Global Trade This Week – Episode 255
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Keenan Brugh 0:01
You're watching Global Trade this week with Pete Mento and Doug Draper.
Pete Mento 0:08
Hello, everyone, and welcome back to Global Trade this week. I'm Pete Mento. With me is my co-host Doug Draper. Doug, how are you from that very stark-looking background?
Doug Draper 0:19
Yes, Pete. I'm doing great. I appreciate that. As I said, I work in a co-working space. You got to reserve rooms, and this is kind of the one I ended up with today. So it's supposed to be noise canceling. So hopefully that's the case. But other than that, that's not what people came here to listen to. So I'll just leave it at that.
Pete Mento 0:41
I'm hoping you're going to have your Swedish death metal band come in there, and you guys can record some new tracks. That'd be pretty awesome.
Doug Draper 0:48
Yeah, it's not foam, so I think that's part of it. It's like a hardwood.
Pete Mento 0:52
Yeah, that's too bad. We we do have a shared a shared topic first this week.
Doug Draper 1:00
Yeah. Do
Pete Mento 1:00
you want me to kick it off, or do you want to get in there?
Doug Draper 1:03
No, you go for it. Yep, that'll work, and then I'll chime in.
Pete Mento 1:06
So, America's least favorite person involved in global trade, Peter Navarro, slithered out from whatever hole it is that he lives in to produce a air quotes paper concerning the transshipment issue, now to me, Doug, transshipment means shipping something from the United States to some place like France, and then from France shipping it to a country where that thing is not supposed to go, like Iran or North Korea. But now we're trying to change the vernacular, like every other damn thing, and say that these the transshipment issue is in fact when you send something to a foreign country to send to America and don't actually do any manufacturing. In his treatise, in his academic stylings, he assumes it to be as much as $300 billion worth of tariffs that are being evaded by doing this. In reality, the numbers do tell a story. There is clearly some transshipment. Clearly, there is. I mean, we've all we've all heard the stories. We've talked to people. We've spoken to folks. It's real, but not to the degree that he assumes. Not in my opinion. And also, I think this is an excellent illustration of how people are moving their supply chains. They're moving them out of China to places where they're able to actually get manufacturing without paying those Chinese tariffs. Now they're doing so by having all the raw material sent to places like Vietnam and Cambodia, and manufacturing it there, where little more than just the the value of the manufacturing goes into into the goods, but it is what is. I mean, think of all the things that come to us from Mexico, or that are made in America, that are made of foreign materials. And once they have a tariff shift, we can say it's made in America. I don't know, Doug. This one really got up my ass. There's no other way to put it. I got really angry when I read this. I'm not a fan of Peter Navarro or his work, and this was just another stab to my my mythical heart about what's going on here.
Doug Draper 3:07
Yeah, it's kind of the broad interpretation of rules and laws in some degree common sense, right? I mean, throwing I I don't know where these numbers came from, but I saw 30 billion to 300 billion, right? It's like well, I could either get an F or an A in a test somewhere in that range, you know. So you know, stay stay with me on that, you know. I I don't know. It's just another thing. It's almost just just more noise. But the one thing that that I thought of is that it's a hell of a lot easier to manipulate documents than it is to move your supply chain. I'm not saying people are not doing that, and the intent of all this is to say, let's, you know, maybe a China Plus strategy that we've talked about, right? We'll keep some stuff in China Plus. We'll look to make changes, but if you're just some company that's out there, and I'm not saying U.S. companies are nefarious by any stretch, but to your point, it's going to continue to happen, right? Let's just give it a shot, right? Let's create some company or importer of record that's kind of exists, kind of doesn't. Let's manipulate some paperwork and let's give it a shot. So, 30 billion, 300 billion. I get it. People are still going to play the game, and and everything else. The one piece of it is, I I read that customs is going to be using some AI technology and really, you know, scrutinizing the the supply chain, which will ultimately slow things down, justify where you've been and where your product has been, where you, meaning the product, has has been sourced. So that's good, but it's just going to slow stuff down. It's going to slow commerce down, in my opinion. And there's always going to be somebody you saw it. Trucking industry with with shadow carriers and everything. Every day I see stuff about theft, cargo theft, impersonation of of companies, the whole nine yards. So I don't know. It's not going to solve the problem in trying to pivot your entire supply chain to something doesn't happen overnight. And I think there still will be nefarious people out there, they're going to manipulate documents and throw it out into the world and see what happens.
