Global Trade This Week – Episode 258
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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 to Global Trade this week. I'm Pete Mento. With me is the greatest co-host in the history of serialized weekly global trade programming, maybe the only one, Doug Draper. Doug and I, as you can see, same wardrobe department. We went straight Johnny Cash for today's show.
Pete Mento 0:25
So Ring of Fire, you know, it's all it's all going down today. Doug, how you feeling?
Doug Draper 0:31
Good. I appreciate that. Yeah, Johnny Cash, Ring of Fire. I always come in the day we tape the show. I'm like, okay, I got to wear some dark shirt, so I'm usually behind this thing, and and I'll bleed into the wall visually if you don't have a dark shirt. But yeah, I just noticed that, my friend. So good deal. I don't have any tats on my arm, so I guess that's your right arm, right? So I'll have to worry on that.
Pete Mento 0:56
Is it time we go and get some some tattoos, Doug?
Speaker 1 1:01
No. No.
Pete Mento 1:01
No. You don't want to get. to get the Kansas Jayhawk somewhere on you?
Doug Draper 1:05
No, no. That's just anyway. That's a whole nother story about tattoos. Hey, I'm from the Midwest, so what do you think? You think I'm a big fan of tattoos or not a big fan?
Pete Mento 1:14
Probably not. I can't imagine Doug's a big fan of piercings and tattoos. I can't imagine. No.
Doug Draper 1:22
Yeah, yeah. Very true. Very true. So, well, we got a lot of stuff. Yeah, we got a busy. This was
Pete Mento 1:28
the first topic, buddy. It
Doug Draper 1:29
was a busy day, or it's gonna be a busy show. So, hey, dude, like diesel prices are at an all-time high. I've heard 582 and 585, something like that. It was June of 2022 when it was this high. Crazy stuff, and obviously the the top headline is, "Hey, everything moves on a truck or a train or a plane, and so everything's going to be more expensive. The shoes you buy, the food you eat, but the interesting take on this one, and I'm jumping into your expertise here in a little bit. But like the Federal Reserve, this is like the next level, right? Shit is expensive. I get that; it's obvious with the fuel. But the next thing, and I think I made comment, it's like the turbocharge of the impacts of high diesel prices, and that the Fed's still trying to make things affordable. And I heard just this morning that they're thinking about raising the rates, right? And initially, Pete, I kind of am somewhat educated on this, and not so much as you, but so I kind of had to dumb it down a little bit, right? So my initial take was, hey, if people are slowing down, right, things are expensive, so I'm going to slow down. I'm not going to buy a whole lot, right, because the prices are high. That's kind of what I'm saying. But the Fed's take is, hey, I get it, right? But if we make the interest rates lower, then you're going to spend more money, which is going to push prices up even higher, right? So it seems kind of obvious whenever you break it down and and simplify it for my simple Kansas mind here. So, hey, we may be sacrificing economic activity now, but it's for the betterment the betterment of the cause, so to speak, but what that means for trade, you got higher costs, higher interest rates. The U.S. needs to borrow money to make products. Oh, by the way, the products are more expensive anyway, and it makes our exports less competitive, and people just buy their stuff from somebody else other than America. So my point on that one is that, yeah, food is higher, gas is higher. The things that you and I wear, our Johnny Cash shirts, are going to get more expensive. But the Fed is taking note of this, and I think that's the bigger tell in this story. So I don't know what's your take on my my comments right there.
Pete Mento 3:59
Doug's economic comments for global trade this week. I love them. They're actually kind of they're actually kind of correct. So we're in a real pickle here, buddy. We're in a real pickle. If we raise rates, which comes from inflation, which comes from things like tariffs and the incredible cost of fuel, if we raise rates, people aren't going to borrow as much, and then the dollar ends up losing some of the potency that it has. We lower rates out of nowhere. People are going to start buying and selling houses, which would be great for the economy. But at the same time, when they do that, you know you're you're lowering your rates. The housing market goes bananas, but it doesn't really impact things in a lot of good ways for anyone else except credit cards. So then, what are people going to do? They're going to have lower interest rates. Maybe they'll spend more crap with their credit cards, and that in turn inflates prices. We're in a really tough place. There's not too many levers that we can pull that would feel magically better right now. And playing with those rates isn't one of them. There's a guy, a good friend of mine named Tim Long. We went to Maine Maritime. Together, I saw him on Saturday. He works for one of the major oil companies, and he said something that I think people need to hear. You know, it's not an oil problem; it's a capacity of refining problem. We can find the oil; we just can't seem to turn it into diesel quickly enough. And diesel is in a crisis. So right now, we don't really have an energy problem as much as we have a refined energy problem specifically to diesel, and that drives the cost up of everything, of everything. So you know, Doug, I for someone who doesn't study it, you did a very good job explaining it, and I think we have not seen the worst of what will happen. I think someone I read this week we're at 97% capacity right now for a fighting, and it's just getting worse and worse and worse. And the types of oil that we can get from some places don't really work that well to be turned into finalized finalized distillates. So distillates. So it's just a problem that eats on itself. It's not good.
