Latest / Beyond Fulfillment Podcast / Strategizing for Uncertainty: How Trump’s Tariff Volatility is Reshaping Global Trade

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Strategizing for Uncertainty: How Trump’s Tariff Volatility is Reshaping Global Trade · Beyond Fulfillment Podcast

0:00
Foreign.
0:07
Hi, everyone, Dave Gulas, Beyond Fulfillment podcast back with my good friend Jim Tompkins.
0:12
Good morning, Jim.
0:13
Good morning, Dave.
0:14
Good to see you.
0:15
Likewise, as always, we're talking tariffs and there's a lot to catch up on since the last time we put an episode out.
0:25
So, Jim, what's happened over the past week with President Trump and the tariffs?
0:29
Well, I tell you, it's been absolutely crazy.
0:32
And I want to date this.
0:34
This is Monday, July 21st at 9am because July 21st at 10am there's going to be something different happening that I'm not able to cover at this point.
0:45
But it's unbelievable what's happening.
0:51
It's also significant that yesterday was President Trump's six month mark for his second term as president.
1:00
The 47 president has served for six months, which seems unbelievable because we've had about three years worth of news in the last six months.
1:10
But maybe even more important, we're 12 days away from August 1st.
1:16
And so August 1st is when the reciprocal tariffs that were originally supposed to go in effect on July 9 got postponed till August 1.
1:28
So August 1 is a huge, huge, huge date.
1:32
There's all sorts of negotiations, there's economic forecasts, there's political maneuvering that are going on.
1:38
And so this is a very, very, very fast freight train and it's traveling at an unbelievable pace.
1:46
But there's a lot that we can say that's about where we're gonna wind up after August 1st and what's going on.
1:55
It's important to remember what President Trump believes reciprocal means, and what he says reciprocal means is what's happened is all the countries of the world have put in place tariffs and different types of constraints that limit our ability
2:17
to trade in their country.
2:18
And all he wants to do is create a level playing field.
2:23
And so what he is doing with the reciprocal tariffs is saying, here is what I think would be a fair assessment of what we should be using going forward.
2:33
Now, this is controversial because we haven't done this for over 50 years.
2:39
In the last 50 years, we've had a negative trade imbalance year after year after year for 50 years in a row.
2:46
And this has been over a trillion dollars a year for the last three years.
2:50
Last year at 1.2 trillion.
2:52
And so President Trump is saying, hey, we've done this for 50 years.
2:56
We now must change or otherwise we're going to have a problem with America.
3:01
So if we look at that, there's four ways I can answer the question you just asked.
3:06
The first one is to look at some specific tariffs.
3:09
What's happened with some specific tariffs?
3:11
Interestingly enough, Canada now has a 35% tariff that's supposed to go in effect August 1st.
3:18
Mexico has a 30%.
3:20
And so the USMCA countries are now facing 35% and 30% tariffs, of which they have some real problems with.
3:28
They're both kind of fighting that.
3:31
The fact of the matter is we're one year away.
3:34
Almost a year from now, we're going to renegotiate usmca.
3:39
And President Trump says, yes, we'll renegotiate it, but we have to set the pace now.
3:44
And so these now have a 35% in Canada and a 30% in Mexico.
3:50
Also, the published number for the European Union is 30%.
3:56
We were making great progress going into Thursday.
3:59
Last week, Thursday, last week there was announcement from the European Union saying that we are only 5% away.
4:08
The United States wants 15% and we're ready to agree to 10.
4:12
The United States said the exact same thing.
4:14
So I kind of thought, okay, let's split the difference, guys, and let's go with 12 and a half or 13 or 12 or whatever you want to do it.
4:21
But we're close to a deal that blew up over the weekend.
4:23
And so now we're back to the 30% for the European Union, of course, a volatile one.
4:30
Brazil, a 50% tariff is now in place, effective August 1st.
4:36
Controversial, because we have a surplus with Brazil.
4:41
We export more to them than we import from them.
4:46
So it's a trade surplus.
4:48
So why are 50%?
4:49
Well, this has nothing to do with trade.
4:51
This has everything to do with politicians and politics and so forth.
