Global Trade This Week – Episode 259
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Pete Mento 0:01
You're watching Global Trade this week with Pete Mento and Doug Draper.
Doug Draper 0:08
Hello, everyone, and welcome to another edition of Global Trade this week. My name is Doug Draper. I'm one of your hosts, but only 50% part of the show. My mother and partner in crime is in a lovely hotel room downtown Chicago, Pete, you were always on the move. How you doing, my friend?
Pete Mento 0:27
I'm all right, man. I'm in Chicago. There are worse places to be now. Doug, do you know where I'm flying tomorrow, buddy?
Doug Draper 0:35
Um, I have no idea, so I'm going to say something like Houston, Texas.
Pete Mento 0:39
Kansas City, buddy. I'm going to Kansas City, which is in Missouri, not in Kansas. But I know that that's a town near and dear to your heart, so I'll be flying my Doug banner. I'll be looking for little pieces of Doug everywhere in Kansas City, buddy.
Doug Draper 0:56
Yeah, yeah. Well, you know, it's famous for barbecue. I think Ted Lasso brought that up on season one this year, so
Pete Mento 1:04
did.
Doug Draper 1:04
Yeah, you got to know what's that?
Pete Mento 1:07
What what place should I go to? Because I do love barbecue.
Doug Draper 1:10
Yeah, I would say Arthur Bryant, right? That's the one. Anyway, you walk in and you better. It's kind of like the soup Nazi episode. You better have your act together because you walk in and they're like, "Hi, how may I help you? Very aggressively, right? And so you kind of stand back and and go from there. So I would say that Jack Stack is pretty decent, right? It's kind of a chain, so some people may nay say it, but I think it's pretty good. But yeah, I think a hole in the wall in downtown Kansas City would treat you well.
Pete Mento 1:43
I'll go find it. I had my whole team with us. Our whole team, not my whole team, our whole team in Dallas this week for the ICPA Gold Pathways Conference. It was wonderful. So I was in Dallas Monday and Tuesday. I came here last night, and I got to go to my favorite barbecue place. I think I can. I can honestly say it's my favorite barbecue place in the world, the Heartache Barbecue in Capell, Texas. And what I love about it is you walk in with four people, and you say, "Get some brisket. Like, yeah, absolutely. How many are you? There's four. Like, looks you up and down. You need like a pound and a half. And then, and we went to some sausage and some turkeys. Like, yeah, okay, I got you, man. And then you just get this giant tray of smoked happiness for four people, and it's always too much. It's always too much. But then you get to bring some of it home, man. I know, I know that that barbecue probably is not the the healthiest thing. I mean, it's smoked meat, right? It can't be good for you. But there's something very comforting when you're from a place like Kansas or from a place like Texas that loves barbecue so much. Chicago likes to talk smack about their barbecue. It's not good. It's it's just like this is a town with incredible food, incredible food. Like some of the restaurants here truly are sublime. They're just wonderful, but it's known for the worst shit, man. Like, it's a war crime to serve someone a Chicago style deep dish pizza. It's a war crime. You should never put that on anyone's plate. And the barbecue here, it's big on sauce and small on small on the actual care of smoking it. You know, in Kansas City when you get ribs there, or in Memphis, the same thing. It's like it's the meat first. Here, I think it's just about slapping crap on it. They think it tastes better. It's depressing, and like a beef, a hot beef sandwich. It's nice, but it's just a sloppy mess. You know, it looks like a five-year-old put it together. I'll eat it. Don't get me wrong, but it's not. It's not like a like a cheese steak in Philly. I know that's disgusting too to look at, but damn it, it's made well and it's very comforting. So yeah, you and I come from places where barbecue is an important part of the cultural scene, and I dig it, man.
Doug Draper 3:50
Yeah. Well, hopefully you can have enough time to go and try and try some, enjoy some. So
Pete Mento 3:56
I'll find time, buddy. You find time for barbecue, Doug. Yeah. Rip
Doug Draper 4:00
it. All right, man. Let's get the party started. Eye open, so that means you're topic number one.