Doug Draper 5:54
Yeah, yeah. It's just kind of the next level. Like I said, people complain about food, clothing, all that kind of stuff, but when the Fed starts flipping buttons, right? That impacts that. That's the turbocharge effect I was referring to. So, all right, what do you got? Topic one.
Pete Mento 6:11
Well, let's talk about trade, baby. So on Friday, because it's always Friday afternoon. It's never like, you know, Tuesday at 12 o'clock central, it's it's always the middle of the afternoon on a Friday. President Trump comes out and says that he is going to stop trading with countries altogether that we have a trade deficit with. They're not going to do it, and he went off on a screed about it. And you know, I was very happy that I'd be spending my Friday night killing Coors Lights after I read that because it was it was a lot. It was just such a wrong-headed idea. First of all, deficits with some countries is a good thing. There's that. Second of all, there are all kinds of products that we cannot get literally anywhere else where we have nation. We have deficits. So to do that would make what you just talked about even worse. Now there'll be even greater shortages in supply and demand of things that we can't get a hold of, and it's going to slow down manufacturing capacity. When that happens, people lose their jobs. When that, I mean, it just keeps getting worse. The only thing that would really help the economy right now is if we stop screwing with all these other nations, bring the tariffs back to where they were, which probably isn't going to happen. But long term, long term, 1015, 20 years from now, if we have the capacity to be strong enough will to stick with what we're doing, yeah, that'll pay off down the road. But you don't get reelected to office by holding people into austerity, and no one's ever put themselves in debt to get rich.
Doug Draper 7:43
Yeah. So the the the thought on that is all right. If we stop purchasing from certain countries, can we can we pivot fast enough, produce it ourselves at a price that America is willing to pay, or do we buy it from another country, or do we go without to your point where we literally cannot buy this widget or this mineral that goes into making this thing that is uber important to us, like right here, right. So it's an interesting headline on a Friday afternoon before you start pounding Coors Lights, but really not buying is not an option, right? So it's I don't even know what to think about that comment, and I'm sure it'll fade off into the distance here in the next couple of days.
Pete Mento 8:33
Go ahead and read my LinkedIn comments because people have a lot of things to say, and normally I just delete anything political. Like I'm letting this one go. I'm I'm letting this one go. You guys want to vent about it? Have at it. I'm okay with it.
Doug Draper 8:46
Like it. All right. Well, we'll check that out on LinkedIn. We're also going to check out halftime because that's brought to us by Cap Logistics. Pretty decent transition there, I would say. So for myself, is when Pete and I get to talk about whatever the heck we want to talk about. We haven't been together for two weeks, so you're unbuckle your seatbelts for this episode. But we want to thank Cap Logistics for making this show happen every single week. So I don't know, Pete. You want to go first? You want me to jump?
Pete Mento 9:15
Yeah, sure. So because you know you're on you're online and you're looking at stuff, you see some really crappy things, and now in 2026, you say to yourself, "This has to be AI, right? This can't be real. This can't be real news story. Well, I found a real news story, and it's a weird one. They're building robotic miniature cockroaches that they can release hundreds of them into a disaster to identify survivors. So I'm going to say that again for the people at home. We have built fake cockroaches. Why cockroaches? Because I guess they're very resilient, very good at digging, getting through things. And those fake cockroaches have some sort of sensors on them, and I guess cameras, and they go into the rubble of an earthquake or that mudslide that we just had a few a few weeks ago, right? And they look. Survivors inside of that, with all the technology and all of the know-how and smarts in the world, Doug, it was someone's job to say, "Let's build a robotic cockroach for emergencies. I just think we live in a simulation. Things cannot be this weird and not be on purpose.
Doug Draper 10:15
Yeah. Well, I guess nature built the best four-wheel drive machine. I guess they just throw little backpacks on these things and let them rip. I don't. My question to you is like, what are you reading to see these crazy headlines pop up?
Pete Mento 10:32
Ah, mostly Twitter. You know, when I'm reading Osnet news, and then something comes up to those researchers in England and build the one. I'm like, oh, really? And I check out. I'm like, that can't be real. And then before you know it, I'm 15 minutes into proving or disproving something stupid I saw on the internet.