Pete Mento 5:26
Two two discussions on that. The first is the number of of counterfeit documents coming out of China on everything from melt and pour certificates, country of origin work, the origin of the information on the documents about where the goods originate from. Try to avoid the Uyghur tariffs, as an example, through the group, Fred. They they can they can manufacture a fake Rolex. They can find a way to make a fake piece of paper. And then the other piece of that, you know, the AI part you were talking about, Doug, customs has gotten incredibly good, deeply sophisticated at using artificial intelligence to identify fact patterns that in the past have meant something was wrong, and then apply them to the new shipments and be like, "Hey, right here, this is the moment you take a closer look at. This is clearly a problem. They've gotten so good at it. To their credit, they've really made an investment, a good investment of the of the taxpayers' dollars into using technology based on what's worked for them in the past, and it's it's paying off in aces. So I feel like I harp on this all the time, and in my public speaking, if you think you're going to get away with something, this is not the time to think you're going to get away with it. Customs has gotten shockingly good at being able to identify bad actors and then apply the necessary pressure to get the truth out of them and stop that from happening. And things that people have done for decades that they were doing wrong. Well, now they've got the tools and be able to identify it and take action on it. And the sad thing is, Doug, unlike the past, this particular administration is more than happy to send you to the Department of Justice and have criminal activities reviewed. And people might go to jail. That's certainly not what we want for anybody.
Doug Draper 6:57
Yeah, ignorance is no excuse for not following the law, right? And and to your point, there could have been people that just honestly were making a mistake, right? Like, hey, you have been filing this incorrectly for years, and now we have this technology to be able to call you out on it. But you know, ignorance is is I can't even think of the right term, but ignorance is no excuse for not following the law.
Pete Mento 7:23
Ignorance of the law is no excuse. Yeah.
Doug Draper 7:25
Yeah. There you go. Yep. Yeah.
Pete Mento 7:27
Judge Roy Bean. Ignorance of the law is no excuse. You will hang slowly. Yeah, that was one of his lines. Yeah. He's a he's a Texan. Boy, he knew how to hang him, I guess. But
Doug Draper 7:38
oh. Anyway, let's
Pete Mento 7:39
take us to halftime, buddy.
Doug Draper 7:40
Yeah, yeah. Well, it's brought to us by Cap Logistics. I think that is once when we tag team a topic. I'm looking at the the time thing here. We're like seven and a half minutes into the show, and we're already at halftime, which is awesome. Brought to us by Cap Logistics. We really appreciate them week in and week out to help support this. And I think everybody got a little shot of Keenan on that live episode we did a couple weeks ago,
Pete Mento 8:05
lumbering in there,
Doug Draper 8:06
made the cut, but he walked right behind us, so that was pretty cool. So
Pete Mento 8:11
like the Sasquatch he
Doug Draper 8:12
is, yeah, yeah. It's an academic halftime, so I don't know. Why don't since you suggested I'll go first, right? So we talked about AI, and AI is starting to change. I read this thing that popped up. AI is changing the way students are studying, right? They're they're basically talking about how AI and changing majors and all that kind of stuff, right? So through AI and understanding the potential of what that's going to impact in the future, the number was 42% from this article that undergraduates have thought about changing their major, and 16% have. Now I know I changed my major once, and and that's a statistic that you can, you know, comment all you want. You know, people always trying to figure out what their purpose is in life when they get to college, but the idea of learn to code and you'll be set is, you know, that kind of got blown up when AI came through. But some of the classes that are coming out are just crazy. So Arizona State, they have a content creation slant Slash influencer major now that you can take right. So how do you become a YouTuber or an influencer? There's a class at Arizona State. Delaware has like a sports and analytics. So kind of think of Moneyball. Remember that movie with Brad Pitt years ago? What was it? Bean Bean Ball. Who was the guy? I can't.