Pete Mento 4:05
So topic number one is the announcement that happened this morning on Cape Phase Three. So Cape, for those of you who have not been watching the show diligently, first of all, what is wrong with you? But we've been talking about Cape for a while. It's the system that allows for people to upload information in order to receive the refunds on their illegally paid AIPA tariffs. Keep phase three is for companies where the entry has liquidated, which means that it's gone through the statutory time limit, and now you you can't use regular keep. And hey, that's great, whatever, fine. Well, there's a wrinkle in this that people probably aren't aware of. Not all liquidated entries for all importers can use Cape Phase Three. You have to have been a member of the lawsuit prior to I forget what date. I think it's july 31. So people that join the lawsuit after the fact aren't able to use Cape Phase three. You know, to be determined. We'll see what happens next. But that leaves a lot of people right now still in limbo, looking for a way to recover their money. Customs has done an incredible job, an incredible job, making these refunds available to people, coming up with really novel and intelligent ways to manage this problem. What they haven't done though is make it easily accessible. There could have been a very simple way to do this. They could have gone into their own system ACE, gone to their own system ABI, and found a way to tie the import to the importer to the bank account and simply given the money back. Although I am impressed with how well they've been getting it done under this system, I think that a lot of this is complication for complication's sake, in the hope that the importer does not get their money back, and that the government somehow retains much of this money.
Doug Draper 5:48
Yeah, I love the to make it complicated for complication's sake, right? I think just the longer this draws on, the curvier the road becomes, and the more opportunities there are for U.S. government not to give the refund back. If you're just a simple, basic importer with not a lot of complications, you import X commodity or or whatever it may be. I think it's pretty simple, but that's not where the big money is. And at some point, some of those smaller are going to say, I got stuff to do. I need to grow my brand. I need to grow my business. I can't afford to pay somebody, hire somebody, or take the time away from my employees to chase this. I'm just making a number up: $7,000 of duty. Let's just move on and drop it, right? And I think as time goes on, that conversation is going to happen more and more frequently within organizations, and it could be part of the strategy, indirectly or directly. I don't know, but it's interesting that there's press releases that are kind of under the radar that define big dollar amount.
Pete Mento 6:57
Yes, sir. Yeah, and the import community, although grateful, is also running out of patience, you know they're they were forced to pay this at the time that the import happened. Right, it was immediate, happened right then, and it was taken from their bank account via ACH right then, and now they're having to go through all these hoops to get the money back. And I wrote a white paper that nobody will ever read. I think it's like 90 pages on what we do when we have to unwind this stuff, you know. And this is a great example of that. Sometimes government makes decisions in the in the heat of the moment, realizing there's a possibility that we're gonna have to undo it. And I think they realized it was a possibility that I have to undo this. Same with 120 2s tariffs. But I don't think enough thought into how that was going to happen when they made that decision, and it's unfortunate. But when we diplomacy works best when it's done slowly, and right now our our entire diplomacy based around tariffs is about speed, shock and awe. You know, it's not about trying to do it in a meaningful, thoughtful way. And I think that's where a lot of the frustration that we feel today comes from. Two days at the ICPA conference amongst it's like anytime ICPA gets together, International Compliance Professionals Association, it's like Comic Con for trade nerds. Like I know you've never gone to a Comic Con, Doug, but the idea that everyone there is like you, everyone there is is weird and strange about tariffs, and we love that we are, and we love this other person for being that way. And here's like the one place you can go where no one judges what a weirdo you are for loving this stuff. In being there, there was a there was a constant refrain of exhaustion of the past year and a half on the people that I work with, my clients, my friends, my friends that have gone a year and a half of just constantly being ground down by procedure, being ground down by timing, by statutory limits, and at the same time having to work with people who don't understand how complicated and difficult this really is, and to be successful anyway at making all this happen, it's um, yeah, man. It not not to get too philosophical about it, but this was the winter of our discontent. It just happened to last a year and a half.