4:55
And so this is Trump using tariffs to do something other than trade.
5:00
Japan and South Korea, 25% gold.
5:04
Good work on that.
5:05
Last week until Friday, the Japanese president wound up with some political issues and he now has.
5:13
He does not have a majority in either the lower house or the upper house.
5:17
And so his situation is somewhat difficult.
5:21
We had last week the copper imports, which hit a 50% sector specific tariff.
5:27
And so that is something Trump is very concerned about because the copper is like the rare earth minerals, something that was constraining our capability, particularly copper, with respect to aerospace and defense.
5:41
Another topic that is not new, but it hasn't been mentioned in several months.
5:47
And a lot of people are going to say it hasn't ever been mentioned, but.
5:50
But it has, and that's the secondary tariffs.
5:54
A secondary tariff is saying, I want to impact Russia, but I can't put tariffs on them because I'm not buying anything from them.
6:03
But what I'm going to do is I'm going to put tariffs, tariff on the countries who are trading with Russia.
6:09
And so if Brazil buys things from Russia, which they are, what we're going to do is we're going to put a tariff on everything we buy from Brazil.
6:17
And so it's secondary from a country point of view.
6:20
This affects China, India, Turkey, Brazil and the uae.
6:26
The topics here are agriculture, energy and defense.
6:30
Secondary tariffs can be very, very, very difficult because we're asking a country to help us get Russia to stop the Ukrainian war.
6:39
And so it's kind of a severe approach.
6:42
So that's kind of the detail of what's happening now.
6:46
If we look at more general what's happening, it's very interesting.
6:51
This morning's Wall Street Journal, front page, right column, said, economy shows swagger as tariff fears ebb.
7:02
You'll remember, Dave, we have said on this program several times that people have a false view of how tariffs create inflation.
7:13
Technically, yes, tariffs create inflation, but it depends how you do them and when you do them and so forth.
7:19
The fact of the matter is, for the last four months, the economists have predicted ever higher numbers on inflation.
7:27
And the fact of the matter is, all four months and they've got lower numbers.
7:31
Inflation now last month was a 2.7%, which is the highest number under the Trump administration.
7:37
But it's still below what the Fed has said is moderate.
7:41
So it's below moderate.
7:43
So inflation is not a topic.
7:46
Inflation has not gone off because of tariffs to date.
7:50
Another topic is the economic concerns.
7:54
Some people have said if we have tariffs, we're going to have a recession and the growth will stop, the GDP growth will stop.
8:02
Quite to the contrary.
8:04
That's not what the hard data shows.
8:07
The hard data shows is that we are not going in a recession.
8:12
We have very healthy growth and things are looking very good from a business point of view.
8:16
And in fact, even our stock market is now hitting record highs on a weekly basis.
8:23
And then one other issue with respect to the economic impacts of tariffs, we have collected to date over $100 billion on tariffs.
8:32
Year to date.
8:32
Year to date, 100 billion.
8:34
If we look at what we're doing now, if we just extended what we're doing now, which is the 10% flat tariff, we will reach 300 billion by end of the year.
8:45
So inflation's not an issue, growth is not an issue, recession is not an issue, and we're taking in 300 billion.
8:53
So, so far, so good.
8:55
The third thing has to do with the progress on trade negotiation and deals.
9:01
This is an interesting one because I, and everybody I read, everyone I see talks about a deal being done.
9:11
When.
9:12
So if Jim and Dave are going to do a deal, Jim and Dave, sit down.
9:15
We have a document.
9:16
We agree to it, we both sign it, we say, we shake hands and say we got a deal.
9:20
Well, that's how we typically do things.
9:23
Well, that's not how Trump does things.
9:25
Trump changed things in the last couple of weeks.
9:27
And what he said is, when I write you a letter, that is the deal.
9:33
We have a deal.
9:34
I just mailed it to you.
9:36
Okay.
9:36
And so Trump has defined a different perspective.
9:39
And so this has taken everyone by surprise.
9:42
It took me by surprise.
9:44
And it is now really putting people on the defensive.
9:50
And they're saying, but.
9:51
But this isn't how we do things.
