Tariffs and Turmoil: Flexport CEO Ryan Petersen on What Trump Is Thinking, And What Comes Next

Channel: Alex Kantrowitz

Published at: 2025-04-07

YouTube video id: bEoDjoVLzZA

Source: https://www.youtube.com/watch?v=bEoDjoVLzZA

What's behind Trump's tariff push and
where does it go from here for tech and
the rest of the economy? It's tariffs
and turmoil coming up right after this.
Welcome to Big Technology Podcast, a
show for cool edited nuance conversation
of the tech world and beyond. We have a
special report for you today and
emergency podcast covering everything
that's going on with tariffs from the
arguments that the Trump administration
is making to the impact on shipping
today and the changes that we're going
to see with the global supply chain. and
then we'll also talk about tech stocks
at the end. We're joined today by two
great guests. First off, we're going to
have Ryan Peterson, the CEO of Flexport,
and then to talk about tech stocks, Adam
Parker of Tvariat Research and a CNBC
contributor is going to be here towards
the end of the show. We're going to
cover why Trump is doing this, if it's
likely to succeed, when he might blink,
what it means for the tech giants,
including Apple, Amazon, Google, Meta,
Microsoft, Nvidia, and Tesla. So, let's
bring in Ryan. Ryan, great to see you.
thanks for coming on on short notice. Uh
yeah, my pleasure. So, you right now, I
would say, are the most soughtafter tech
CEO. We appreciate you having uh the
time to come and speak with us here at
Big Technology. I just want to pick up a
conversation that you and I have had uh
in the past, which is about uh the
merits of globalization. You remember
you were on the show a couple months,
maybe a year ago, and I said, "You still
believe in this globalization thing?"
Because it had been taken uh some heat
uh with uh the politicians and you're
like, "Yes, definitely. No doubt." Well,
I got to sell my own book, man. We're
Flex Word's mission is to make global
trade easy for everyone. So, it's our
mission became more important this week
is it's become harder and so we got to
work even harder than ever. Definitely.
So, let's just talk a little bit about
what the White House So, to me, I've
spent like a good chunk of the weekend
trying to understand what is going on in
the minds of those who are behind this
policy. And I think we should just talk
a little bit about what the White House
is is trying to do. Um, and then we can
get into the merits and we can get into
what the long-term impact uh might might
be. So, I think the first thing that
they're trying to do, I'll diagnose the
problem, then we can go into some of the
solutions. The first thing that they're
trying to do is basically seems like
they're trying to rearrange uh the
economy. So, this is from Finshots. uh
Finchots, this article says, "Past
economic policies favored the top 10% of
of Americans or those wealthy enough to
fuel spending and drive consumptions,
but the bottom 50% haven't gained much."
So, while everything might look great on
paper, in reality, half of America could
still be struggling. And so, what it
seems uh like they're doing right now is
is they're trying to change the United
States from a consumption economy to a
production economy. and they don't
really care, it seems, at least in the
time being, what it does to the stock
market. This was Secretary uh Tre
Treasury Secretary Scott Bessant on
Tucker Carlson this past week. The top
10% of Americans own 88% of equities,
88% of the stock market. The next 40%
own 12% of the stock market. The bottom
50 has debt. So what they're trying to
do is basically rearrange the system
that has been brought about by global
trade uh and try to make it fairer for
the for more people in the United
States. Um what do you think about that
perspective, Ryan?
Do they have a point? Sounds good. I
guess the the problem, you know, is
where rubber hits the road and what's in
reality, you know, the global free.
There's there's a million arguments for
why manufacturing would be
good be great. We could do more
manufacturing. Uh the reality, however,
is that manufacturing requires inputs
that may come from other countries,
machinery that comes from other
countries. We're a, you know, behaving a
little bit like a guy who's hasn't been
to the gym for 40 years and says, "Hey,
I got to get in shape." The doctor says,
"You got to get in shape." It's obvious,
yeah, you have to get in shape. Start
going to the gym. But you don't go there
and start deadlifting 600 lb and trying
to run a marathon on the treadmill. You
might you might die. Like you got to
ease into these things and and kind of
such a shock makes it very very
difficult to adapt. Um, so that's for
one is just like the way this is
implemented is is probably going to be
unsuccessful. But on top of that, we
just know from there it's like very
clear economic theory that globalization
that free trade benefits both parties.
