. Wide studios of global trade this week, and we would be happy to have him in person or to have him on the show remotely, to come talk about this idea. I want to believe Doug. I want to believe but I'm just not there yet, and so we're putting it out there. I think his name's Mark. Mark, if you want to come on the show, I'm sure you've got a lot of things going on, but we'd be happy to have you talk to our worldwide extremely engaged transportation audience about your idea.
Doug Draper 15:26
Yeah, awesome. Call out. Awesome. Agree 100% any listeners know this gentleman or this company will do the heavy lift, so to speak, but no, no pun intended, we'll reach out. So great. Call Pete. I love that.
Pete Mento 15:39
Yeah, yeah, yeah. Well, come on, man. We're not gonna we're not gonna trash you. We want to hear your idea. Yeah, agreed, agreed. So take us to your favorite part. Doug,
Doug Draper 15:48
all right, it's halftime. It's brought to us by CAP logistics. They run the show. Keenan is with us, literally behind the scenes, you know, flipping the levers and pushing the buttons and all that stuff. So we can't thank cap enough for giving us that platform week in and week out. So all right, here's my question to you, and I don't even know why this popped in my head earlier today, but oh yeah, I was putting some shoes on. So there's two types of people in the world. There's either shoe guys that love shoes and spend money, and you open up their their closet, and there's tons of shoes, whether that's, you know, Air Jordans or limited run productions or a super high end dress shoe. And then on the other spectrum is watch guy, right? If you know folks that have multiple watches, you know, like a lot, 1015, 20, even more than that, right? I don't know, but so my question to you, Pete, are you a shoe guy, a watch guy? Neither or both.
Pete Mento 16:53
I have been both. So friend of the show, Hector strata with Richemont. They own many of the very high end watch companies. You know, he'll tell you that it is very much a collectible, very much a thing where people get into it, and they really get into it. They appreciate the craftsmanship. They the resale value on many of these. They only go up in value. So I do own a number of high end pieces, I believe, is what we call them in the trade. But I'll tell you what Doug, I never wear them. I have a number of Rolexes, number of other really nice watches that are in a safety deposit box right now in Manchester, New Hampshire, because, for one, I feel like kind of an asshole going on a sales call to talk about rates with somebody wearing a super expensive watch. I think that that's that's a level of of arrogance that I'm unable to pull off. And second of all, the number of people I know who have been followed home from dinners that have been that have been mugged, I don't, I don't feel comfortable wearing, wearing a watch of considerable value. Whenever I travel around. I wear an Apple Watch. Now I wear an Apple watch just because I find it to be very convenient shoes. I have a problem Doug. And I don't know if we've talked about this before, but I love very difficult to find highly collectible Nikes Adidas as well. But most mostly, it's Nike that I'm into and because of I travel around in those footwear circles, I have a tremendous amount of appreciation for the design that goes into it and all that, but I also have an appreciation for the resale during covid, it was common for me to win one of these lottery picks on sneakers and buy a pair of shoes for a couple $100 and immediately resell it on the goat or on stockx for sometimes twice, three times what I bought it for. So it wasn't so much a collector. There are things that I own that I will never sell, like my air, Jesus. It's a pair of Air Max. It has holy water in the soul. I have a pair of tallies from adidas that are made like Tali from South Park. Then when you go in the sun, the eyes on the tongue turn bloodshot. There are shoes I really I've never worn either of those pairs, but I do really appreciate what goes into them. But the real problem Doug about why I'm not buying them anymore is my feet are too wide to wear Nike, so I have a hard time justifying collecting these sneakers that I'll probably never sell that now, in my old age, they're simply uncomfortable for me to wear. But I've been both buddy and right now I'd say that I'm neither.
Doug Draper 19:31
I'm not familiar with this brand, Adidas, so I work and know Adidas, that's kind of some shoes that I wear. So you'll be you would be wrong.