Doug Draper 9:11
Yeah, yeah, for sure. It's like investing all this. All right, man. We'll we'll jump into mine, and it's all about the great Canadian product band. Kinda, sorta. There was a friend that did a post on LinkedIn, James Ferry, that was the catalyst for this one, and I started looking into it a little bit more deeper. But the band that's coming up on the 29th, right? It's a flashy headline, and it gets dramatic reactions. And if you pull it back and take an effort to look at it, it sounds worse than it really is. So here's a couple of takes on it. Number one, I'm going to go through kind of the big categories. Two of them, in my opinion, are customer consumer facing. Right, one is motorcycles. How dare you take my Harley David? Or whatever it may be, right? So when you drill down to it, it's like one line item on the HTS code, and it's for 800 cc motorcycles. And and I asked Chat, like, give me a name of a company that this is impacted for. And the only thing they could come back with was one company called Can Am, which makes two styles of three-wheelers that are going to be hardest hit. So that company up in Canada. So it's a really small, narrow piece of it. But when you hear the term motorcycles, that defines freedom in America, and you're taking away my freedom. So that draws a lot of consternation on that. So that's that's the one. Alcohol is another one, right? It's really based on product and packaging, product type and packaging, right? But it is brand names: Crown Royal, Labatts, all these different types of beers. One that they called out that I haven't had since I was in high school called Moosehead Beer. Have you ever? Do you remember that? Yeah, yep, yep. When I saw that, I'm like, I haven't haven't chugged a moose head in some odd number of years. So it's all about packaging. They've not stopped every single piece of alcohol coming into the into America. But you know what? Crown Royal-that's a big brand name. Moosehead Labatch-those are big beer names, so it's it's not every single type of alcohol that's coming in. So those are the consumer-facing brands that can create ire and and and madness. The other one, which is a little bit unique, is dairy, right? Well, and that's not forward-facing. That's not consumer-facing. It's an ingredient, right? Whey and molasses. Whey being like protein powders, nutrition, baby nutrition, that kind of stuff, and you know molasses goes into a lot of other different types of products. So it's not really about shutting down the supply chain. It's more about making certain Canadian finished products unavailable, right? And that really draws the attention, and it certainly worked. So, you know, those type of all the other commodities are still facing the 50% tariff; they're not banned. But it's a pretty narrow aisle that we're walking through, and I don't know if the general public understands that.
Pete Mento 12:21
When we talk about higher tariffs or banning the imports of certain things, I agree with you. It's important to keep in mind that it's not everything, but at the same time, those inputs do end up in a lot of other American items. I think you've milked a cow, right, Doug? You've milked a cow at some point in your life, I imagine. I have
Doug Draper 12:40
to say I'm not
Pete Mento 12:45
okay. Well, you know it's one of those things where I say to folks the funny thing about global trade is a lot of this stuff we could do ourselves we just don't choose to do it. I've milked the cow. I've drank the milk out of the cow that I milked. Right, good for me. I can do it. I don't want to do it. I'd much rather reach into my my refrigerator and pull out the nice little plastic jug of milk and and have my milk. It's the the greatest thing about NAFTA. The greatest thing about USMCA is the ease with which it makes all three economies work. And when the person with the most economic power decides that they don't want that to work anymore. It's devastating to all those economies. But these brand names, these things that we-I wonder if most Americans know that Crown Royal, that VO, that Seagrams comes from our very good friends in the north. I wonder if they know. You know, in that name, Can-Am, pretty-that's pretty obvious, right? Canadian American. I, you know, I, I don't, I don't know if people put two and two together and really understand that that's where it comes from. So much of our world, so much of our lives, is really connected together between ourselves and Canada and Mexico. And if we were just to close the borders and shut down those gates and say no mass, no more. Cars wouldn't run. Electricity wouldn't be on in a lot of places. Phones wouldn't work. We're playing a dangerous game, and that's why at the end of all of this, I believe that we'll find some way to reconcile. But between then and now, it's scary to see just how much damage we could do to each other's economies. And I certainly hope it doesn't happen that way. You know, again, last week at at the Trade and Customs in Dallas, this week at ICPA, I meet a lot of Canadians, and I start every conversation by saying, "I'm really sorry. This wasn't this wasn't my idea. This wasn't this wasn't. I'm really sorry, but sorry sorry doesn't quite do enough. And in Canada now, the backlash is they see American products on the shelf, they don't buy it, and there is something incredibly exhilarating and what's the word I'm looking for, like inspirational, about seeing a whole country decide that they've had enough of our shit, and they're not they're not going to put up with it anymore. They're not going to put up with it by buying our things. Could you imagine if the United States said we're just not going to buy Chinese stuff anymore? Could you imagine if we if we closed our wallet to the country who's our greatest economic rival? What that would mean for their country, for their economy? We don't have the ability to do that, and I'm very touched at the fact that Canada has done that with
Doug Draper 15:23
us, yeah. As an American, sometimes it's weird to say you're rooting for Canada.