You don't engage in it if you can't. If
anything, the thing that's caused
problems in the US is our status as the
world's reserve currency, which has
allowed us to be rich. Uh, allowed it's
made demand for our currency much higher
than it would be otherwise. countries
that kind of have to buy our currency.
That makes Americans much richer. It
makes it easy to buy goods from other
places. And uh it's sort of an awesome
thing that we get to be rich for it, but
it does have its second order
consequences that manufacturing doesn't
make sense if you can buy stuff from
other countries that's so much
cheaper. Maybe tariffs are the path
around that. But the reality is, having
talked to a bunch of companies that are
in active active planning mode on
building factories, they've actually
paused that right now because all of a
sudden the machines that they have to
buy are going to cost 20 to 50% more
depending on where they're being
sourced. And they just the economics
don't work anymore. And you know, it'll
take time for the you have to also have
that machine made in America. Okay. But
like if it's not, what do you do? You
have to stop your plan to manufacture.
So, okay, it can go on and on about
about this. I'm I'm very firmly
anti-tariff. It's bad for my business.
So, you know, I'm selling my own book
again, but uh there's plenty of economic
theory from Milton Friedman onward to
just show you Adam Smith, everybody else
is show why free trade is benefiting
both sides. Yeah. But okay, here's
here's what the argu I'm going to just
try to channel Besson here. At least we
should have his perspective represented.
So what he says is that the United
States basically the economy has grown
into this consumption economy. Uh
they're addicted to Americans are
addicted to cheap goods. We're
cluttering our homes with stuff from
Amazon and you know while we're buying
we're not producing anymore. What do you
think about that? Yeah. I mean I hope
that they're factoring in the export of
digital services, financial services.
You know, Netflix, for example,
generates 60% of its revenue
internationally of 33 billion of
revenue. Like, if you're not counting
all the Netflix exceptions in these
other countries, you're not actually
modeling the modern economy and the and
the trade balances. I mean, that's
ultimately trade. They're buying our
services. So, I don't know how they're
doing it. If they're just doing physical
goods, I think you're coming up short.
You know, Cambodian's probably not going
to buy a lot of American manufactured
goods, but I bet you they pay for some
Facebook and Google ads and Tinder
boosts and some other stuff. So, you
know, the American economy is much
different than it's not some like
Charles Dickens industrial world like we
we have very advanced services that uh
services economy and if you're not
factoring that in, I think you're going
to get the model wrong. Yeah, it is
interesting how tech has been uh both I
think maybe not accounted for enough by
the administration here and then also
like firmly in the crosshairs of the
countries that are thinking about
retaliating. We're going to get into it
in a moment, but since you brought it
up, I mean, one of the things that's
Europe is considering for instance to
retaliate is to uh provide uh greater
restrictions for American technology uh
that is coming into the continent and
not going one for one necessarily on
production, but trying to get the
digital services uh to feel the pain.
Um, I'm curious if you think that's
going to be effective and what you think
it means for the uh tech CEOs that
basically um celebrated Trump's
inauguration and sat there basically
closer than uh the Vances.
Yeah, it'll be very interesting. You
know, even Elon's kind of distancing
himself on the tariff issue. He's been
posting Milton Friedman videos and
saying, you know, being he's he's quite
anti- tariff and pro- free trade. Um, so
I do think you're going to see a split.
I've seen it amongst my friends who who
supported this administration and then
are now really I don't know that they're
willing to turn against the
administration, but they're certainly
against the the tariff policy and how
it's been implemented. And it feels a
lot like central planning. It feels a
lot like um sort of putting your head in
the ground and imposing things that just
don't have any ground in economic
theory. And the tech industry will be
the natural place to target. It's our
best industry, our best companies. And
if you wanted to retaliate against
America, that would be the place to hit.
So hopefully hopefully I think I do have
some confidence that this will get
resolved. There was this rumor earlier
today. I think we're going to drop this
today, but uh earlier on Monday where it
said that uh they had agreed to a 90-day
pause. Yeah.
