Global Trade This Week – Episode 261
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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
Hello, everyone, and welcome to another edition of Global Trade this week. We come to you every single week and talk about global trade. My name is Doug Draper. I am only one of your hosts, and we have a fill-in today because wonderful Pete Mento was on a plane somewhere. I don't know if he's over the Atlantic or if he's back in the states or whatnot. But the show must go on, and so our good friend Keenan, who's usually behind the camera, is now in front of the camera. And Keenan, we appreciate you filling in, brother? How you doing?
Keenan Brugh 0:42
Doing well. Yeah, it's hard to keep up with where Pete is in the world at all given times, but happy to be here in his stead. Lots going on, but yeah, excited to dive in.
Doug Draper 0:53
Cool. All right. And speaking of which, why don't you just get us kicked off with our first topic?
Keenan Brugh 0:58
Absolutely. So today is september 29, and it is the day the U.S. Canada dispute goes live. So, as of a minute after midnight, the latest round of 338 exclusion tariffs or ban authority restrictions are going into place on specified Canadian goods, so alcohol, dairy, large motorcycles, and that's on top of the revised 50% duties before. So it's one of those where if people were hoping for a last minute change or agreement, that has not happened. And at least from the signaling I'm reading from Trump and the U.S. Trade Representative's office, there's not a hurry to get a Canada deal, I mean, long term, you got to imagine we're going to have some sort of good relationships and terms because they are our neighbor, often have been our number one trading partner. They've been number two for the last couple years, second behind Mexico. But it's it's a lot of trade, and that's both ways. And so these are going into effect and impacting what people can buy, ship, or the costs of getting those goods, and also impacting the markets that our U.S. businesses can sell to and at what prices. So, I know you guys had mentioned this when there's kind of the tit for tat going back and forth with them, but today is the day the tariffs are live.
Doug Draper 2:22
Yeah, yeah, and there's no splashy headline, right? It made news a couple weeks ago. Whenever we we spoke about it, and you know, in this day and age, when you and I were growing up, the term millions were big numbers, right? This is a $400 million deal, or this is impacting $800 million. Now it's all about bees and billions, right? So you get these splashy headlines that say $30 billion of trade impacted, and the dollar isn't accurate. But if you look at the big picture of what it impacts us and what is banned, we spoke about that in previous shows. I think the motorcycle one caught my attention because I was like, okay, my gosh, what's going on? It literally is a specific size of engine, type of combustion, and when you narrow it down, it's very, very insignificant. You know, it doesn't even-it's not a blip on the radar, right? Now the beer's real. You know, there's brands on there that that we know and have consumed in the past. So, the simple fact, my my whole point here is that yes, there is a ban. Yes, it is real, but the overall impact to you and I as consumers are pretty minimal, unless we just love Canadian beer. But the bigger impact is what is going to happen to the trade agreement and the USMCA in North America. The tit for tat, I think, is more important with the end result of how that trade alliance and trade comes into excuse me into effect. So, I think the impact is more long term than short term. Yes, there is a ban. Yes, it's making headlines, but the big picture is pretty, pretty minimal. The important impact is going to be what happens on the ongoing negotiations.
Keenan Brugh 4:09
Absolutely, I mean, so many of these deals historically have taken a long time and slowly going back and forth and talking and working out things over a decade or two in order to make these agreements. It does seem like these sorts of things, the tit for tats, going at a much faster pace. Whether that gets us to a good end goal quicker remains to be seen. You know, in weeks past, we've also talked about is Canada going to expand their relations with EU trading blocs, and will there be more tit for tats in those types of situations? So you know, costs higher as well as just some things won't be allowed in. Total ban on some of those goods. If you get your protein powder from Canada, it is no longer able to be shipped across the border. That remains to your point. There's still a large amount of business that happens between the U.S. and Canada, and I think that's important for our listeners. For decision makers to keep an eye on the big overall relationships, even as some specific things are banned right now, hopefully we get to a good positive working relationship between our two countries in the long term.