Doug Draper 10:48
Yeah. All right. Well, I guess my nonsense comes from Reddit. So my wife pokes fun at me, like, get off the death scroll on Reddit. I'm like, there's some good stuff here. Cool. All right, man. I'm jumping into halftime, and some of our viewers that may not follow this show all the way back for our 250 some odd episodes is of the two of us, I'm the one that went to Burning Man about a decade ago, and Burning Man just ended this past weekend. So I wanted to do a quick Burning Man recap, right? So first of all, here's the backstory. 1986. These guys were in the beach, San Francisco. Some dude was just like, "Hey, let's burn an eight-foot man. So they came down and did it. Called some buddies. About 35 people were there. That tradition happened for another four years, and then the cops were like, "Hey guys, you can't burn anything here on the beach. You got to get out. So there was this group, and I'm going to hope I'm going to pronounce it correctly, called Kuka, Kukophony, right? Like Symphony, but Kukophony. Anywhere, a bunch of like hippies and artists and stuff like that had made this trip called a zone trip out to the to the desert of Nevada, and they're like, "Hey, we know this guy. He's been burning these people or burning this wooden man for your. Let's just take this thing to to the desert of Nevada, and everybody else bring your art and your symbolism, and let's do this thing together, right? So that's how the whole thing got started, and that's why it's now in Black Rock City and the 400 square mile radius out there. So, anyway, you've probably heard about it that it's getting too corporate, the whole nine yards. But back in the day, it was kind of like a do-it-yourself. Just bring your crap out here and build some things, and let's burn everything together. Now it's totally institutionalized. To build Black Rock City is like $60 million, right? All the young kids aren't coming anymore. I think the percentage of 30 unders was like 12% where the the number of 50 plus was like 30 some odd percent. So it still has its its kick and its its draw, but it's no longer a kind of a do-it-yourself counterculture. Then it would turn into something kind of cool, and now it's almost jumped the shark, where tickets can go up to $3,000. It's just being priced out, and it's a bunch of tech bros that fly in for a short couple of days to say they were there. And I think there's, you know, some of the articles I've had is it's what is the next evolution of Burning Man, and the true burners are kind of bailing out on it's just too gosh darn expensive, and the counterculture aspect of it is no longer there. So I don't know what's your read on Burning Man. I'm sure I saw you. I'm sure you saw some articles about that.
Pete Mento 13:44
Yeah, Burning Man is silly. It's it's a silly, silly thing. But there's a lot of silly things that are fun, and you know the idea of going out in the middle of the desert with a bunch of people and sort of not having any rules and being ridiculous is probably a lot of fun. It's not not for me, dude. Not for me. My fun needs to include refrigerators to keep beer cold and comfortable toilets and yeah, just not not for me, man. But I get it, right? It's wild and lawless, and every year you go and you get your wild and lawless trip in and you go home. I think it's fine. I just it's just not for me. It's not for me.
Doug Draper 14:18
Yeah. Well, sometime off off show, I'll have to tell you. So my, I'll get tell you the details. But my trip was in one of the camps that was right on the playa. So think of the semicircle, and everybody that's on the playa has to have some kind of shtick that goes on. And ours was a stilt bar, so you had to have a stilt bar, and you had to serve alcohol and do all kinds of stuff. And then there were these people from Cirque du Soleil that somebody hired and did all that. So my camp was probably 75 people, and they served lunch once a day. They had showers, porta potties, and a whole screened-in area that had couches and and and rugs and everything else. So my. Experience of living in the back of your car on row Z, trying to manage it. I was kind of front row and and maybe exasperating the whole thing I'm just talking about. But yeah, I don't think I'd go to Burning Man again at all. But if I did, I'd have to be.
Pete Mento 15:20
I would need to have air conditioning done, and I don't think that's something that's normally operating.
Doug Draper 15:25
No, no, no. So anyway, all right. So there's the halftime. Let's get back to the show. Topic number two. I guess I should go right to keep things moving in the right, the right pivot. So I was trying to think, Pete, that Tariffs, trade, all kinds of other things. Like, what topic is out there that would be somewhat unique that is not related to all of those things? And kind of what popped in my mind, and I did a little bit of research on it, was shipping containers, ocean freight containers, and how they're getting smarter, right? And how that impacts decision making, right? So it's not novel per se, but you can deal with where's it located. What's the temperature of the container? Is there any humidity in there? Has there been any shocks or drops, right? And so I think that's really cool because the real time visibility is kind of like when you order a package from Amazon. For a while it was like two days, two days, two days, which is still important. But just tell me where it is, right? As long as I know where it is, then I can set my expectations, or be home for this, or tell somebody it's coming around, or know that I need to get back home this afternoon to grab whatever it is that I ordered. So that quick visibility, I think, is a lot of what people want, and the visibility will give you the ability to say, "Hey, we got a an order that's coming in because we need to hit it for fall season. It's going to be delayed. I get it. We can beat up our freight forwarder to tell them to move it quicker, which may or may not happen. But at least I can make a decision about what I do when I know my container is going to be two weeks late. So that decision making is pretty cool. The other two things that I thought about was like, who owns all the data, right? Is that a third party that comes in and then sells it, kind of like an import Yeti, or is it the steamship line? Is it larger freight forwarders? And then the last piece on this one was the security and theft. So just imagine if you and I had this theft ring going on, and we were able to identify what's in the container, where is it exactly, and what are the vulnerability points as it moves to the supply chain. So, anyway, I think it's pretty cool. Doesn't really get a lot to talk about, but that visibility is out there now, and I think it's great for decision making, Inventory management and making sure your business stays afloat. So, anyway, have you heard about any of the smart containers or have any experience with them? Yeah,
Pete Mento 17:49
yeah. Smart containers have been a thing for quite a while, but they just keep getting smarter and less expensive. That's what's awesome. Is this stuff just keeps getting more and more technically advanced, and the prices of it keep adjusting downward, so it's it's it's finally starting to hit a real stride here. But when you deal with the pharmaceutical companies, the medical device companies, they're big on it, and you hear a lot about it. But the adoption of it by companies that maybe have less expensive stuff in there, because it's finally hitting a price point where they can actually afford to do it. I'm surprised more insurance companies don't require it for certain value of container or that they don't require it. But organized cargo theft is a real problem right now, and anything that you can do using technology, because you're not going to be next to that container, can't have someone ride with it. I mean, you could, but the likelihood of being able to have people riding with this stuff is pretty low. So whatever you can have for that visibility, the cheaper and cheaper it gets, the better it is for everybody.