Turn out to be false, but it said the
S&P surging and NASDAQ. Um I I believe
there will be deals cut. I don't know if
in time to pause the tariffs alto
together but um and I believe that
because a cabinet secretary told me that
there would be a a p a negotiation I
should say not a pause but he said the
two weeks ago that this was the start
and not the end of the uh of the process
that they want to send a message to the
world's countries that they mean
business that America's in his words
tired of being taken advantage of but um
and then they expect companies to come
to the ta countries to come to the table
and we've seen that now over the weekend
they announced that 50 different
countries have come to try to negotiate.
The EU just said they would take tariffs
to zero uh to get a deal done. So if so
is India I mean these are countries that
have had pretty high barriers to US
goods. Now tariffs aren't the main
complaint. If you listen to I do
recommend people watch the
administration's
um you know content that they're putting
out. I thought Lighheiser's video uh
recording with Tucker Carlson, he did a
pretty good job of making his case or at
least so you can understand what the
case is. Um and their argument is really
it's not just the tariffs that these
other countries put up, but it's the
non-tariff barriers, industrial
policies, subsidized
credit, straight up manufacturing
subsidies. They get free land or free
buildings. Um they get uh they may get
repressed organized labor. That was a
big part, you know, in Korea's rise.
They made the six day work week
mandatory and banned labor unions and
you know and environmental laws. They
don't we have much stricter
environmental laws. So there's all these
other things that they're saying hey
these are making America uncompetitive
that and the and our retaliation against
that is tariffs and and so it's not just
that they're trying to get equal
tariffs. That's why they have these
reciprocal tariffs that were have
nothing to do with the actual tariffs
these people charge us. Uh and that's um
a bit of what they were getting at even
if in fact it was implemented with a
really silly formula that had nothing to
do with that even. So yeah. Okay. So
that's really interesting. So it's both
the attempt and I'm just like we have to
try to unpack the intent here to sort of
understand what's happening. I feel it
seem like a lot of analysis that has
just been like this is crazy and you
know look maybe it's not advisable but I
think it's worth an exercise of trying
to figure out what they're trying to do.
So the intent seems to be both to bring
manufacturing back into the United
States in some way uh and then also for
US exporters to try to get them on more
fair footing so that they're able to
export their goods. I mean there might
not be a huge market in Cambodia but
there certainly is in Europe that well
so I think there's at least four things
that they want to achieve with this. Um,
one we've already gotten to a little bit
is, hey, they'd like to negotiate lower
barriers, including tariff, but all
these other barriers that I just
mentioned, so that US exporters can be
more successful. Two, they'd like to
have manufacturing in the United States
as a really, it's a national security
thing that in a time of war, you know,
your car manufacturers become your tank
manufacturers and and and and everything
else down the chain. So, if we don't
have manufacturing capacity, that is a
national security threat to us. Um third
is we have a massive debt crisis in this
country and they would like to raise
revenue. You know these tariffs would be
very significant um generator of revenue
if if nothing changes. Um and uh and
then there's something too like
culturally they want to see us be a
country that makes things and and
there's some element of that that in all
of this that they don't want to see us
be uh I don't know you don't want to be
that what's that robot movie Wall-E.
Well, these like fat people just
cruising around outer space and don't
know how to make anything or do anything
like they don't I don't think that's the
future we want for our country. I mean
then why why do you think that this is a
bad idea? I mean you just outlined their
plan pretty well. I mean I can got
understand if you can't this is like a
good rule in life is like don't argue
with anybody unless you can state their
position more clearly than you can. Yes.
And that's what we're trying to do here.
So what would your counter argument I
mean Ryan go ahead. You can debate the
administration that you just sort of put
their their perspective out. what's why
would you uh oppose what they're trying
to do? I mean these seems like they seem
like at least in the intent good goals.
