Global Trade This Week – Episode 260
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Keenan Brugh 0:01
You're watching Global Trade this week with Pete Mento and Doug Draper.
Doug Draper 0:10
Well, hello everybody. Welcome to another edition of Global Trade this week. Excited to be here with you. My name is Doug Draper. I'm only half of the hosting crew on this show. The other half is mr. Pete Mento. Pete, how you doing? And where does this podcast find you today?
Pete Mento 0:28
Doing good, buddy. I am in my house in New Orleans, hence all the Saints helmets behind me.
Doug Draper 0:36
Love it, love it. Well, I I am doing this one from my phone because I got some laptop issues, so I'm used to looking at the screen on my laptop like I'm doing now, and I will make a point to look down on my phone. So it doesn't mean I'm not engaged with your conversation, my friend.
Pete Mento 0:51
I get it, buddy. No problem at all.
Doug Draper 0:53
Yeah, yeah, cool. All right, I know we're we're gonna hound this show out, so why don't you go first?
Pete Mento 0:59
Yeah, you got it, but so alarming news that was reported by Reuters yesterday and picked up by some other services. The United States has accused; these are allegations, mind you. No one has seen any evidence at all. I think it's important to point that out. That Costco, which is the Chinese open ocean shipping company, a very large ocean-going carrier, that their vessels have been used for purposes of espionage, gathering data, collecting data and information of both military and non-military targets. Okay, you know it's some real James Bond stuff. It's not cool, but the we don't know what that threat could turn into. The president has all kinds of authorities he could use to sanction them, to disallow them from operating in the U.S. I mean, there really are a number of them there. But I think before we all get a little too flag wavy about this, Doug, what do you think the odds are that the United States does something similar with its vessels around the world?
Doug Draper 1:55
100%
Pete Mento 1:58
Yeah, I don't know for sure, but seems like the kind of intelligence gathering that we'd want to do. So yeah, I've got a really hard time buying that this is such an offense. I think that we're just admitting that we caught them, and I'm sure the Chinese will admit they caught us too, or one of their partner, you know, friendly, politically friendly countries will as well. But come on, man, like it's not shocking. I mean, there was stuff in the ports and the cranes. We found that out. Everybody's phone has parts from all over the world. I'm just, I'm not, I'm not shocked. I think it's terrible. I hope that we do something about it. But before we get too high and mighty, I think you should remember that we're probably doing the same thing.
Doug Draper 2:32
Yeah, valid, very valid point. And the the timing of this quote unquote discovery or or release is not coincidental, right? So we'll see how this comes into play. But you're right. I mean, I had not even thought about that until you mentioned it. Without question, we're doing the same thing, and probably a lot of other countries are doing the same thing. That's why it's called global trade, global, right? All over the world. So interesting stuff.
Pete Mento 3:03
Great line for espionage. If you're not cheating, you're not trying. So you know, doesn't surprise me in the slightest.
Doug Draper 3:09
Yeah, yeah, cool, awesome. All right, man. Well, I wanted to start mine off with this quote from this CEO of a battery startup, and his quote is: "We're an American company with a Chinese footprint. The guy's name is Hennick Roth, R-A-T-H, and he's the CEO of a company called Ener Venue, Ener like Energy Venue Battery. Anyway, so this guy makes batteries, right? It's a startup, and he chose to open his factory in China over the state of Kentucky, or maybe it's the Commonwealth of Kentucky, and and and and basically, the reason was kind of an industrial clutter. Excuse me, industrial cluster out there, right? So, the factory he's going to build over there is 95% automated. It has all kinds of hydraulics, pneumatics, automation specialists, and there's engineers that are on site, right, and accessible, I should say, to basically do iterations and changes and things quickly. The plant in Kentucky was going to be $400 million. The plant in China, about 20 to $40 million. The exact number has not been released, right? So it's a startup. It's the cost of money, right? Like it's the potential increase of borrowing money, right? So there's these investors, like, hey, great idea. We're going to invest some money, but only a little bit. Or if we have to invest more. We're going to have to borrow against it or pull money out from another investment. And obviously, we talked last week about what Treasuries are doing with borrowing money. So this makes total sense. I don't know why anybody would be frustrated or upset about it. It makes complete sense to me. There's a juggernaut of a cluster of. Port out there, and it'll be interesting to see. So the comment I have is two. One is what does this say for reshoring, right? Because part of the tariffs from back in April of 25 was to help nearshore, friendshore, bring stuff back, and this is a blatant flip. This isn't a hey, we thought about like like we're just doing it right. And then the other piece is how is that going to what type of retaliation right that the the duties still apply, but is there going to be more on top of that because of such a bold move like this? And then the last thing, Pete, is like you know who else needs batteries in in the entire world, right? So it just it makes sense, and it just defines global trade to you know right right down to the penny. If you and I were in in a class at say Colorado State University, and we were talking about this, I mean, this is the definition of global trade, and you can't. You can't. In my opinion, you can't get mad at these guys to replicate for like 10. You know, it's 10x to do that in the United States. I mean, it's it's a little bit interesting. So it caught my attention. It's not specifically related to global trade or a specific topic, but it caught my attention, and I wanted to bring it up on the show.