Doug Draper 5:13
Yep. Oh, good points. Good roundoff. Well, speaking of trade agreements, right? I don't know if you knew, but the president of China was in town last week, and there is sort of a trade agreement that came into play, right? And I say kinda, sorta, right? So I'll get into that specifics in a second, but it's almost like we were fighting on everything-we, China, and the U.S. and the trade agreements-and now it looks like we're not fighting on everything anymore. There's a little bit that we're starting to agree upon. It's a little bit of substance there. It's not monumental. And as you and I were talking before the show here, we saw some good posts on LinkedIn yesterday about that. That really, again, using a big number and putting a B in front of it, $30 billion, you know, sounds sounds incredible. But here's the gist, and I pulled some of these numbers from some of those LinkedIn posts and doing some research on my own. But there's 77 categories, so U.S. gets tariff reliefs on 77 different categories, right? So, consumer household goods, toys, some appliances. But the thing that's not in there is anything about semiconductors, nothing about EVs, right? The semiconductors being the more important of those two. And then China gets relief on 1600 categories by far and away, agriculture and food-related products are are paramount, which helps the farmer. And it's meat, dairy, seafood, different types of grains. No strategic technology, and no real industry policy breakthrough. So, I think it's really symbolic. Yes, you get the B and the 30 billion, right? My words, not what I what I read online. A little bit more fluff than substance. And the most important thing is we got a couple of pandas out of the deal too that are now hanging out in Atlanta, right? So, so worst case, worst case, we got we we got some new zoo animals down in in Atlanta, Georgia. So I don't know. Obviously, it's been all over the news. What have you heard, and what's your general take on what transpired? Yeah, well,
Keenan Brugh 7:31
the pandas are a great visual. You know, when you're at the gym, I see that on the mainstream news. There's images of the pandas going around, and to your point, I think that is symbolic, and at least it's a a good symbol, symbol of friendship and working stuff out. It is definitely not a finalized trade agreement. Things are all over, though it does seem to be positive vibes on both sides. Everyone's trying to give and trying to get, trying to work well together. First and foremost, I was relieved that she actually came and was in good health. I know there had been rumors from a previous meeting in India, and I think the rumors were overstated. You know, maybe it was a stroke, maybe it was something else more serious. So there was a doubt in my mind if he was even going to come and they were going to have this meeting. But I think the rumors were overstated. He maybe just like missed one dinner and people went crazy about it, but she and his wife came and got all sorts of tours and had all sorts of conversations. Now, some things we are not privy to. Discussions happened around things like rare earth minerals, but we don't know all of that. To your point about ships and some of the other strategically important things, those are still maybe less agreed upon, still silent, still posturing and negotiating. Though some good things coming out of it with the agriculture, I did see that some ag groups were decrying that soybeans and some processed foods were not included on that. But there is a fair amount of the raw commodities-corn, wheat, sorghum, meat, dairy-that should get some. And while it's not a final deal, at least the truce has been extended from the november 10 deadline to january 10. So two more months of try to figure some of this stuff out, change the the dates and pacing of some of this. I remain cautiously optimistic, while also empathizing with Pete and our other customs broker friends, or people who are trying to now, what does this actually mean? It's great to have some pandas and have some some symbolism of friendship, but what does this mean specifically, and how long? And I think there's a lot of unknowns and things that frustrate folks like Pete. There are others who need the real okay, what is the rate? What are what's changing? What's going on? In order to advise their clients well, so still lots of uncertainty and ambiguity. But I'll I'll take it as a cautiously optimistic positive symbolism. And yeah, to your point, we got a couple of pandas at the very least.
Doug Draper 9:56
Exactly, exactly. So I'm sure we'll see Pete's comments on LinkedIn. He's always good at expressing his opinion. So it'll be interesting to see what he says on this one. But for here and now, this takes us to halftime. Keenan is brought to you by your company and your team, and we appreciate that every week you let us join you on the sounding board to talk about global trade, and it is much appreciated. Namaste, my brother. But halftime, we can talk about whatever we want. So why don't you go first? I'll I'll bring up the second half.
Keenan Brugh 10:28
Yeah, sounds good. So yesterday was a monumental step for SpaceX launching their Starship all the way up into Earth orbit. There had been over a dozen previous launches and practicing catching it and different tests, but those were all suborbital. Some people historically had claimed they were never going to be able to achieve orbit with this massive ship, but they did it. And not only did they do it, they brought cargo along with them. So lots of Starlink satellites. I believe there were also some other satellites from maybe Facebook or India. I'm not 100% sure, but quite a few 26 Starlink V3s were deployed. So if you had seen the renderings in years past of what this large cargo capacity ship was going to be able to like spit out these satellites in orbit like a Pez dispenser, that all worked. So pretty cool for the space industry as it's growing, and whether it's the communications we know and love, or more and more data center AI or other processing type power being put up there. You know, you always hear about the "not in my backyard" stops, or the big water and power demand of some of these on terrestrial data centers that will be the near future is will it will be on Earth. However, SpaceX and their AI components will XAI will be putting more and more of their assets and compute up into space, and other giants like Google is testing some of their TPUs up in space, where you have a lot of sunlight for energy and a lot of cooling capacity without using a limited resource like water. So near term, the compute is here on Earth, but in the medium to long term, folks like Elon Musk are anticipating that the number will round up to being 100% of compute will be in space, and this is a major step towards that or other payloads off into space. So congratulations to the SpaceX team and Elon. Great work doing doing some big things.