Yeah. Um I think there are those those
are all reasonable things. The you know
the the short of it is again our modern
economy mo you look at how a Boeing
airplane is made and you know some
people have published some infographics
of these there are parts coming from all
over the world and that is an optimized
supply chain. It's a complex system. We
don't work in this simple centrally
planned model like the these there's a
very complex dynamic system and and you
have this sort of fundamental principle
of don't mess with things you can't
understand and nobody understands this
like across the broader economy. I mean
I bet you there's no one even at Boeing
who understands all the details of where
all these things come from. It's a
complex system that has evolved and been
put into place um through a many year
process. And if you overnight try to
upat that and say, "Oh, no. I need you
to do it this way." Like the reality is
those manufacturer, those component
manufacturers, parts manufacturers are
not in the United States. You cannot
source it. And so all you're going to do
is jack up the price of manufacturing
the airplane or anything else and
actually hurt the manufacturing like
you, you know, you're you're hurting
your own stated goals. Uh would be the
simplest way to refute this. um to say
nothing of you know actually uh
President Mle in Argentina has made some
very he's a free market economist if
there ever was one and he's and he's put
some some very clear uh and he's dealt
with the exact same things in Argentina
where he's been bringing down trade
barriers and those those trade barriers
may protect American jobs. Um now in our
case these jobs have already left and
we're trying to bring them back. So
that's a different argument but when
there are trade barriers they may
protect the job. So, let's say um you
you have a product, your local company
can produce the thing for
$600 and they can produce it in Cambodia
for $200. So, you say, "Okay, let's put
up tariffs to make the Cambodian product
cost $610, so everyone has to buy ours
in the US." Well, that extra $400 that
consumers had to spend on the local
thing, they would have spent on other
stuff. they would have gone to buy uh
travel services, hotels, other goods
from other companies and and that money
doesn't get circulated and generate
growth and demand for other things and
and or just end up in their savings
account to pay for their kids' college.
I mean, so you know, we don't live in
this simple world that where it can be
centrally planned. The Soviets tried
this. It's a disaster. You know, don't
forget the images of Boris Yeltson
coming to the United States, looking at
our grocery stores and and having his
mind blown by all of the the choice
available through the free market. So,
it's very dangerous to play with systems
that you don't understand. Okay. One
more thing I want to talk about with the
plan and then we can sort of move on to
whether this will stick and what the
impacts are even if it's rolled back
now. But I want to ask you this one more
thing which is that there's also a
conversation about this being about
refinancing the debt. So the US has $34
trillion in debt. 7 trillion of that
needs refinancing soon. Uh interest
rates recently hit
4.8%. The idea is to drive down the
interest rates uh you know basically by
uh killing the stock market and
therefore saving billions by refinancing
the debt. What do you think about that
plan?
It's kind of genius. I don't think I
don't know. I mean it sounds a little
crazy, but I do think we we have a
massive debt crisis. Like I acknowledge
that. Uh, and on some level you're a
Ponzi scheme if you just keep spending
more than you take in over a long enough
period of time and and it's compounding.
We're now at the point where, you know,
entitlements plus interest payments is
100% of the tax revenue and our taxes
are already pretty high. So that's
crazy. That is actually crazy. Yeah.
Yeah. Um, so you have you do have a debt
problem and tariffs will help with that
if it you know, so you either have to
raise income taxes, cut
spending or Yeah. raise taxes or cut
spending and tariffs are a form of the
taxes. So, I'm not I'm not saying you
have to have zero tariffs and there's
there I do acknowledge the points that
they have around industrial policy of
these other countries and I'd like to
see them use these tariffs to negotiate,
you know, free trade agreements around
the world and and reduction of other
types of subsidies for their local
companies and other things. So, all of
that's valid. Um, I'd like to see
government I like what they're doing at
Doge. Uh, I'd like to see more cuts to
waste in government. Uh, I don't know if
they can cut a trillion dollars. And
their plan was to cut, you have two
trillion dollar deficit. So, the plan
was to cut a trillion of spending and
increase GDP enough that taxes go up by
a trillion taxes or tariffs. And we'll
see if now that second half of that
sentence seems at risk. I don't know
that they're going to get GDP increases
at least in the short term. Right. So,
we we're looking now at these tariffs.
So 10% tariff across the board went into
play over the weekend. Now we're going
to see another all the bigger tariffs
like the extra 34% on China that's
supposed to go into play on April 9th
which is Wednesday. So Ryan, do you see
what's going to happen next is basically
the administration has announced these
tariffs and now they're going to go try
to negotiate with the other all the
countries on the list maybe except the
Penguin Island uh to try to figure out
like what an appropriate working
relationship would be and whether to
actually keep those in place or lower
them. Is that what the next week looks
like? I
think I I would give it like 70% chance
that that's what's going to happen. Not
not within the two-day, you know, they
didn't give themselves a lot of time to
negotiate these deals. So, it may go
live and then be undone. Now, remember,
it's um it's they did it April 9th based
on when the vessel departs at origin.