Pete Mento 6:21
So here's the counter to that, and I don't know that I believe it, but I'm playing devil's advocate here. Your technology is now completely at the whim of the Chinese government, so the the ability to steal through corporate espionage your information is, I mean, just blatant. Number two, batteries are going to absolutely be a massive 232 issue. So at some point, when the import tariffs on those are 5060, 100% who knows? Are you really saving money in the long run? And then third, the transportation costs. The batteries are already in the U.S. Wherever they're going, they're going. If you're a global company and the U.S. isn't the biggest thing you're focused on? Sure, I get it, and China has already really embraced the idea of electric cars, whereas the United States still really hasn't. We're getting there, so I can see that. But no, I I agree with you. How do you expect to be competitive in an environment where the cost of construction, manufacturing, and employees is going to be just so significantly higher because building it doesn't count having people actually come and work there, and all the environmental issues that also go along with that.
Doug Draper 7:30
Yeah, yeah, you bring up good good points. Would be curious to see what our what our listeners have to say, and hopefully they'll put some comments in the comment field. Hopefully, anyway, that brings us, yeah, yeah, yeah, brings us to halftime. Brought to us by Cap Logistics. Appreciate everything they do for us every single week. So,
Pete Mento 7:49
sure do. And I'm
Doug Draper 7:50
going to jump in here and and get this party started. So, here's the question: AI or not to AI? That is the question. So I got, I think, nine questions here that I put together for you, and you have to decide: is are you going to use artificial intelligence to handle this task or decision, or are you not going to use it, right? Your own.
Pete Mento 8:15
I love it. Sorry, everybody. The compressor on my AC is out, and I'm in New Orleans. It is not very pleasant here right now, but I love this topic, Doug. I love it. Let's go.
Doug Draper 8:25
Nice, cool. All right. So, fixing a compressor at your house in New Orleans. Do you do AI, or you come in there and do it yourself? I
Pete Mento 8:36
would love to know how to do it myself, but unfortunately, I don't. So, and I don't think AI's got a robotic arm yet, but it will happen eventually. Someday repairs like this could be done, but I don't think that someday is for quite some time.
Doug Draper 8:49
Got it. All right, that was the bonus one. All right, here we go. Control your finances, invest your money, move your money around, control your monthly budgeting. AI or not AI?
Pete Mento 9:00
Yes, with extreme oversight.
Doug Draper 9:04
Okay, all right. All kind of major negotiations for you: salaries, say business deals, a car purchase, things of that nature.
Pete Mento 9:14
Yes, with extreme oversight. Same thing. I'd have to watch. No, you can't. Okay, I'd watch it very closely, but I would I would use it as a foil against the ideas that I have.
Doug Draper 9:24
Got it. All right, grocery shopping and whatever it's whatever it bought, based on your profile, you had to eat it. You couldn't say this is crap. I'm going to order Taco Bell. So are they going to go grocery shopping for you, AI or not?
Pete Mento 9:38
Yeah.
Doug Draper 9:40
Cool. All right. Travel, business, and pleasure. Business or pleasure, or both, and whatever it tells you to do, wherever it tells you to stay, you got to do it.
Pete Mento 9:50
Yeah.
Doug Draper 9:52
Okay.
Pete Mento 9:52
I believe the power of the prompt, Doug. I believe in the power of the prompt.
Doug Draper 9:55
Yeah. All right. So, power of the prompt with your wardrobe. Every. Day always they choose based on your schedule for that day.
Pete Mento 10:03
No.
Doug Draper 10:06
Okay.
Pete Mento 10:06
No.
Doug Draper 10:07
Awkward phone calls, Pete. I don't think you have many of these, but this would be stuff like canceling a gym membership, haggling a bill, potentially having some personal deep discussion with somebody that you had to break up with, or something like that. So awkward phone calls, AI or not?
Pete Mento 10:27
Probably, yeah,
Doug Draper 10:30
yeah. All right. So, what about AI would remember everything about you, conversations and things like that, and then properly give you advice in situations. So, if they say, "Hey, Pete, I think you shouldn't do that because three and a half years ago you were talking to somebody about this and you were pretty passionate, so that's really not the right decision to go for. So would you want them to remember everything about you to help them make decisions moving forward?
Pete Mento 10:56
Yeah, because I think they already do. So yeah. All
Doug Draper 11:00
right. So I just got two more. What's one thing that you would never hand over to AI?