Doug Draper 12:33
Yeah, yeah, it was great. And I, the the orbital piece when I saw this, like yeah, haven't they been up? Haven't they been up in space before? But this is kind of the next level, and and it was interesting that it was supposed to be a 10 hour voyage. I think it turned into three hours because one of the engines, one of the rocket boosters, caught on fire. But they still did what they were supposed to do, and nothing came back damaged. I mean, the ship did, but as far as the cargo, so it worked, right? Yeah. Splashed down outside of or north of Hawaii or something. So, so kudos. I think there's 11,000 satellites up there now for Starlink, and I think you would know more than I. I could have sworn I said some read something that it was like a million or some crazy amount, some crazy number like that that they want to get complete coverage.
Keenan Brugh 13:27
I I don't know the total number of the constellations, but they have been deploying large amounts and higher technology on the different versions of them. It's kind of fun to see when they get launched if you're out camping or somewhere away from city lights that you can see when they first launch. They're all kind of in a line in a train, and as they pass the Earth every 90 minutes, there's a couple times towards sunset and towards sunrise that the reflections are just right because they don't have lights on them that we can see. But the reflections from the sun make kind of a a cool train, and then they space out and space out, and ultimately break off into their constellation pattern. Yeah, you know I've had pretty good luck with Starlink as well. So interesting to see what internet access capabilities will be enhanced in the near future, whether it's somewhere remote in Africa or remote up in Colorado. Having having internet access is a is an important thing, so it's good to keep an eye on for all of that stuff.
Doug Draper 14:28
Yeah, yeah, very cool. Well, my halftime, I'm going to bring it from space back down here to the Earth, right? Specifically, a national park in Alaska called Katmai K A T M A I, I believe it's pronounced Katmai, and it is Fat Bear Week, my friend. Right, every year they go out and look at the bears in that national park, and you get to rate you and I can vote on them. Right, there were 16 bears that started, and literally they're down to the final two. So. This is a championship championship round, so this is basically hyperphasia is the name of the time of the year where the bears are bulking up basically before they den down for the winter, right? And essentially, what bears what bear is packing on the most weight, right? So as I said, started with 16, now they're down to the final. So the two remaining ones is bear number 89, which has a nickname of backpack, back like you wear. You're taking your backpack to school, and then the other bear is number 910 910. Does not have a name, but they meet today, right? And so we will know the title tomorrow. My favorite pick was was one called Bucky Dent, and he was knocked out. So he made the final four. He didn't make the final two. And if people want to go and check out the winner, you can go to explore.org. It's got a list of all the bears when they were Cubs and where they are now, and who matched up against who, and and it was pretty cool. So Fat Bear Week. One more thing about bears, Keenan. I'll let you go. There is this thing out there that I saw that's called this other bear called Kobook, K O B U K, Kobook the Destroyer, and this is a bear that was relocated to a sanctuary. And this this guy, Kobook, he's essentially a professional product tester. This is not a joke. Literally, manufacturers who want to make products that are bear-proof, like trash cans, coolers, food containers, they basically fill whatever it is that they're trying to bear-proof with literally fish or honey or other bear snacks-and they throw it in a cage with this bear, and he has one hour to basically destroy it or try to open it, and and then the you know the engineers and the designers basically come back, and if it can survive an hour, then it is technically defined as bear proof. So anyway, I figured we're talking bears. That caught my attention. I don't even know how it came up. I was probably in a death spiral on LinkedIn or Reddit or something. Caught my attention. But anyway, that is my bear halftime. Explore.org for Fat Bear Week, and then check out Cobook the Destroyer, which is the Bear Product Tester.