Pete Mento 15:28
Man, you know it's a playful rivalry. You know, I I'm big NHL guy, and as soon as my team, the Bruins, are out of the playoffs, I root for whatever Canadian teams are left, I want them to win another Stanley Cup. I I love that country, and I've had nothing but fantastic relationships with people up there. They really are the nicest people on the planet, and the fact that we picked a fight with them-it's like that's so American. Hey, who should we get into it with? The nicest people we can find. Let's go mess with them. Like that-that is just so American. It's such a stereotypical reaction, but we are-we are, man. We're doing.
Doug Draper 16:05
Yeah. Well, this will be the number one show in Canada now after all those nuts commentary. So, anyway, that brings us to halftime. It's brought to us by Cap Logistics. We appreciate all their efforts week in and week out. This is when we get to talk about whatever the heck we want to talk about so, Pete. I'll let you jump in.
Pete Mento 16:23
Yeah. So my topic this week is it's pretty simple, right? We are we are past summer, and we are now in fall. I mean, I mean, not not literally, right? Like we're. I think it's the 21st of September, right? Is that when when fall starts? But you know, kids are back in school. Football's on, right? We're in fall. We've had this conversation before about what our favorite season was, and I know that mine is fall. I think yours was too. There are things about fall that I love. I love that football appears to be on every single day of the week now. I love that it gets cooler. I I adore the coziness of fall. I love the the fact that we are in the season now where we're preparing for winter. It's not quite too cold to go out. It's not so hot not to go out. It's wonderful. So what I wanted to talk about, Doug, was a couple of things I don't like about fall. All right. So I don't like leaves. I grew up in in Texas until I was a teenager, and then I moved to New Hampshire. And New Hampshire is known for its foliage. Oh, so pretty to look at when it's up on the trees. But son of a bitch, when they start falling, I had a 200 acre farm, dude. Right, we had a lot of maple trees, and when those maple trees would dump their leaves. It was like an assault. We had to spend weekends, full weekends, just picking up leaves, raking leaves, mulching leaves, getting rid of leaves. They're really nice, and I love that people spend a lot of money coming to visit New Hampshire. But my God, when they fall, they have pain in the ass. I hate pumpkin spice. The whole thought of it, like everything associated with it, I cannot stand its flavor. I don't like that part of it. I also don't like that fall for me has a connection with the first day of school. You know, when you go back to school, and at first when I was a kid, that was wonderful. But every time my daughter would have her first day of school, then another first day of school, and another first day of school, it was this constant reminder of the fact that she was growing up, and that she would eventually leave. You know, she will. Fall is a season of change. There are things about it I adore, but there are also things about it that piss me off. So, Doug, are there things about fall that make you crazy? Anything that you don't like about fall?
Doug Draper 18:42
Wow! Probably the only thing, and I was going to bring this up before you mention it, would be the pumpkin spice, right? It's pumpkin spice this and pumpkin spice that. I guess we can thank Starbucks for making that happen. They were promoting PSLs literally in August, right? Nowhere near fall, so so that's it. But generally, I don't I don't have a beef. I'm not picking a fight with fall. I think it's pretty much okay. Summer is probably my favorite one, and people think that's probably crazy since I live up in the mountains. But yeah, I think summer would be my favorite. But as far as fall, no, it's it's the one season that you really feel a change, right? Fall into into winter, not so much. I'm obviously the snow, but yeah, I don't have a fight pick. I don't have a beef football other than PSL.
Pete Mento 19:34
I'm the problem, Doug. I'm okay with it.