So, the actual that's when the clock
starts, but the duties will be paid.
These tariffs get paid when the vessel
arrives. So you got, you know, another
couple weeks uh before that so to
potentially to to avoid these tariffs
actually hitting. Um I I I give it like
a 70% confidence level that they
negotiate some deals. I think the China
tariffs probably stick. Um and I I
suspect what they're actually asking for
from these countries is for them to put
their own similar barriers tariff uh and
otherwise against Chinese trade and say,
"Hey, take two sides here. take the US
side or the Chinese side have it both
ways. I suspect that that's a big part
of the negotiation that's going to go
down with the EU and some other
countries. Um, and I don't know how
amendable people will be. I think a lot
of countries rather, if you're forced to
make that decision, you might rather
have access to all the great
manufactured products coming out of
China.
Yeah. Cutting China off is not a like a
simple ask. I mean, they do make so much
of the stuff around the globe,
especially for like developing world.
Like if you don't have a car industry
native in your country, you got to get
these Chinese cars. They're so freaking
good. They're so far ahead of anything
that the the West or even Japan and
Korea are making that like if you're in
Africa, you'd rather have some $10,000
amazing brand new Chinese car than you
would America. Well, I don't know. It's
a good trade. It's a good question for
them. You'd rather have an American
military base protecting you or uh or
Chinese cars? I'm pretty sure if if what
you're saying is is accurate that that
is the exact trade-off that they're all
going to be considering this week, which
is wild. I don't you know, again, these
are just like my intuitions. I've got a
little bit of conversation with some
administration folks, but I I don't
really know how it's going to play out
at all. Okay, so now the question is,
all right, let's say this negotiation
period does happen, the 70% uh you know,
possibility it plays out. Uh then what
are the risks? because uh we've already
seen the markets fall. They've down the
S&P 500's down 15% this year. It was
slightly in the green when we started
this conversation around what was
probably a rumor that there was going to
be a 90-day pause. Uh now it's back down
again. So, who knows? But the markets
are crashing. Um and this is from Brad
Gerson. The danger with shock therapy
approaches and complex systems. It's
impossible to model the negative
reflexivity. Ben Thompson also writes,
"The current economic system, flawed the
way we may now recognize it to be, is a
complex system built over decades. One
ought to be very wary in remaking
complex systems in a top- down manner.
There's a reason that new economic
systems usually arise after major wars.
It's easier to build something new after
the old thing has been destroyed. So
what are the risks? Even if the US
negotiates lots of deals that put them
in a better position to export and maybe
bring some manufacturing back home, uh
what are the risks that this could do
long-term damage and have unintended
consequences? I mean, there's massive
risk here is uh these the tariffs. I
mean, take for example Flexport's
customer base where on we're one of the
largest logistics providers in in the
world and we did on Friday a call down
for I mean we didn't get in touch with
all of our customers but we called a lot
of customers on Friday and they 28% of
them told us that they're pausing all
their ocean freight. All their bookings
are paused. Uh that's a massive I mean I
don't think I don't want to read too
much into that because it's a
catastrophe if it holds. A lot of what's
happened is these folks knew about April
2nd deadline for the last few months and
pre-ordered and they've they're well
stocked on inventory and they you know
they brought it in beforehand when the
tariffs were lower. So that's a lot of
it. The other the other half is they're
expecting like I am that some of these
countries will have deals cut and the
tariffs may come down. So that said if
it holds I mean you can already see it
from day one that's that's massive.
Business models are at risk.
um merchants on ecom, the ones that we
track of our customers have raised
prices of five to 10 percent already to
the consumer already already. Um and so
you're going to see even more of that as
these price as these actual tariffs flow
through the system and start getting
paid and cost of goods sold goes up. So
you'll have inflation.
Um and yeah, I don't know, maybe
interest, you know, the easiest way to
balance trade is to have nobody trade
with anybody. So, they might achieve
their goals, but it's going to make
everybody a lot poorer. Uh, let's say
they say, "Just kidding." Is there going
to be stuff that's happened over the
past week that is already irreversible?
Yeah. Psychologically, some lack of
confidence and um perhaps, but at this
point, you still have some time. It
hasn't even taken hold yet. So, and I
don't I don't think, you know, they
didn't give themselves enough time. So,
they could say, "Okay, let's we're not
we're going to pause." I I thought the
thing this morning was part of the
reason it went so viral is it was
credible. It would be like that would be
a sensible thing, a smart thing to do.