9:52
Well, Trump says, I don't care how you do things.
9:55
I'm telling you, I need to have my balance paid, balance of payments being surplus, and I need to eliminate this debt we've built up over the last many years.
10:08
And then the fourth thing that.
10:10
Oh, there's another thing on that that I wanted to mention is people ask all the time, what about the August 1 deadline?
10:18
How is that?
10:19
You know, because we had the July 8 deadline and that got moved.
10:24
Tricky.
10:24
If you watch what Trump is saying here, he's guarding his words.
10:29
What he is saying is, if we don't agree, we have a deal.
10:35
That means this is the rate that will go in effective August 1st.
10:41
Now, is he willing to change what he's hypothesized?
10:44
Yes, he is willing to negotiate that.
10:47
And if we're close to it, maybe we'll go a couple days or weeks past August 1st.
10:52
But basically, the deal is what's in the letter, unless you and I, you and I, our country and your country agree something contrary.
11:01
So I think the deadline of August 1st this time is going to hold, which is not what we've seen over the last six months, but I think it's going to hold.
11:10
But not to say this is the final, final deal.
11:13
It just says that's what you're going to start paying on that date, and you're going to pay that on the date until we agree to something differently.
11:19
So I think that's an important aspect which you bet to quote deadlines, because deadlines have not been upheld.
11:26
And then the last part of this question has to do with specific industry incentives.
11:32
We all saw when he went to the Middle east, the over one and a half trillion Dollars that was raised through orders and sale of product and so forth.
11:44
What's happened over the last few weeks is actually a few months because I went back and pulled data on this.
11:52
If we look at U.S.
11:53
companies investing in the U.S.
11:56
we now have $1.6 trillion of money that's allocated for building manufacturing facilities in the United States.
12:06
Number one on that list is Apple at 500 billion.
12:08
Number two is Navita at 500 billion.
12:11
But then we have Micron Technology at 200 billion.
12:14
IBM at 150 billion, TSMC at 100 billion.
12:18
Five more companies over 20 billion, 10 more companies over in the three to $10 billion range.
12:24
And so they're pledging $1.6 trillion to be building manufacturing in the United States.
12:31
And, and that's going to be a huge plus to the economy.
12:35
And then the last two things that kind of tie up the two are kind of combined.
12:39
Number one, when we talked a couple of weeks ago, rare earth minerals were a big problem.
12:45
China was holding up the magnets.
12:47
The magnets shipped in June is three times the rare earth mineral magnets that they shipped in May.
12:54
And MP Materials is now in Fort Worth, Texas.
12:58
They're up and operational.
13:00
Business is ongoing.
13:02
They just got a $500 million for from Apple to sell them magnets from rare earth minerals.
13:09
And so the rare earth mineral problem is basically gone.
13:13
And we're really, really, really doing well on that by getting more from China and also being able to bring back that manufacturing capability into the United States.
13:22
So very, very, very interesting couple of weeks.
13:27
You know, as you said, Dave, lots going on.
13:31
The reality is that the tariffs are more than just the numbers.
13:35
The tariffs now is about a shifting in global alliance, it's a shifting in economic priorities and it's a shifting in political strategy.
13:46
So, oh my goodness, what an interesting time to be involved with trade and supply chain and trying to understand this and how do we guide our companies to find opportunities in these troubling times as opposed to just sitting
13:59
and wringing our hands.
14:01
Yes, and appreciate all the detail there.
14:04
But Jim, I want to key in on something you said in terms of what's happened because you point out time and time again what the economists have predicted versus what has actually happened.
14:16
And there's time and time again there's been discrepancies between those two sides.
14:21
Why do you think there's been those discrepancies?
14:25
You know, I didn't have a good answer to that, but when we discussed it the other day, I got digging into that and I'm not an economist, and I'm not claiming to learn to be economist over the last
14:42
few days, but economists are, like a lot of us in supply chain and other fields they do is they base their projections on models, and they have very complex models.
14:59
And so their models tell them, if you have a tariff, that's going to result in higher import cost.
15:08
Well, that's true.
15:09
If you have higher import costs, they're saying, therefore, that results in higher consumer prices and higher consumer prices.