Keenan Brugh 17:31
It seems to be a bigger Bear Week than ever before. I'm an outdoors guy. I've heard and followed Bear Week in years past, but it seems like more and more people are aware of it this year. I mean, and just googling it and kind of catching up on who's still in the running. Google had a custom animation going on, and then Polymarket, which I don't know if they're taking bets on Bear Week, but they are announcing that so many people were voting in this year's that they actually crashed the website. So it's one of those things that's gotten much bigger than in years past, like the bears, and people are excitedly following it. And you know, good for the bears. The would you call it hyper aphasia? I hope they have a great bulking season, and to the to the biggest bulkiest bear goes the victory.
Doug Draper 18:22
Yeah, I like it. I like it. Well, there's halftime. We get to talk about whatever we want. A couple of good topics today, Keenan. So that brings us to the second half of the show. So let's get this thing kicked off. What's your second topic?
Keenan Brugh 18:37
Yeah, the energy shock continues. I was looking. It was about three weeks ago. You guys were covering some of the latest diesel prices or crude oil prices. You know, we've all have been aware of what's been going on with first, you know, the Red Sea, but then also now Hormuz and everything with Iran. Now we're at an extended three weeks of 100 plus dollars per barrel Brent, and so it's not just a quick flash in the pan, turning around on one news and then the other. This is a little bit longer going, and something that won't come too much of a surprise to a lot of our listeners. But is important to consider that root cost goes on into all the refined products, whether it's jet fuel and diesel and everything else. Even less refined things like the bunker fuel and all that higher prices goes into higher costs of transportation. So, in addition to the uncertainty we mentioned earlier with you know China and Canada and trade relations, there's also higher prices here and in the near future for transportation, so important to keep an eye on. Companies are probably looking at how they can either absorb, pass on, or mitigate some of those costs that are coming down the the pike. Yeah, it's a it's. A lot, and there's some things moving, but it seems like the the oil in the Middle East will move some way. Then it stops, and they're speaking a tit for tat from earlier. There's all sorts of maybe an agreement, definitely not an agreement. And the latest sentiment I've been kind of seeing with U.S. and Iranian relations is that it's not likely to be settled in the near short term. I think it's kind of a certain status quo of tension and disagreements between now and at least midterms. I don't see a resolution happening before then. I suppose there could be a surprise. Never say never, especially if you want to be optimistic. But it seems like we're kind of in a quagmire of higher energy prices, and we'll be seeing the downstream effects of that.
Doug Draper 20:44
Yeah, yeah. Well, I know Cap Logistics does a lot of support in that industry, so you're seeing it firsthand with your with your customers. But the key thing on this one, in my opinion, is that we've seen you know 100 plus barrel oil, but it's gone up and gone down immediately, right? This is the first time in my memory that it's been sustainable. That it's been sustained, right? Like you said, it's been three weeks. Nothing's going to happen in the next month until midterms. That's going to be six weeks, maybe two months of this type of craziness going on. And so that, in and of itself, what does this? What does it look like in an environment that has sustained energy challenges and and and things that we're looking at? I was in California last week, and I think I filled up my rental car. It was like $7.50, just for me and and you know regular unleaded and and diesel is in $9 range out there, right? I mean, it's it's crazy. You and I could talk about the impacts, but I think gas is expensive. Diesel is crazy expensive, and it's going to be more sustained than it has in recent years. And I will see what that impact
Keenan Brugh 22:00
is. Absolutely. I mean, at least fortunately, the U.S. is an energy producer, and so to your point, yeah, we're definitely helping our customers keep the production up and running, helping with the maintenance and keeping everything going that way. There's still uncertainty as there's some political calls for maybe export bans here, or you know, there probably were discussions between Trump's team and Xi's team about LNG and other energy type exports. As you know, China being a big buyer of energy themselves, we haven't heard an announcement, but that could be a thing. I know Pete had also posted on LinkedIn about how you know a ban could help some costs here in the U.S. short term as the production that we have can't be exported if that does happen and lower prices, but there would be higher prices in the long run with that sort of stuff. So grateful that we have some energy, but it is a lot of changes and a lot of uncertainty. So, yeah, energy prices are are pretty high. A quick aside, kind of tied to the SpaceX. I don't know if you saw within the last week, not a full topic, but Tesla semi trucks are now going into full production. They had had some pilot stuff for a while, but they're starting to ramp up their production for some of the customers for the 18 wheeler type full truckload cyber trucks of semi varieties. So we'll see. I'll be watching that with great interest as well. You know, the earliest ones may not have the full capacity or different things. That's been one that they've kind of missed some deadlines in my recollection, they wanted those out years ago, but now in a higher energy price environment, and plus maybe their technological or production improvements in those years, maybe those could make more sense than ever before. That being said, I think that's kind of on the edge and fringes that won't be replacing the vast majority of transportation anytime soon, but something to keep an eye on.