Pete Mento 11:07
Parenting.
Doug Draper 11:10
Freaking amazing! That is a killer answer. I love it. All right, and would you? So here's the final one. So would you let AI make a decision if you disagreed with it, but the data showed that they were 90% right.
Pete Mento 11:27
Yes,
Doug Draper 11:28
does that make sense?
Pete Mento 11:30
Yeah, I'm I'm an economist, dude. I believe in data, so I I already live that way. That's why maybe I'm the wrong person to ask this question to. I for those sorts of things, for many of them, I would have no problem at all handing it over. They're going to do a faster, probably more in-depth analysis than I would, and my brain is full of these questions constantly. So, I already use it for many of the things that you brought up, Doug.
Doug Draper 11:53
All right, cool. All right, well, you're-I didn't count them all, but probably 70 to 80% AI guy.
Pete Mento 12:00
Yeah. So
Doug Draper 12:01
maybe six. Let me rephrase that: 60% with 20% oversight and 20% yourself.
Pete Mento 12:06
Yeah. Well, you know, I'm not ready to trust the machines completely.
Doug Draper 12:10
Yeah. All right. Well, that was a good one. Thanks, man. What do you got?
Pete Mento 12:15
This weekend, I I saw some some teenagers doing teenager crap here in New Orleans, they were trying very hard to steal a street sign, and I got to watch in real time as the police showed up and chased them. And that's because there's cameras everywhere down here, everywhere, every single block, every corner, every street corner. If you do anything stupid, NOPD is going to find out about it, and it made me think about the dumb things that I'm not saying I did, but my friends might have done when we were teenagers, and how the lack of being constantly held accountable to a phone made it possible and fun. You know, we we would party in places we shouldn't party. We absolutely stole street signs. We stole all kinds of dumb things, like just stupid, stupid things, Doug. We were big ding dong ditch guys. You know, ring someone's doorbell, run like hell, and they open it up, and we're not there. Prank phone calls when I was much younger. That was something we did. I just, I, I weep for this generation, Doug. I weep for them. We've talked about it before. I don't think they know how to have fun, and beyond all of that, I think that the surveillance state has taken a lot of that away. I mean, it's it's it's aggravating fun. It's not like they're breaking windows at the warehouse. You know, they're just being kids, and I feel like a lot of that's been taken away.
Doug Draper 13:39
Yeah, yeah, 100% I mean, if you look at any type of, I have to admit that that I'm a fan of Reddit, and I get on a death scroll every once in a while. And 20 minutes in, I'm still flipping through it. But the amount of, hey, I'm going to catch you on video, and then somebody else's video and the videoer, and somebody else's video. You know, the there's a Dr. Seuss thing in there about who's watching the watchers, watching the watching, but yeah, just the the surveillance surveillance state is recruiting a lot of fun things from happening. There's a handful of things, Pete, that I want to say, but I'm not going to say because it will destroy my reputation as a nice wholesome Midwestern Midwestern guy, but off air, I'll tell you a couple of things that I was involved with.
Pete Mento 14:26
Cow tipper you, you know that that line. Who watches the Watchers? I know it's a Soviet era comment. I don't know who said it, but it's also the theme to one of the greatest comic book graphic novels ever made, The Watchmen, which I know you have not read nor have you seen the films or the television shows, but it it gets deep into that question, Doug. I think you'd find it fascinating. Yeah.
Doug Draper 14:48
Oh, yeah. Well, as long as it's an audiovisual book, I'm in. So you said there's a movie of it.
Pete Mento 14:53
Oh yeah, yeah. The Watchmen. Yeah. When I went and saw it, it was it was a long time ago. I don't even think my daughter was born yet. And there are all these nerds at the at the movie theater, and I said one hand grenade would probably kill the entire development team of every major technology company in Cambridge right now, because we were all there. We couldn't wait. This it's like this is like deep nerd stuff. This is like prog rock. Like you got to be a real nerd to love Watchmen, and I do.
Doug Draper 15:18
All right, I'll have to check it out, maybe, maybe,
Speaker 2 15:21
maybe.
Doug Draper 15:22
All right, my friend, that's halftime. So let's get to the second half of the show. I think you're up for your second topic.
Pete Mento 15:31
Yeah, you know, there's a lot of news out the last four days of ships that have been the subject of cyber attacks, and not just any ships, energy ships, tankers, ones bound for the United States, and the I've been ringing the bell on this for a very, very, very, very, very, very long time. This will be the one. This will be the successful thing that changes everything about cybersecurity when an LNG tanker is taken over by a cyber attack, when it loses its ability to navigate, when crewmen die and cargo is lost, we might start taking it seriously. Either this or a bank. Our friend Alex, friend of the show, said that you know it's not surprised at all. He does a lot of work in this arena trying to find the bad actors and keep people safe, but not everybody's doing their part. Doug, this is terrifying to me. It's terrifying to me as a former mariner. It's equally terrifying to me as a as an American, as a human being, that you know, floating hydrogen bomb on its way into a port could find itself unable to navigate.