Yeah. Give ourselves a 90day pause uh
and then negotiate some deals and then
you can come out of this looking like
you got to win. Oh, actually we wanted
more free trade with Europe and now you
know we got them to drop these barriers
and that's a big win.
Um so there's still time for that but
every day that goes by becomes a lot
more difficult. And if you just look,
you know, the role of government is to
set the rules and define those and then
business got to find a way to make
money. So even if these tariffs hold,
it's like, okay, cool. Your job as a
business person doesn't change much.
Still the same as it was before. Go find
a way to make some money given the the
rules of the game. The challenge becomes
when the rules are constantly changing.
And they're constantly changing right
now by this administration. Every couple
days or weeks there's new
interpretation, new new rules, new stuff
coming down the pipeline. We have on
April 17th, no one's talking about it
right now, but they're in 10 days
they're going to impose fees on ships
made in China when they make a port call
in the US. It's going to totally
rearrange the shipping networks and make
ocean freight incredibly unreliable. Um,
so number one, that's coming down the
pipeline. So the rules are changing
constantly, and that's true with this
administration, but it also we have to
assume that there's going to be another
administration this party or back to the
Democrats. Who knows? But four years
from now and in two years you have the
midterms. Remember that under the
Constitution the president does not
control the tariffs. Congress does. The
only reason he's able to put these
tariffs in is because of acts of
Congress where they delegated powers to
the president under a national
emergency. So he declared an emergency
when doing this. Well, Congress has the
power to overrule that. But right now
it's a Republican controlled Congress.
So if he loses the Congress in the
midterms, which if all this holds, like
he probably he might. I'm not an analyst
of politics by any means, but look at
the market. He loses control of
Congress, he no longer has control of
the tariffs. And so if you're a business
person going, "How do I plan for this?
Am I going to set up my manufacturing in
a world where everything could change in
two years?" Like, no, you can't. So,
but do you think that the businesses are
basically going to wait it out? I mean
from the c you spoke to so many of your
customers and a lot of them are pausing
but do you think it's probably just them
saying listen this is not going to last
forever because congress could shift or
the president I'm not reading too much
into the pausing I think it's a few
weeks and then we'll start but broadly
what are your customers saying about
that businesses will have to pass
through the higher price the tariffs are
are that high they will have to raise
prices we're already seeing that prices
are going to go up even more uh and then
the demand for their products will fall
you know we just know that that's
economics 101 want if you charge more,
people buy less. And then it'll shift
consumption patterns to things that are
yeah, made in America or even if it's
just like not a manufactured good made
in America, you you got this you can
spend your dollar at a restaurant or,
you know, get a massage, go travel to a
hotel, like there's other things that
you'll spend your money on. Um, and that
will put these businesses at risk and
many of them are manufacturers. You know
the other thing that's happened I was
with one of our customers that does I
was at their factory a few weeks ago and
they said that this is an American
company manufacturers in Los Angeles and
they said that demand for their products
in Canada and in Europe has fallen off a
cliff because of sentiment about
America and so you're like even American
manufacturer who should benefit from all
of this is seeing that it's hurting
them. Yeah. I guess if you try to
rearrange the whole global trade system
and you take down all your export
barriers and people say actually we
don't really like Americans. We're not
going to consume your products anymore.
Then you've basically gone behind even
if you've won. We'll see. We'll see.
Complex. It is. So just reading through
what you're saying, there is no going
back at this like like basically you
can't wait it out. This is going to lead
to price increases. No. and and
companies will not be able to say we're
just going to like basically wait till
the cong next Congress comes or the next
administration. They're going to have to
all deal with it. You you know I met
with a customer had dinner with a
customer two nights ago and $150 $150
million is what they spend on their
product business uh enterprise
electronics $150 million of cost a year
and that's going up to 185. So it's an
extra $35
million. I don't I don't even know if
they make 35 million in profit. I doubt
it. So there just literally they have to
raise prices for their products. So you
think inflation, we're going to see
inflation.