Doug Draper 18:46
Yeah, I think people riding with cargo is called human trafficking. Thank you. I was waiting. That was a joke. That was a joke, and I'm glad that you at least had a respectful laugh. So anyway, all right, my friend, bring us home.
Pete Mento 19:05
How many years you've been doing this? I tell you all the time. Leave the jokes to me.
Doug Draper 19:08
Okay, that actually that was a pretty good one that I just thought of, like in the last five seconds when you were making your comment. So I think that one was okay.
Pete Mento 19:17
All right, bud. Right, take your W. Take your W on on getting kind of a joke in there.
Doug Draper 19:21
Thank you.
Pete Mento 19:24
All right, last topic for me. It kind of goes with the first couple ones we talked about. Companies are starting to re-question whether or not they should be making major investments in NAFTA countries. It was kind of a no-brainer, right? Build manufacturing in Mexico and Canada, take advantage of the rules, import it to America. This huge market. Well, now people are starting to hedge their bets, and maybe we shouldn't put a whole bunch of money into a factory now. Probably gonna do it in America because labor's too expensive. So you know, all this wrangling with Canada and Mexico is actually having the opposite effect, where people are saying we're not going to near short, we're not going to French short, we're going to find the cheapest place that. Think long term we'll be able to make this stuff, and the big winner is India. That's where most of the stuff is going-not Mexico, not Canada, India. So I would venture to say, my friend, that I think a part of the legal wrangling we've been going over with regards to beating up on Canada and Mexico every couple of days is having the exact opposite effect than what we actually wanted to have.
Doug Draper 20:21
Yeah, yeah. If I was a large, the leader of a large company and organization, I'd be like, "Listen, I'm trying to do the right thing. The incentive for the USMCA and and and NAFTA back in the day is you wanted us to come home. Okay, I'll do that. I will make the investments. It doesn't happen in 24 hours, it doesn't happen in 24 months, right? It's a strategic long-term play. And if I was a large company, be like, "What? What the hell's going on? I'm trying to do the what was what the two trade agreements were designed for, the USMCA and NAFTA, and now it's too volatile. And I'm just going to put the brakes on. The other piece is when things go to India or another country. Is it just China with a new address, right? Like, how are we monitoring the stuff that came from India? Now I know the technology, and we've spoken about this in the show. Technology's gotten much much better, but is it just another way to have have the Chinese manufacturers have a different address for for point of origin. So
Pete Mento 21:26
that's what's going to happen, Doug. I mean that. So that's why customs is on this you know holy war right now of wanting to ask importers for the export documents and the export domestic commercial invoices for that very reason. They know what's going to happen. I mean, we know what's going to happen. These suppliers are going to say it's less expensive and less less of a headache to just ship it to a second party, do minimal things to it, or maybe nothing at all, and just repackage it and send it to America. We're going to see a lot of that, but I think customs this time is going to catch a lot more people, and it's going to make them think twice about whether or not they want to want to do that with their time and money.
Doug Draper 22:00
Good point. Good point. All right. Well, that brings us to the end of this week's edition of Global Trade this week. Pete from a lovely hotel, as always, somewhere in Dallas, Texas, and I am in a box. Literally, looks like a phone booth in the great city of Steamboat Springs. We want to thank all our listeners every single week for joining in, and if it's happening in global trade, mr. Pete Mento and myself will be talking about it week after week. Pete, take care of the heat and and good show this week. Thank you, sir. Thanks, everybody.