Pete Mento 9:43
Moneyball. It's Billy Bean from Billy Beane. Yeah, yeah, yeah.
Doug Draper 9:46
With the Oakland A's. And so Delaware has a sports analytic type of thing. So you got all these online gambling and things of that nature. So it's funny that you know college. So my my kind of last comment or premise on this one is. College used to be where you learned how to think. College taught you on how you think. Now they're teaching you what to do, and in my opinion, that's called a trade school, right? And so it's interesting how AI has changed the perception of kids. What am I going to do with my life? That's always been a question for the ages, right? But that technology is starting to have have students change it more and more. And some of these new majors are just more of a trade school. Here's how you can make money in a transactional way versus learning how to think. So it's a little deeper than a normal halftime peak, but I want to throw out there because yours is also related to academics.
Pete Mento 10:44
You know, you you you talk about like imagine your your son or daughter saying, "I can't wait to go be an influencer. Send me to college
Doug Draper 10:51
to do it.
Pete Mento 10:51
Yeah, and just having to swallow every awful thing you want to say at that point while they go and run after it. You know, AI has become a part of our lives. Social media has become a part of our lives, and I suppose if someone would have said back 40 years ago, "I'm going to go study the supply chain, they would have said, "You're out of your mind. You know, it's an industry; it should be served by academics. But I'd have a hard time paying that tuition if I was being honest, Doug. I have a really hard time with
Doug Draper 11:16
it.
Pete Mento 11:17
Right. So mine is a little bit more lighthearted, I guess. I, you know, I'm on the Instagram. I'm not a big user of the Instagram, but I am on it. And a lot of my friends were posting pictures. Super. I think it's super early. This early in August of, you know, Junior and Little Missy heading off to their first day of fifth grade, first day of whatever. The last picture I'll take of my son going into 12th grade. Here's when he was going into kindergarten, you know, and it reminded me of my first days in school. I was always very excited to have my new clothes because I always got new school clothes that I got to pick, and I always got a brand new pair of of sneakers and a pair of of casual dress shoes. Right, I could always run faster in my brand new sneakers. I usually went to schools that had a dress code or a uniform, so I didn't really get to wear what I wanted to wear. But I was happy to have nice new clothes to wear. Getting to go back to school and the people that live farther than a bike right away, getting to see them for the first time-you know-that was awesome. Getting to hang out with my friends in school, and then the excitement of knowing one more year is going to be down, and I get to be an adult soon. I didn't really take that for granted. I did. I took that for granted when I was younger. So the I do have one new outfit I remember distinctly that I was very excited to put on. I I was quite classed as president when I was a junior in high school, and I had a crisp polo Oxford button down, you know, with the button down collars, and I had a I had a tie that matched it, that had guys playing cricket on it, and and a pair of of greenish greenish corduroys that I wore with it in both very 1980s. It was very 1980s, and I had a fresh haircut. You know, I was all excited to go into school looking like that, and I wish that I had had a friend that would have said, "You look like an absolute clown right now. But I don't know. Ladies loved it. What can I tell you? I did love that. I I also remember my mom buying me Goranimals. Remember Goranimals?
Doug Draper 13:23
Yeah, yeah. They did the the max the mix and match.
Pete Mento 13:27
This animal and this animal match. This is how you know you can wear these particular clothes because both my parents worked, and the idea of having to get me dressed in the morning they had to turn it into a game. So I did. You know, I was excited to match things up together, and then the lunchbox. When I was a little kid, getting to pick out the lunchbox of whatever it was that I was into at the time, with my therapist that was on the inside of it that matched the lunchbox. My favorite lunchbox I ever had was Spider-Man and Friends. I got a Spider-Man and Friends lunchbox. I was so fired up, even more fired up than my Star Wars lunchbox. I should mention, and that thermos was almost always full of soup that my mom would heat up, you know, and put in there for me so I could have I could have my soup at lunch. The amount of care and effort that my mother put into making sure I had a good lunch when I went to school every day was incredible. Was just incredible.
Doug Draper 14:19
Yeah, that you know that is so funny when you said thermos, right? You got it was metal. It had the little hook. You open it up, and then that soup canister. There was a little clip, right? It tied. But right when you were talking thermos, I think there was more soup that was consumed when we were in elementary school than at any other time because everybody I know had the chicken chicken noodle soup, and you you pour it out.