15:18
That's the definition of inflation.
15:21
And what it's going to mean is people are going to have less money to spend, and therefore they're going to spend, be able to buy less.
15:29
Their expendable money is less, so they're going to buy less, and therefore they're going to be slower growth.
15:34
And so that's a very logical model.
15:37
And that model has worked for many, many years.
15:40
But the fact of the model is, is that model assumes a certain performance on business and a certain performance on consumers.
15:51
And so what happens is when the consumers act differently or the businesses act differently, you get different results.
15:58
And that's exactly where we are.
16:00
As we just said, there is no problem with inflation.
16:03
There is no problem with growth.
16:05
The income from tariffs is booming.
16:07
And so what are the reasons specifically that their models don't work?
16:13
I think there's five reasons.
16:15
Number one, policy volatility.
16:19
Okay, I have studied and you and I have talked at length online and offline about the volatility of Trump's tariffs.
16:27
So if we have a model, Dave and Jim have a perfect model, what numbers are we going to put in?
16:33
I mean, the numbers, my goodness sakes, you go to bed at night, you're close to a deal, you get up in the morning and they're having another fight.
16:41
They go from 10% to 50% in a night.
16:44
So now I got my model.
16:45
What number do I put in?
16:46
Do I put in 50%?
16:47
Do I put in 10%?
16:48
And so with the policy volatility that we have under Trump's negotiation, it's not surprising that the models are probably accurate.
16:59
But we're putting in the wrong numbers because we don't know what the right numbers are.
17:03
None of us know what the right numbers are.
17:06
Secondly, let's assume we knew the numbers.
17:08
When does it go in effect?
17:11
You know, we got the taco effect that people call.
17:14
You know, Trump always chickens out.
17:16
Trump's not chickening out.
17:18
What Trump is doing, he's playing the game and he's negotiating.
17:22
And when you have negotiation going on, there's Give and take.
17:25
And there's push and there's shove and, and, and, and so a lot of that takes place.
17:29
So when is the Trump, when is the Trump tariff going to go in effect?
17:33
I mean, my goodness sakes, this is varied all over the place.
17:35
And then there's exceptions to the tariffs.
17:38
So let's say we know, okay, it's 22% and it's going in effect August 1st at 12:00am Perfect.
17:45
But you read the tariff and there's some exceptions.
17:48
Well, except if you do this, except if you do that, except if you do that.
17:52
And none of that still built into the model.
17:54
So there's two reasons, the policy volatility and the date of implementation that are just totally unknown.
18:02
Thirdly, there's resilience in the supply chain and adaptation.
18:08
People say, ah, Trump's going to put a high tariff on China.
18:11
I'm going to move my goods to Indonesia.
18:14
And so therefore you and I put in the right number.
18:17
But they're not buying from that country anymore.
18:19
They're now buying it from a different country.
18:21
And then we say, gee, what's the right number for Indonesia?
18:24
And when is that going in effect and what are the dates for that?
18:27
And then there's the issue of consumer behavior.
18:32
Consumers read all going to be inflation.
18:34
Some consumers say, hey, I'm going to go out and buy all that stuff now and put it on the shelf so I don't have to pay the higher price.
18:39
Some consumers are saying I got to pull back.
18:42
Other consumers are saying, I'm tired of holding back and I'm going to go for it.
18:46
And so the consumers are not acting as the model predicts the consumers.
18:51
In fact, at this point, the consumers, you know, what was that quote from the Wall Street Journal?
18:56
It said that.
18:58
Where was that quote?
19:00
The title of the economy shows swagger as tariff fears ebb.
19:07
So the consumers have swagger.
19:09
They're spending like drunken sailors.
19:12
And so then the last thing is the issue of time lags and that let's say the Tariff is implemented August 1st.
19:20
Well, when does that actually hit our shore?
19:23
Is that going to be September 1st or October 1st?
19:27
Is that going to be before Christmas or after Christmas?
19:30
Guess what?
19:30
Everything is coming from China.
19:32
It's already either in country or on the water.
19:35
And so chances are good these tariffs are not going to hit the rest of the year.
19:39
So there's some uncertainty with the timing.