Yeah. Yeah. You're going to see
inflation. Now the of the goods that are
imported for 100% certain um the US
relies on imports less than almost any
country in the world we're you know we
think it for manufactured goods sure
like on all the trinkets and Amazon
goods and stuff are manufactured abroad
but as a as an economy it's only 14% of
our GDP is imports um so that part of
the economy is going to have
inflation energyy's coming down right
they that's what they're celebrating
right now the price of oil's down 15% in
the last few weeks. Um price of housing
might come down if interest rates fall.
There's other there's other factors
beyond that. Um
so it it's it's a it's hard to say that
there'll be like I'm not a
macroeconomist by any means, but the
price of imported goods will definitely
go up. Okay, let's talk quickly about
what's going on with tech. Um, first
thing that we should talk about is this
dimminimous loophole has been closed.
That is the way to basically get a
package of some goods from Shien or Timu
ship from China and not have to pay
duties on them. So that's going away. So
I'm curious um hasn't closed yet. You
have until May 2nd to buy as much of
that stuff as you can duty-free. So how
do you see that impacting your clients
and what do you think it means for Shien
and Timu?
Um, well, we fly a lot of e-commerce
parcels in on our aircraft. We have
3747s that fly. Uh, there's a lot of
e-commerce parcels flying in those
planes every week. So, definitely a big
impact. Uh, it's going to crash the
price of air freight would be my
prediction. Um, I think it's possible. I
don't want to speak to those companies
in specific, but the model
generally the uh of ecom parcels flying
in from Asia. you know, the the tariffs
is one big part of their advantage that
not paying going duty-free, but there's
uh several others. You know, not having
to pay for expensive US real estate for
warehousing,
uh expensive labor on warehousing.
They're doing that at origin. Less
working capital, so the the goods just
like sort of just in time. You don't
have as much inventory sitting there,
not earning a return while it travels
across the ocean or sits in a warehouse.
their last mile costs are lower because
they're flying the plane into the local
region instead of trucking it instead of
going to a port and then trucking it
across the country. Uh so there's a few
other advantages that and then you know
their cost of goods. Remember these
duties are on the cost not on the final
price, right? And a lot of these
companies are just like really good at
sourcing goods very cheaply uh in a way
that may overcome it. So I I I uh it
remains to be seen, but my suspicion
from having analyzed a few of these and
working with them is that the companies
will keep keep going and just have to
pay the duties. Yeah. And bigger picture
tech has been hit hardest uh out of
everyone here. We have like the entire
Magnificent 7 is in correction
territory. No, bare market territory 20%
down or more. Why do you think tech has
been penalized like this? I don't know.
I'm not I'm certainly no Wall Street
analyst. I I only own one one stock and
that's okay. But I I'll break it down
for you. I mean, but so we talked a
little bit about shipping, right? So
that's probably going to hit Amazon as
well. Um they import like the increased
cost of goods coming in from China. Then
you have advertising, right? I mean
Meta, Google, Amazon, they all make a
lot of money for company from companies
advertising Chinese goods. So that will
take a hit. Data center construction,
right? I guess everywhere you look
somewhere in tech, there's there's a
risk. And then what we talked about
previously just like the EU uh
potentially saying okay we'll let your
stuff come in but we're going to tax
your or continue to regulate your tech
services highly like is that the vibe
that you get in Silicon Valley from tech
CEOs that it's just everywhere you look
there's there's a challenge. I don't
know you know I mean I feel it's feels a
little misguided to me. I think the tech
sector is one that's going to keep
dominating and keep growing there. it
shouldn't be that affected by by
tariffs. But yeah, maybe the retaliation
is that bad from other countries or um
or something else that that I don't
quite understand. But I would expect
things like Walmart to go way down more
than than the tax actor era. Yeah. So,
okay, let's just talk before we leave
big picture. Uh what do you think the
big picture on what's going to come next
uh is going to be? And then again, just
like let's talk about um what are the
long-term uh impacts that this is going
to happen? like what are some things you
can't put back in the bottle once this
gets going? Shortterm there's going to
be a lot a goods recession for sure. I
mean there'll be less goods sold because
prices will be higher um there will be
in the ocean freight markets. I predict
that the price of ocean freight is going
to fall really sharply um to levels we
haven't seen since probably a decade
2016 it was very very cheap. Uh we were
talking last time 2,000 per container.