Doug Draper 16:38
Yeah, yeah, you're right. I mean, we focused a little bit on the domestic trucking industry and and fraud and and and theft and all those kinds of things. And now that's just the the equivalent of the open seas. But you look at the quantity, the size of these vessels and the sheer damage they could do is just ungodly, right? It's either going to be for money, intelligence, or disruption of some sort, or even a distraction, right? Kind of like the sleight of hand with you. I mean, oh my God, look at what's going on over here, but the real problem is over this way because there's been a distraction. But money, intelligence, what we spoke about on the first the first topic, or some some level of disruption until we see something pretty catastrophic. I think it's just it's not visible. It's not visible or tangible.
Pete Mento 17:29
I want you to imagine what would happen if a oil tanker was scuttled or damaged on the approach into Houston Harbor, where so much of our oil that comes in to be refined would no longer be able to make it through the port entrance. What if do it for a day, do it do it for a month, do it for a week, do it for a couple hours, and now that changes all the tempo of maritime operations. Doug, this is serious, and I'm telling you, we will be on this show talking about a successful attack. Just a question of when. All
Doug Draper 18:09
right, man. I got to take a deep breath on that one. I'm going to try to end us on a positive note, or at least flat note, right?
Pete Mento 18:15
Good luck, man. Yeah,
Doug Draper 18:16
exactly. So let's talk liquid natural gas (LNG) You know who's got a lot of LNG, my friend? We do. United States has a ton of it. We're putting more and more of it online, and you know who needs it?
Pete Mento 18:35
Everybody.
Doug Draper 18:37
Everybody, including China. And you know who's in town this week?
Pete Mento 18:42
I'm pretty sure China. Well, that's assuming he actually is alive. Now there are rumors that he is incredibly ill, so we'll see. But keep going, keep going.
Doug Draper 18:52
Yeah, yeah, no problem. I had not heard that. I had not heard that. So anyway, my point is that LNG, I think, is going to be a topic that we're going to hear about after this this meeting this week. I think it will be used as a negotiation to reduce or remove tariffs on liquid LNG. Excuse me, or it'll be used as a leverage point, kind of like a quiver, an arrow in their quiver, so to speak, to have it, which could be the same thing that you spoke about earlier, right? So, I think we're going to hear something about it. I think we're going to have some some trade agreement with it. But initially, last comment on this one, Pete, is a year ago when the Chinese basically said we're not buying any soybeans. We're going to go buy it down in South America from from Brazil, and everybody freaked out because the farmers were not selling these contracts they did in the years past. And then there was an agreement to say, "Hey, China, why don't you commit to buying X number of soybeans? And when I did a little research on this, Pete, actually, they almost made the commitment. I think it was 12. 12 million unit of measure, you know, insert unit of measure, 12 million tons or whatever. They think they've purchased about 10 million of that, and then the next couple years it's been escalated to 20 some odd million tons of soybeans. So it's I'm trying to liken it to the fact that here's some leverage that we had at with the soybeans in 2025. I think LNG is going to be that equivalent, and it's going to be happening this week when they talk about it. We got a ton of it. China needs a ton of it. It's a win-win for everybody, and it puts us at a position of strength, which I know is important with this administration. So look for that on the headlines end of this week.
Pete Mento 20:40
I agree for a lot of reasons. One, having China buy it from us means they're not buying it from Russia, and if Russia is not selling gas to China, then their war machine grinds to a halt. Also, it is economically a wonderful thing for the president to say he pulled off, and it becomes a win-win with China. I mean, China doesn't lose any international prestige for buying energy from anybody wherever they can get it from, and it would hopefully do something about stabilizing the world energy market. It would make everything more expensive here, though. If we start shipping that stuff overseas, where we make a lot more money for it, then that means that the stuff that is available for sale here, it's supply and demand, right? There's scarcity in the energy, so it does have its negative impacts on our economy if we were to go in that direction. But from a diplomatic standpoint, it makes all the sense in the world.
Doug Draper 21:31
Yeah, yeah, good deal. All right,
Pete Mento 21:35
all right. Well, I think that's it for the show, my friend. Yeah, that's gonna do. I want to thank everyone at Caplogistics for their unwavering support of the show. Thank Keenan for the work that he does for us back in Colorado, making it happen. Thank all of you for constantly listening and for sharing our content with everybody. And like we say every week, if it's happening in Global Trade, we'll talk about it next week on Global Trade this week. See you, buddy.
Doug Draper 21:56
All right, catch you later, my friend.
Pete Mento 21:57
Bye.