Pete Mento 19:40
You would be wrong if you ever want to read a hell of a story. Read about how Puma and Adidas were founded and the split between the family of how they were created. It really is an incredible
Doug Draper 19:50
story. All right, yeah, what's the I can't think of the car company dodge, the Dodge Brothers, that kind of thing. Yeah. Anyway, yeah. Check it out. Never
Pete Mento 20:01
wear Pumas to a sales call at Adidas and everywhere. Adidas to a sales call with Puma just all right? Nice,
Doug Draper 20:07
nice. I'd probably have to say Pete. I'm more of a shoe guy, right? The watch that I have, that I'm not wearing right now is a swatch and and the it's it is cool. I, you know, you and I, when we were growing up that was hot. You'd have like, four or five of them on your wrist, the little piece that you put the the strap in, you know, so it doesn't flap around that fell off. So I just used duct tape. So probably once a month, it takes me a couple minutes to figure out the duct tape so it looks somewhat professional. So I have a swatch that's put together with duct tape. But shoes, I'm not a collector, but they have to be clean, right? They have to be presentable. Because I tell my son, firm handshake, look somebody in the eye and have clean shoes, and that'll take you, take you many places. So not just the top of them. I'm talking dress shoots. You gotta hit the back so when you're walking out the door, they can see your your shoes are clean. So I'm a shoe guy, you know, I have a decent amount of shoes, but they better be clean. Don't walk around with white shoes or white soled shoes, which are very hip now, and have them all smeared up and dirty, right? Show some respect. Have some pride in yourself and keep your shoes clean.
Pete Mento 21:19
I agree. I agree. You know, are you a guy that shines your own shoes? Doug, oh, yeah, yeah, me too. Yeah, that was a big part of my freshman year in Maritime Academy, is I never learned how to shine shoes, and so they expected, like a mirror, like shine at the academy and and I learned, I learned, you know, all the little tricks that people did. And there were guys I went to school with that could really buff those things up. Mean they're beautiful, but now I really love when I'm traveling, if I'm dressed up. I love getting a shoe shine. I always tip the guy really well, you know, if he does a good job. But I just, I just love the idea of a guy really knows what the hell he's doing shining up my shoes. But Doug, you said what you said to your son. My grandfather always told me, right to have clean shoes on, or have have shine shoes, to look a man in the eye and shake his hand that was another one of his big ones, and always smell good, but not offensive. I said, What the hell does that mean? He said, have, have you can wear cologne, or you can be freshly bathed, but don't, don't have so much cologne that you're a distraction. And I've always remembered those three things,
Doug Draper 22:25
yeah, I like it. I like it. All right. Well, I have some unusual feedback on your halftime, so I'll let you,
Pete Mento 22:33
okay, all right. Well, I Doug and I grew up. We were teenagers in the 80s and in the 80s, and I guess in the 70s too, there was a genre of movies that really defined my sense of humor, and they were movies like airplane or police squad or what was the one with the with the police? I can't remember. There was the third one that was about these police that were that were constantly getting into trouble. Movies, movies like Blazing Saddles, right? They were absurd. They were simply absurd. The jokes, the jokes were not a punchline joke, for the most part, they were sight gags. And if you weren't really paying attention to the movie, you weren't always going to get them. I love these movies, and now that I've watched them again, I don't know if an 11 or 12 year old should have been watching these movies, but I really, really did like them. And this weekend, there is a new police squad, which is Liam Neeson, is playing the son of the original Frank Drummond, and he is involved in all the capers and all the sight gags and all the things that we were used to in those original films. And Doug, I will be going. I'm gonna go this weekend. I'll find time on Saturday or Sunday afternoon to go and see it. Are you in or are you out? Doug on these types of films under I couldn't
Doug Draper 23:55
wait to talk 100% in love it for all the things that you just said, This movie looks to be hilarious. It's, it's going to be, it's going to be awesome, right? I mean, some of the outtakes, and the, not the outtakes, but some of the promos are just, I laugh out loud. I'm like, I gotta go see that. So huge, huge fan. I mean, I'm thinking right now some of these crazy ones, but, yeah, all the the movies that you had mentioned, and the one that I smiled at that you said that in no way could it be made today is blazing Sabbath. No, there's no way, no way in hell that movie was made. Again,
Pete Mento 24:35
true. Yeah, it is. It is no Brooks is redoing space balls. And I'm wondering just how far he's going to push it, because even Spaceballs was super, super out of hand, you know, so, but that's another one. Space balls same idea, right? They were just ridiculous,
Doug Draper 24:51
yeah. Well, if there was a game that we played, is he alive or dead, I would have thought Mel Brooks is no longer with us.
Pete Mento 24:57
So with us? Yeah? Yeah. I remember seeing space balls with my mother and my father and my dad, and I just roared. We roared the whole start to finish. And my dad didn't like Star Wars, but he got a kick out of that movie. And when we left and we got in the car to go home, my mom just looking at the two of us like, I don't know why you thought any of that was funny. I just I, and I'm not trying to be mean about it, guys, but I just nothing that we watched in the past 90 minutes made me want to laugh anything like you two idiots just laughed. But still, I think about stuff from those movies, like airplane, the the part where they're all taking turns slapping the lady in the in the aisle because she's being hysterical. I can't stop laughing when I think about some of the things in those movies where the Hari Krishna is getting into fist fights. I mean, who comes up with this? But I'm so happy that they did, and I'm so happy it's coming back.