Pete Mento 14:41
Chicken noodle, alphabet beef. That was another one of my favorites. And then sometimes, not all the time, I would either have red beans or I'd have pinto beans in my. And I love that. I love that. That was awesome. And then we we would like we would swap stuff. We'll be like, hey man, you got. I'll give you my my my ho hos if I can have your. Heavy Doritos done deal spit on it. Let's go, right? But I would have to bring my lunchbox home every day, or else I didn't get a lunch packed. That's how I remember to bring it home every day.
Doug Draper 15:10
Yeah, yeah. Well, that was a long time ago, Pete, because the very first thing that you said on this halftime was the Instagram, right? I don't think kids nowadays call it the Instagram or the internet. No, probably not.
Pete Mento 15:27
Yeah, yeah. My my mom used to call it Twitter Face, not not Facebook. Yeah, she had all kinds of names for stuff that just just to irritate me. She was also a big fan of using the term contraption. Are you still in that contraption, looking at all your pictures? I am.
Doug Draper 15:43
Yeah, yeah, that's funny. Good deal. All right. Well, that was halftime. Brought us by Cap Logistics again. As I said before, can't thank them enough for letting us be on the air every single week. So, hey, I'm going to jump into my second topic real quick, my friend. And this is a common theme that we've talked about on this show, excuse me, is that I think the next thing. So, I'm trying to get a clear chain of thought here. So, the tariffs related to Canada, and basically saying we can do a 50% tariff on countries that are impacting our ability to do commerce, right? Very vague, very vague. I think the next one, because this is all about, hey, the Supreme Court said what this is tariffs the administration. The Supreme Court said the tariffs that we did back in April of 25 are illegal. Okay, we'll find all other routes to go ahead and implement tariffs. One of them's a 338 that just got delayed up in Canada, but I'm going to go on a limb here, Pete. The next one is going to be anti-dumping and countervailance, and the reason I say that, so anti-dumping is basically saying, hey, you're selling stuff too cheap, and then counterbalance is saying, "Hey, you're selling stuff too cheap with the help of your government, right? And so, I think that if you just get a lobbying group all fired up here in the U.S. and they go out to associations and they angle the association with a product that they're making, right? So let's say the the pipe workers of of America or something like that. I'm just using that as as an example, right? Hey, you're having difficulty with this. I think that if we collaborate and find some small reason that this could fall under those those rules and laws, I think that's the next step. As crazy as it sounds, is how many commodities can we put underneath that? Because they're not creating a new law; they just need to justify and go up against the International Trade Commission and the Department of Commerce and basically say this widget, with the help of these lawyers and my lobbying group, has decided this fits under this anti-dumping counterbalance, and the duty rate goes sky high. So I I think that is going to be the next thing because the simple fact that the the tariffs that were issued back in April 25 were defined as illegal. We are seeing time and time again what are the work around on the existing rules that we can insert and apply tariffs, and I think that we're going to see some of those lobbying groups trying to fit new commodities underneath those laws that already exist. So I don't know what your take is on that.
Pete Mento 18:39
Absolutely, whatever methodology we can use, we're going to use, and we're going to try to put them through. Whether that's anti-dumping, countervailing, two two threes, 300 ones, they're going to use them all. Dumping has been a scourge on the American public for, or being a really bad way for the past this administration, Biden, and then Trump before the number of ones that we're seeing because it's relatively easy to get one of these rolling now. In the bad old days, Doug, if you said Pete is dumping stuff into America from his company in Italy, you would get part of that money back, and it it it would it was an inducement to get more of that stuff done. You know, the government wasn't really chasing stuff. Now they're chasing stuff. They're looking for things for anti-dumping, and anti-dumping because of the overcapacity question, I'm not going to say it's easy to do, but there's a playbook for that. You know, you do A, the B, the C, the D, and you give a threshold that you want. Nine times out of 10, they win, and that the U.S. import community doesn't do a good job of finding ways to carve out their suppliers so everybody gets hit. They could be ridiculous, you know. It's a dumping duties. There's ones out there that are in the hundreds of hundreds of percent. It's not five or 10 or 15% So yeah, there's a political piece to this. Absolutely, there's some truth to many of them where they are in fact dumping. And you're right, Doug. We're only going to see more of them. This is a weapon that every. Administration will use because it just takes one person raising their hand and saying something's not fair. Do something about it, and then they move the ball forward. I completely agree with you, Doug.