19:42
And so, you know, yes, it's, it's hard to predict the models.
19:49
I mean, if, if I had infinite wisdom and I sat down with the best economics models in the world.
19:56
I'm going to have the wrong numbers, too.
19:57
So it's not criticizing the economists for being goofy.
20:01
It's saying that you can't really model this.
20:03
Now, how can I relate to that?
20:05
I thought, well, wait a minute, here's an example that we all see.
20:08
In fact, we all see it daily.
20:10
How about the weather forecast?
20:12
The weather forecast people, they're scientists.
20:16
They've really studied this stuff.
20:18
They've got all these models that predict the weather.
20:22
I'm at my beach house in Wilmington, North Carolina, about this time of year.
20:26
There's always hurricanes that are coming my way.
20:28
You know what I've learned with their prediction of their models of hurricanes?
20:32
Don't pay any attention to them.
20:34
They don't have a clue what's going to happen.
20:36
You know, sometimes they say, well, it's going to happen on Sunday morning.
20:40
And it doesn't.
20:41
They don't even see a shower on Sunday.
20:43
You get up Sunday morning, it's a beautiful, bright day.
20:45
And so the weather forecast, they don't know.
20:47
So why is that?
20:48
Well, the weather forecast is looking at all these numbers.
20:51
They're looking out the window, seeing the dark clouds.
20:53
And what are the dark clouds?
20:54
Well, the dark clouds we're facing in tariffs are tariffs and trade wars and higher import cost and all these.
21:01
GDP falling and inflation rising and consumer pain.
21:05
And we got all these things.
21:07
We don't have any way to predict the weather any with any quality either.
21:12
And so the storm doesn't hit like it's supposed to, or it hits later than it was supposed to, or it varies off course.
21:19
And so that's where we are with economic prediction.
21:23
I'm not criticizing the economist.
21:25
I'm just saying that it's about as accurate as the weather.
21:29
And we all have grown to know that the weather forecast, although they do a great job and are working hard at it, it's.
21:35
Don't really count on it because it might rain on the other side of town, but it's not going to rain where I live.
21:40
And so it's not a big deal.
21:41
We're going to, let's, let's, you know, let's go play tennis anyway.
21:44
It's going to be a nice day.
21:46
Okay.
21:47
All right.
21:47
And you mentioned all the volatility and all the changes.
21:51
How do you think Trump's negotiation style affects the predictability of global trade policies?
22:00
Wow, that's, you know, that question is so important because now instead of asking the question, what's going to happen, we're saying, help me understand more about what's going to happen.
22:17
And so we're really now digging into the understanding.
22:21
The fact of the matter is there's different types of negotiation.
22:26
But let me just simplify it by saying there's business negotiation style and there's political negotiation style.
22:35
The two are unrelated.
22:37
And so what we have is Trump, who's not a politician, he's a business guy.
22:42
He is taking business negotiation tools to the table and people are evaluating him based upon the issue with respect to politics.
22:55
And so it's like, you know, one of my granddaughters rides horses in competition.
22:59
Another one of my granddaughters plays soccer.
23:02
And if I take the horse show criteria and apply it to the soccer game, I get confused as all get out because she's not sitting straight in the saddle.
23:12
Guess what?
23:12
The soccer player doesn't even have a saddle on.
23:14
I mean, there's no horse.
23:16
So they're different Sports, business negotiation and political negotiation are always, always, always different.
23:25
And so what is Trump's negotiating style?
23:28
I think it has three words to it.
23:30
Number one, he is assertive.
23:33
He is aggressive, he is in charge.
23:38
That's assertiveness.
23:39
The second thing, he is and wants to be unpredictable.
23:44
He wants to keep the opposition off balance.
23:48
And so he regularly comes up with strategies to surprise them.
23:53
And then thirdly, and here's the one that the political people don't get, but Trump's negotiation style is based on being unilateral.
24:05
What does unilateral mean?
24:06
It says it's only a one person activity.
24:11
It's not a discussion between two countries.
24:14
It's one country telling the other country what they're going to do.
24:20
Unilateralness means one sided negotiation.