Doug Draper 19:37
Yeah, cool. All right, man. Well, I saw on a news feed this morning that jewelry and bling are still very popular in this economy. Obviously, the upper echelon and the high earners are Louis Vuitton LVMH. I think is the official brand name with watches. Jewelry. The rest of us are hanging out with our Kohl's cash, buying stuff out of the out of the display case. But I just caught it. It was interesting that they said on the new on the report that jewelry is still pretty hot, and specifically with younger generation. I think obviously younger generation males is watches are a big deal. Even my son and all of his buddies like spend substantial amounts of money on watches. I don't know if it's a status symbol or whatever, but that's a new thing with young males is to have watches. So my question to you, Pete, is watch and bling, right? Are you into any of that stuff? Do you purchase that? Do you wear any of it? I
Pete Mento 20:48
so I've got on my Apple Watch now. Just remind me to put it back on, and it's hysterical, Doug, because I have a I have a Pepsi GMT Master Rolex in my bag right now. That cost more than I think my parents' first home, and I, I don't wear it. I have I have some beautiful beautiful watches. My my closest friend, my friend Hector, who works at Richemont, fan of the show. Hey Hector, you know they make these incredible watches, and he and I can talk about watches for hours and the way they're made and the functions of them, I think I'm very much in that camp, like your son and his friends. That I deeply appreciate the craftsmanship that goes into it, but I'm not a jewelry guy. I've been wearing my Harvard ring recently because when I was unpacking, I found it and like I should probably wear that. You know, I spend a considerable amount of money on it. I should probably wear that, but I feel like an absolute douchebag walking around with the symbol of where I went to school. You know, and I live in a place that has terrible crime. Let's just be honest. I adore New Orleans, but it's a very dangerous place. And the idea of walking around the streets of New Orleans with a $30,000 watch is pretty stupid. So I find myself really not wearing it anymore, and I actually had a conversation with myself probably last winter that I should probably sell all this stuff. You know, I should sell all this stuff. I should, I should do something more meaningful with that money. So yeah, although I am very much a watch guy, and I suppose I am a jewelry guy, I don't enjoy wearing them like I used to. I think it's a, I think it's a something about just getting older. You know, it's not as important to me as it used to be. Peacocking, right? Showing everybody how much you love. It's not important to me anymore.
Doug Draper 22:33
Yeah, yeah, I'm kind of with you on that. Here's my jewelry, non-existent. I don't even wear a wedding ring. How does
Pete Mento 22:41
mrs. Draper let you get away with that? Like, doesn't she want the world to know that Doug Draper is off the market?
Doug Draper 22:48
No, that was a discussion the first couple years, and I'm like, I'm just not going to wear it. Not because I don't love my wife. We've been married for 27 years. I don't know. I just don't wear any jewelry at all. I was into swatches. Remember those things back when I was in college, and you'd wear like three or four of them.
Pete Mento 23:03
Yes.
Doug Draper 23:03
Right. So that's that's kind of the last time. But I'm anti jewelry, anti watch, anti tattoo, the whole enchilada. So anyway, my
Pete Mento 23:14
favorite watch I've ever owned. I wish I could find another one. It was the All Clear Swatch. I got it for Christmas. I think when I was a junior in high school, I loved the hell out of that watch, man. And then I had a Keith Haring one. I collect okay, so hard flex. I collect original Keith Harings. It's it's it's something that's his art is very important to me. I had a Keith Harings watch, and I I lent it to a girl that I was dating, and I'll let you guess what happened to that watch. I never got chicks, man. I tell you what, you know, so many hoodies I'll never get back.
Doug Draper 23:48
Yeah, I love it. All right, well that was halftime. We appreciate you listening to us and enjoying our banter. Cap logistics helps to make that happen every single week. So we're in the second half of the show, Pete. What's your next topic?
Pete Mento 24:00
American 10-year bonds have reached a 5% return. Bonds are this thing where, you know, Doug, when I win the lottery, because it's going to happen. It's it's going to be part of my story. It's going to be in the biography when Pete won Powerball or Mega Millions or whatever, and I somehow have $50 million dumped in my lap one day. The smart thing to do with that money is to put it into annuities, put it into bonds. Right? You have money. You don't really need more money. You want to protect that money. So people do that, and I think that's most Americans when they think about the bond market and what bonds bonds mean. They think of it as a safe way to get a return on your money, long term return on your money. But there's a lot more to that story. Bonds are there because people are loaning the U.S. government money. That's what that means. It means that we are asking for you to give us money, and we're going to pay you back with interest down the road. Well, now at 5% what what the world is being told or telling us, telling America is you're not as safe a bet. Anymore, right? We're raising that interest rate to a point where it's actually a pretty good return if you pay us because we're not 100% sure you guys are are really safe to loan money to anymore. You're spending it like those sailors that just got off the fort in Thailand, right? Like you're raising hell with it. You're doing all kinds of nutty stuff with this money. I'm watching that very closely because it is a symptom of of a troubled economy, when you begin to see that, and it also tells me that inflation is not going anywhere. It's not. So these increased prices, how much more everything costs, that's a big tie into global trade. You can't build that new factory that you want to reshort jobs with if you're going to take out loans at incredibly ridiculous interest rates. Most American credit cards now are over 20% done. So there are people going out and financing their big weekend at a 20% interest rate. It's madness. So I'm very concerned. Be watching this closely, but my take on the future, because that's what this show's about. This isn't the last time we're going to see it above that, we're probably going to see it far above that because nothing about this economy makes me feel like it's getting better anytime soon.