Doug Draper 20:11
Deal. All right, bring us home, my friend. What you got for your last topic?
Pete Mento 20:15
Well, I'm talking about tariffs too. Gee, imagine that Pete's talking about tariffs. But my tariff talk is about these three three eights at the last minute. I'm not the last minute, last night at the zero hour. He said we're going to give him three more days. You know, it's like it's like the thug walks into the shop and on behalf of the bookie and says, "Where's Joey's money? I told you, I told you, Joey. No, Nikki, don't break my fingers. That's what it kind of felt like, you know. So here's three more days. You better get it. I better not see you with the track, you know. That's what it felt like. Three more days. I have a feeling this three more days is going to turn in. No, no, no, no. Three more days. Like they're just going to. When you don't do a deadline like this, and you decide to move back, it takes away the question as to whether or not you're serious about doing it. But because Canada is such a big prize, they want to get this taken care of. One of the things I noticed about these three three eights was the United States expects Canada to agree with them for the expansion of and creation of the XL pipeline. That was one of the things that they've asked about. Now I am a massive fan of pipelines. I'm a big, big fan. I should let everyone know that right up front. Not not a popular opinion, but I believe that pipelines are probably the safest way to move bulk petroleum from anywhere to anywhere. We can control them in our own within our own commerce, and it allows us to move the incredible amounts of energy between these two particular countries into a third Mexico, and actually manage the entire supply chain, and for that reason, I don't have a real hard time wrapping that into this. But what does that have to do with tariffs? What does that have to do with the availability of American products on shelves in Canada? Which, by the way, go ahead and put bourbon back up on the shelves. Go ahead and put American goods back on the shelves. Canadians probably still won't buy it. They're pretty upset. Unlike the United States, they do a very good job of banding together and deciding not to support an economy that isn't supporting them. I sometimes wish that we had that same level of solidarity when it came to economic force. So, Doug, I'm I'm more and more convinced these three three eights won't happen altogether, and I think it's just a question of we should bet on how many delays they'll have before they don't happen, rather than whether or not they're.
Doug Draper 22:26
Yeah, that Keystone Pipeline was interesting when I saw that this morning. I was kind of like, wait, what is that? Is that how does that have to do with the cost of tea in China? To to use that reference, right? Like that was never discussed. It was never brought up, and so who knows? I mean, at this point, who knows what's going to transpire? But I think kicking the can down the road is probably a real valid thing until the agreement comes into play. So three days would be from last. So what is that? Friday night. So Saturday morning it would kick
Pete Mento 22:56
in. Yeah.
Doug Draper 22:57
But anyway, I I think it's-I don't know if I should say this, but another taco type of thing that people are saying. Well, we're getting close. We're getting close, and I truly believe they are, right? Just need a couple more days, and so we'll kick the can down some arbitrary dates that come into play. So, anyway, I think your spot was just-I
Pete Mento 23:19
was just reading it, Doug, and it was like okay, dairy products check, American products check, auto check, oil pipeline.
Doug Draper 23:26
All
Pete Mento 23:27
right, you know it's just a strange thing when I was reading the news this morning.
Doug Draper 23:32
Yeah, interesting. All right, well that wraps up global trade this week. It took us a couple of days to get rallied up and sync our schedules, but I'm glad that we did, Pete, because we want to do this every single week. We're at 255 episode, and and it's such a pleasure to to talk to you week in and week out. And it's great to have the show kicked out to our our listening audience, and we appreciate them week in and week out. We appreciate Cap Logistics for making that happen. So until next week, and we'll always have some fun stuff to talk about in this day and age. If it's happening, global trade, Pete and I will be talking about it every single week. Pete, travel safe, my friend.
Pete Mento 24:08
Thanks. All right, take care, everybody. All