24:26
This gets back to the Trump statement that he's just been using now for a few weeks.
24:31
The letter is the deal.
24:35
I will tell you what the the deal is.
24:38
Now, what Trump might say.
24:40
Maybe Trump says, you know what I need to get from this country to really be reciprocal is 15.
24:44
So what he says, I'm going to put a 20% reciprocal on you.
24:48
And so then he expects you to take him from that 20% down to 15.
24:52
But that's not how the person on the other side of the table because they're not doing business negotiation.
24:58
So Trump's style absolutely throws them off of the whole political negotiation.
25:05
Now, there's some risk with this, but there's also some really interesting benefits here.
25:11
I came up with four key points to understanding this better.
25:15
Number one, Trump has a strategy of constantly shifting and Making sudden moves.
25:24
My goodness sakes, the accessibility to President Trump.
25:28
He's, you know, one time he's having a meeting in the Oval Office, then he's having a luncheon someplace, then he's with his Cabinet, then he's out visiting some site, then he's got his press secretary talking, then he's got
25:40
his Secretary of Treasury talking, then he's got his secretary of Commerce talking.
25:44
And so there's all this noise that's happening.
25:48
And so they're constantly changing.
25:52
And so the opposition is sitting there and say, what are their position?
25:57
I want to negotiate with them, but they keep changing positions.
26:00
So I'm confused.
26:01
That's his objective, keep the opposition confused.
26:05
Secondly, Trump sees the negotiation in the position he is in more as coercion than collaboration.
26:15
He doesn't really care what you think the answer is he's the one that has the negative trade balance.
26:21
He's the one that's putting America first.
26:23
He's the one that wants to get this done.
26:25
And so he views himself as holding the cards.
26:30
And if he's holding the cards, he's going to play it out, he's going to play his hand.
26:36
And so he is not deal making.
26:38
He is power playing.
26:40
And so it's a different thing.
26:42
And that's why these political analysts get all confused, because they don't understand that the political ramifications of his business negotiation affects the markets.
26:55
So why did he do the July 8 delay?
26:58
Because the financial markets were going down, were really, really all of our investments were hitting negative streak.
27:06
And then there was all these activities with the Iran thing and the Gaza Strip thing and the big beautiful Bill thing, all these things going on.
27:16
And Trump said, hey, great, time for a change of pace.
27:20
So he pushed the button and boom.
27:22
The stock market has been hitting records almost every week now.
27:25
And so there's a lot of really good stuff happening.
27:28
And so the impact on the financial markets has allowed him to have an additional incentive.
27:36
Now he's watching the tariffs, but he's also watching the financial market.
27:39
Because when that financial market started going, consumer confidence went down, business confidence went down, and he wants those to turn, and now they're going back up.
27:48
And then the last thing that really causes a problem is that he is not necessarily looking for the same outcome, because each country, there's the reciprocal part, but then there's, oh, we got to look at the drug problem.
28:06
Oh, we have to look at fentanyl.
28:07
Oh, we have to look at what they're doing with respect to the sovereignty of the dollar.
28:12
Oh, we need to look at this issue and that issue and this issue.
28:16
And so there's a lot of different things at the table, and that results in uncertainty.
28:20
So, in short, Trump style injects volatility into global trade.
28:31
And while it may give us leverage in negotiation, and I think it will give us leverage in negotiation, it may result in some relationships down the road not being as smooth as they've been in the past.
28:44
But Trump is willing to accept some bad feelings when he gets the country back on a level economic playing field.
28:53
And he believes for the long term, US Needs to be stable.
28:58
And therefore, if we destabilize some relationships, that's collateral damage and we have nothing that we can do about it that we have to just accept that.
29:06
And so I, I'm impressed by his fortitude.
29:12
I wish we could be a little more smooth about it, not make so many enemies.
29:15
But, you know, he's, he's, he's working as hard as he can to get the job done.
29:20
Okay, and so how do you see his negotiating style affecting the supply chain?
29:27
Yeah, now that's another interesting one.
29:34
The same as it affects trade, except it's even more complex.
29:39
And the reason it's more complex is because Trump is attempting to apply his same set of rules to all circumstances.