Doug Draper 25:48
Yeah, I'm with you. I'm with you there. So good. Well, that's it. That's half time brought to us by CAP logistics. And we'll move on to the second half of the show. I'll jump in. You can finish this off. This is kind of along your lines. And there's been so much talk about, you know, tariffs. I think every week we talk about tariffs in some form or fashion. But the latest, well, it may not be the latest, because I think there's some things going on with China that you posted on recently, but the EU tariffs, that's what I want to talk about today, in the in the agreement. And the thing I've noticed with these tariff deals Pete is that, again, there's a big headline, and then you peel it back and you're like, where are the details here, right? And all the details are TBD, right? And so there's a couple on the EU tariff, the 15% across the board, but there's still 50% on steel. You know, cars are a little bit better. Auto Parts are better. Semiconductors and alcohol is still to be determined. And then I think there were some investments that were committed into the US. I think there was $600 billion or 750 on purchases of energy, and then additional investments into the US. The thing is, is that these are commitments to buy, but there's, there's no they're non binding, right, right? So you walk out of there like, that's great. That's great. This covers some of it, but there's still all this ambiguity, but we're done, and we move on, right? But that's not really the case. So people are left still a little uncertain about, well, I make this thing in Germany, I'm still uncertain what the duty rate is beyond the 15% and stuff. So we're getting there, but it's still not a clear runway of what to expect. So I know this is right up your alley. Pete, what's your take on the tariff agreement with the you EU that just popped over the weekend?
Pete Mento 27:49
The ambiguity of all this is is so vexing. It's so frustrating because we're, we're we're in the we're in the world of certainty, logistics, supply chain. Yeah, it's certainty. It's It's clients who want to be certain when their things are going to be available. Going to be available. It's, it's clients that are dealing with all the production woes of wanting to make sure they have inventory either to sell or to manufacture what to sell. It's about the certainty of knowing how long a certain process is probably going to take within our world, whether it's unloading a container on a vessel and draining it somewhere, or how long a customs entry is going to take, certainty. And for the past five months, we have been in an incredible world of chaos where everything that we're normally used to doing has this, this new ingredient of uncertainty, and it's really tipping through everything we do and causing us, unfortunately, to question very important decisions. Case in point, Doug, the tariffs are supposed to start August the first. We don't we're not supposed to time stamp that's a couple days away. And as of this, this podcast, I can't tell you for certain if the tariffs will be based on the day of arrival, on the time of entry. I can't tell you if there's going to be any sort of a grace period like we saw back in April, where if the goods left by a certain date, they wouldn't be subject to new tariffs for quite some time. We know nothing, and maybe this is some kind of a tactic that's being used to keep people off base and to force for some sort of a resolution. But in the meantime, you have billions of dollars at stake of inventory, you have 10s of 1000s of American companies who are not making decisions. And all of that uncertainty is creating chaos in our market. It's driving me nuts. Doug and above and beyond all of that, I read this on LinkedIn, and I love this term, back of the napkin agreements, you know, like they're they're written down on a napkin in someone's pen at a bar at an airport. But these aren't agreements yet. They're just frameworks. So until we have something in the Federal Register, until something is actually written that can be executed and enforced by customs, I don't see really how we're supposed to guide people and to help them. Them, and that's what I do for a living. It's what you do for a living. It's what all the people that listen to this podcast probably do for a living. Is we give people counsel on how to deal with change, and right now, the change is so hard to put your finger on, we can't even do that.
Doug Draper 30:15
I love it. I have nothing else to say on that, because you just nailed it right. The uncertainty it I don't know if it'll. If it'll, I don't know when that will happen. So it's, it's pretty, pretty crazy. So the
Pete Mento 30:27
anxiety, I'll just one more thing Doug, the of people in this industry right now, whether you're a buyer or a seller, of logistics, the anxiety levels, because we have no idea what's going to happen next. I believe it's worse than covid, because at least then, if you had enough money, you could control the problem. Money's not going to solve your problems right now. It's just not going to do it because we don't know which direction to go, and it's incredibly vexing. Sorry, sorry, Doug, I'll tack that on
Doug Draper 30:54
there. Oh, no, you nailed it. I mean, from a warehouse perspective, you have some customers that are saying, bring in as much as you can, because we don't know. And you have as many customers saying, Hold off, we're still going to wait on the wings because we don't know, right? So there's two different approaches to the same uncertainty, and one will be a winner, one will be a loser, or maybe, hell, maybe they'll both be winners, or maybe they'll both be losers. I don't know, but people have to make decisions and move their business forward, and and people are starting to do that regardless.