2000's like the long run historical
average. 2016 it went down to about 900
and I think we might get there. Um
around the marginal cost of shipping an
extra container and the marginal cost is
really low. I mean the only reason it's
not 200 is because of the the labor
cost, the union cost to unload the
containers at the port. Um but so I
think it would I think it would drop
really really far.
Um, there's that to look forward to, but
it won't, you know, there's 100,000 of
goods in a container. So, you know,
you're saving a thousand bucks on the
ocean freight, but you're spending
$46,000 on the duties. It's not it's not
going to save you're not going to help
your business that much. Um, but I think
that's very relevant for our business,
obviously, and we've got to have a
strategy to go take market share uh by
passing through low cost of ocean
freight. So, if you're out there, you're
buying ocean freight, come to Flexport
later this year for cheap ocean freight.
I expect we'll have it. Um I
think longer term you know I take the
really long view is if you look at the
graph of global trade for the last 800
years you've had 4% annual
growth that goes back to the Mongol
invasions which disrupted things a
little bit but then after that it was
just like up and to the right but there
are definitely blips you know in that
period you had the black death you had
you know the 30 years war you've had
wars between the Ottomans and the
Venetians, you've had the age of
discovery, you had World War I and two.
All of those things look like little
blips that you barely notice when you
look at the four what what 4%
exponential growth does. It looks like a
vertical line going straight up. And so
you're you fast forward 10 years from
now, I think all of the I think there'll
be more trade. I have pretty strong
conviction there'll be more trade, not
less. Um because it's just fundamentally
both sides are made better off. People
want to do it and there's always going
to be governments that have reasons to
restrict these things.
Uh but we live in a democracy and so
governments maybe get voted out if they
do things that people don't like. Right?
Okay. We started on globalization. Let's
end on globalization. Again, Scott
Bessant just listening to what he was
talking about over the weekend. He said,
"Last year more Americans went uh on
European vacations than ever before.
Also, more Americans went to bread lines
than ever before." I think that this
idea that when you have free trade,
everybody wins. uh maybe sometimes
leaves out the fact that you know it can
create bigger winners uh and bigger
losers and on um certain sides when it
plays out. I'm curious if I'm reading
what you're saying right that that's a
problem to address but these set of
policies in the big picture uh aren't
going to get it done. Yeah. Like I'm
glad that they're looking out for
working people and and the bottom 50%
and I I mean I kind of agree with the
the the diagnosis. I just don't agree
with the solution. I think have access
to lowcost goods is very good for poor
people. Like the idea that, you know,
and you're going to centrally plan their
way into something uh something else is
a little crazy. Um so I shouldn't say
crazy. I just think their strategies are
off. And but uh you know, he also admits
they don't exactly know. They're going
to try some things and what was
happening before doesn't work. I
basically agree with that. You can't
have$2 trillion dollars of debt in
perpetuity. it just compounds and
escalates and some point you declare
bankruptcy. Um and the reserve currency
status of the United States is perhaps
the biggest uh
problem the cause the biggest cause of
these problems is also the biggest
beneficiary to the biggest cause of the
the great wealth of this country is the
fact that we're the reserve currency.
But kind of if you're just makes you
rich uh makes people like maybe too rich
without having to work hard. you just
get to be extremely wealthy because
everybody needs your currency. And so
you look at the US G, we forget how rich
we are. The US GDP per capita is like
double of most of the countries that we
think of as rich like Japan and France.
Like we're twice as rich per person as
they are. Uh and some of that's caused
by the currency rather than just how
productive we are and how great our
geography is. Yeah. Well, Ryan,
appreciate you coming on and explaining
all this, taking a look at the actual
policies, giving an explanation of what
they might do, what the intent is, where
you see the problems, and then the
long-term uh potential consequences for
our economy. You did a great webinar,
like you mentioned, um, and I will link
that in the show notes for anyone that
wants to go take a little bit, uh,
deeper look. It's called Liberation Day:
Tariffs and Trade Impacts, what we know,
and where we go from here. It's a really
great session. I recommend everybody
check it out. Ryan, it's always great to
see you. Thank you for coming on the
show. Yeah, I appreciate that. Thanks
for having me back. All right, thanks
everybody for listening. We're going to
take a quick break and be back right
after this with Adam Parker from Tvariat
Research to talk about the stock
implications on big tech. Back right
after this.