Doug Draper 26:07
Yeah, it's the it's the flip side of the tariffs, right? Which caught our attention for the last 18 months. To to your point, this is kind of a bigger bellwether sign that you know, hey, U.S. you're you're pretty cool, but I'm not going to give you any money unless my my interest rate is higher, which which again gives people pause on the impacts of the interest rates to cost of making things right. Like if if I got to give you back 5% then then everything else I do needs to be a little bit more expensive, which makes our exports more expensive, which means countries are going to say, "Ah, I used to buy this machine from America, but I'm now going to buy it over here because it's just too gosh darn expensive. So that's a bigger tell on the global trade. Yes, tariffs are a specific instance, but this is a all-encompassing change that's happening. And five is the magic number, right? I didn't know when it was 4.7 or 4.5, but I sure the hell heard about it when it went over five. Right? It's kind of like gas prices, and then all of a sudden it's a hot topic. But it it impacts a lot more than just this sucks. I had to pay more more duty because the tariffs are higher. So it's interesting to see where this is going to take us.
Pete Mento 27:22
Save your money, kids. Save your money.
Doug Draper 27:24
Yeah. All right. Well, all in. Mine. Mine's pretty short, and I have to admit that I we talked about this a little bit, but I will take the credit. Not the credit. I'll take the hit. Is we were hyping up peak season, and that it came and went, and there is no peak season, and it's super flat, and I just saw a report that said September is going to be the busiest month on imports that that we've seen in 2026, which kind of aligns with the traditional peak seasons, right? You and I were hyping, hey, it's over, it didn't happen, all the things that we speak about, it's flat. All of a sudden, there's a slip. So we were absolutely, and I say we, but I will take the hit on it. Like I said, we're wrong. It looks like there is peak season. It may come quick and short, but I don't know. You know, I don't want to place blame on things that we can't control. But I know there was some typhoons and people are freaked out a little bit. On excuse me, the Panama Canal and they're rerouting stuff and and this is my conjecture, but maybe you know the the cost of money and the cost of inventory. Let's just buy a little bit at a time and seeing how things are going and and and so there's the same amount just in multiple shipments. So I don't know, but the bottom line here, Pete, is that I was wrong on a flat peak season this year because September is definitely showing us that is not the case.
Pete Mento 28:49
Yeah, man, it's nice to be proved wrong when you're in the business of moving things across borders. You know, it's it's not a bad thing to to look at what's going on, and see that things are still moving, moving much more expensively, but moving. The desire for the American consumer to buy Christmas presents back to school, you know, holiday season stuff-it's not going away. And what surprises me is just the volume. You know, August year over year, I believe it was 24% higher our imports from China than the year before. With all these tariffs, with all the stuff that was going on, and like you said, this this month is looking like it's going to be a banner month again. So, I guess it's great for our friends in the business. It's not so great when you think about the the increased cost and all these things that go along with it, man. Hey, we we take the L on this one, buddy, right? We take the L on this one. We weren't we weren't right, but that's okay. At least we had the the guts to put it out there.
Doug Draper 29:47
Yeah, yeah, for sure. Good deal.
Pete Mento 29:49
Yeah. All right. Well, I'll close out the show. As always, want to thank everyone at Caplogistics for their unwavering support of our foolish old man ramblings. Just you. Two angry, irritated men talking about our business for 30 to 40 minutes every week. I want to thank Keenan for the hard work that he does, despite what a pain in the ass he is, to keep this show running. And I want to thank all of you for showing up every week and listening and watching. Please send us questions, send us ideas for the show. We'll be happy to answer them. And if it's happening in global trade, talk about it next week on global trade this week. Peace, brother. All
Doug Draper 30:24
right, travel safe, my friend.