Pete Mento 31:25
Yeah, yeah. When trade goes on in the face of all this chaos, in the face of all this uncertainty, we still have a job to do, and we're going to make the best decisions we can based on what limited information we have. Yeah, all right, so speaking of tariffs, buddy, I put a post up on LinkedIn this week that got a lot of traction, and it's really about this realization for a number of administrations, there has been a desire to create a national sales tax, or that, if you ever traveled outside the US, they're very common. Canada, Mexico has their own versions of them, but the idea is that there's a national sales tax based on consumption. So when you go out and you buy whatever, you know, buy yourself a bunch of sweatshirts, there's a sales tax on top of this. Now we have state ones, but on top of the sales tax that goes to the federal coffers, and they're very common. We don't have one in the United States. It's not something that we have to deal with. If you look at where the tariffs are currently and you peanut butter them across all American consumption. So things that are imported, things that aren't imported, but you just look at total American consumption, and you take the tariff amount on imported goods, it comes to about a 3% two and a half to 3% increase on the cost of goods that we consume. So assuming that consumption stays the same, which it might not, assuming that imports stay the same, which, again, they might not. If you take all of the proposed tariffs, we've increased consumers costs by about two and a half to 3% which in effect is a 3% sales tax, and it makes up somewhere between 12 to 16% of total federal revenues. So without calling it a VAT Doug, we have, in fact, created a VAT where the amount of consumption that an American does is directly in line with the amount of revenue that the IRS will get from it. Now, what they do with it? I don't know what they do with this. If they'll lower taxes, if they'll just say, Hey, this is a windfall. We can pay down debt. We can give it back to American people. American people, I don't know, but one way or the other, we have essentially created a sales tax on everything that Americans buy in one form or another. Yeah,
Doug Draper 33:32
yeah. And the thing that you said is on the consumer and the end, right, you could, you could bundle it up as a tariff, a value added, a VAT, but the bottom line is that the consumer is going to pay for it in some form or fashion, right? Let
Pete Mento 33:49
me give you one more thing to consider. Doug right. My My beloved grandfather, who was very rarely on the right side of the law in his career, would always show up at things with wine and liquor and cigarettes that didn't have tax stamps on them. Whenever you create a tax liability on certain goods, especially expensive ones, you, without question, create a black market, and you create opportunities for nefarious activities. I don't know if people are realizing that folks are still going to smuggle things, and they're going to smuggle things to avoid that extra cost in order to offer it in the marketplace at a value that is different than it would be paid for in other places. So I think this is also creating a situation that's just wrought with opportunities for corruption.
Doug Draper 34:34
Yeah. I mean, you, you nailed it. You've seen the tariff dodging for lack of a better term, right? And and manipulation in that form or fashion, and those stories are starting to come to fruition because they're starting to get caught when, I mean, they importers, exporters, you know, let's just kind of manipulate it to some degree and see if we can get, get get away with it. But you're right, the black market piece, and I. And that was something I was thinking about is, you know, it's going to be ripe. I mean, there's an opportunity there, and people take advantage of opportunity. Advantage is somewhat of a negative term in that context. But, yeah, the black market is going to be opened up for all kinds of things, and not just high end consumer items and stuff, but you know, they're gonna, and I'm just using as an example, we're gonna black market apples or some very mundane commodity. You're like, what's the deal with that? Well, there's going to be real money to be had in there. So I think that is a huge piece to to keep your eyes on, as far as all these different black markets and things that people are going to pop up. So that last comment, 810% confirmed with that.
Unknown Speaker 35:47
Thanks. Doug, take us home, buddy.
Doug Draper 35:49
All right, that's it. Global trade this week, you and I are back in the saddle. It's good. Keenan is a pretty good big Poppy, but it's always good to spend time with you and hear the banter. And of course, we love our listeners. We really appreciate the time that you spend, usually about a half an hour every single week and everything else. So make comments, give us feedback. We're always welcome to it, and we will see you next week, because, as you say, Pete, if it's happening in the world, it's happening in global trade, we're going to talk about it here first, and we certainly have a lot of fun. So Thanks, Pete, it's good to see you again, buddy. See you
Pete Mento 36:26
next week. All right, catch you later. You.
Transcribed by https://otter.ai