Doug Draper 24:04
Yeah, yeah, I saw that article as well. I think they said that the entire production a human doesn't touch it, right? The whole thing is automated, and I think they said that the cost of those EV trucks was around 300k, which he doesn't seem crazy, but I've never bought a I've never bought a semi, so so I don't know. But anyway, that's a good adjunct to the topic. So Keenan, for my last topic, I wanted to ask you: Is it too early to to to start talking about holiday trends with retailers and consumers.
Keenan Brugh 24:42
It is not too early. I think you stated it correct earlier. It's never too early. I mean, our household and neighbors have already put up some Halloween decorations, and obviously, people retailers bringing things in for the first holiday of Halloween and. And ongoing into Thanksgiving and Christmas, it's begun. So it seems like from just looking at some of the NRF numbers, it's expected to be up and higher this year than previous before. But what are you seeing as far as trends, or what comes to mind when you're thinking about holiday trends?
Doug Draper 25:20
Yeah, yeah. So I wanted to break this into like what a retailer's perspective and a consumer's perspective, right? So kind of like post COVID, when there was insane amounts of inventory after everybody went from a consumer environment to an experience environment, Peloton I always say is the greatest example of that, where people just literally in in a 24-hour period decided to stop buying stuff and experiencing stuff, which left a lot of inventory on the table, so to speak. So I think that there's going to be less inventory and and bets on what will sell and what won't sell. So basically, leaner inventories, not necessarily less inventory, but leaner, and really utilizing AI to say what is selling out there and where do we need to position the inventory, because at the end of the day, they don't want to have a whole bunch of stuff left over after the holiday season, right? Especially if you're financing inventory with the other aspect of of the interest rates and the cost of money in general, so I think that's number one, and number two, I think that to your point, we're going to start seeing sales in October. I think when when Prime Days hits in a couple of weeks, that's kind of the start. You know, before it was Thanksgiving, now it's like Prime Days, and they always haven't been October. From a computer or computer from a consumer's perspective, the one thing that I've heard is that people are going to use this opportunity on Prime Days and and the the sales and stuff for Q4. It's like, hey, I need to give my uncle Bob a Christmas gift, but you know what? Stuff's so cheap? I think I'm going to load up on toilet paper and things that I need because it's on sale. Because normally buying this this consumable that I need on my day to day life is less expensive now. So I think some of the buying numbers that we'll see, X number of dollars spent, billions this, billions that could just be regular stuff that humans humans that people are buying to go about their daily lives, and then I think the consumer has a little bit of a dance to do to say, how long do we wait because we know there's a sale, but do we wait too long and find that it's sold out because the retailer is trying to manage their inventory level. So I think there's a sweet spot. I think people are going to be trying to play that game a little bit to say, I'm going to wait, I'm going to wait, I'm going to wait, but not too long because if I wait any longer, you know, the blue powder jacket I want for skiing is no longer going to be available. So I think it's going to be a little, a little bit of a game there, but anyway, those are my couple of thoughts related to: Is it too early to talk about holiday season discussion?
Keenan Brugh 28:09
Yeah, definitely not too early. And one of those holidays, kind of like Prime, you reminded me Cyber Monday will be one of those coming up after Thanksgiving and everything, and computer parts are still very expensive. I'll be curious to see if there's any good deals or some prices going down. But with all the AI and data center buildouts, I mean RAM and drives and GPUs, everything's been going up and up, and that includes just whole package computers as well. So things are kind of kind of in demand there. I'm sure a lot of the manufacturers are releasing new models and trying to produce more, but at least for me and my Christmas wish list, things are more expensive than they would have been in years past.
Doug Draper 28:55
Yeah, interesting. I'm sure we'll have more commentary on this in the future on future shows. But for this show particular, Keenan, I think we're going to keep it under our 30-minute target. And I want to thank you for joining us. Global trade happens regardless of who's in front of this camera, and we always appreciate when you can jump in when Pete is doing whatever Pete's doing. So thank you for that. We want to thank Camp Logistics and all the things that you and your company does put this show on every single week, so thank you very much. And if it's happening global trade, we will be talking about it next week on global trade this week. Thanks, Keenan. Really appreciate it, brother.
Keenan Brugh 29:35
Thanks, Doug, and thanks for everyone listening. Have a great week.
Doug Draper 29:39
All right, see you.