29:54
And when it comes to supply chain, there's a major difference between how you need to negotiate tariffs with respect to products that are easily automated versus products that have a high labor content and are not easily automated.
30:15
I think the world is broken up into two types of products.
30:19
We've got products like footwear, apparel, handbags, belts, furniture, toys, low cost commercial goods, home decor, seasonal goods, et cetera.
30:32
And these items are items that have high labor content and are not easily automated.
30:40
And then we, we have the other products which are easily automated, you know, such as automotive, such as high tech, such as medical products.
30:51
And so those are two different categories, and you can't negotiate the same with those two categories.
30:58
And Trump is trying to do that.
30:59
And so I think that's a mistake he's making.
31:01
I see 60% of the product, and that's obviously an estimate.
31:06
60% of the value of the products are products that have low labor content, and we can economically deploy automation.
31:16
And so with those products, what we say to the opposition here is the deal, Take it or leave it.
31:24
If they take it, we got a deal.
31:25
We keep doing what we're doing.
31:27
If they leave it, we reassure that and we cut them out.
31:32
And in fact, because we didn't do A deal.
31:35
We're not going to give them access to our market.
31:37
And so that's very iffy for them.
31:41
To the contrary, if it is low, high labor content, low cost items like the footwear and apparel and handbags and so forth, we can't reshore that.
31:54
We can't bring that back to America because although we did once manufacture it, there's no place to take it back to.
32:02
But when you say I'm going to bring that back if we're going to high labor content, inexpensive goods when we bring it back, guess what?
32:14
The factory it was made in has either been torn down or turned into a condominium that build.
32:21
You can't bring it back because people are living in that and that's their, that's not the manufacturing facility anymore.
32:26
That's where they live.
32:28
And so we don't have the facility and bring it back means we're going to hire back those labor.
32:34
That's what the people that worked in the factory, they've gone on education, they're now AI gurus or they're, you know, out there doing high tech maintenance work or they're doing really high skilled work and they don't want to
32:45
go back in that low labor paying days.
32:48
And so there's, there's a problem there.
32:50
So you can't reshore stuff that's not reshoreable if it's got high labor content is no way to automate it economically that you can't bring back ashore.
33:01
You either got a near shore that or you got a friendly shore.
33:04
And the problem is if you near shore or friendly shore, what are the tariffs going to be in those countries?
33:09
When we first got in this, this, this tariff thing, we said oh well, just bring that to Mexico.
33:15
Well, but now Mexico is going to have a tariff.
33:18
And so is that a good move or is that a bad move?
33:20
And so how does that work?
33:22
So when Trump is dealing with low labor content, products that are highly easily automated, he does have Trump.
33:35
He is holding Trump cards.
33:37
He holds the cards because if you don't do the deal, I'm going to reshore that product.
33:43
But when we're dealing with products that are not automatable, that are high labor content, we have to reshore those.
33:52
Excuse me, we have to near shore those or friendly shore those.
33:56
And there we need to decide where to do that.
33:58
Herein lies the problem is that many companies are not doing advanced planning, they're not doing scenario planning, they're not doing re globalization.
34:08
And therefore they're sitting there saying ah, things are uncertain, I'm not sure what I'm going to do.
34:13
And therefore they're not doing anything.
34:15
And therefore they're winding up sitting there waiting for decisions to be made.
34:20
And all of a sudden, you know, September 15th through October 1st, you can say, oh, wow, I now need to address this.
34:27
But you can't just turn on near showing.
34:30
You can't turn on friendly shoring.
34:32
You can't even turn on reshoring quickly.
34:34
It takes time to get the factories tooled up, build the factories, get the labor and get them in place and make all that happen.
34:40
So that takes time.
34:42
So what we need to do is we need to get, and you've heard me say this again and again and again, we need to get planning done in re globalization.
34:50
And what we need to do is have optionality in that planning so that if this happens, we can do this.
34:55
If this happens, we can do this.
34:57
If this happens, we can do that.
34:58
And now we're prepared for it, and now we can move ahead of our competition.
35:02
So, yeah, it's a great question because his negotiating style is resulting in companies having to do this advanced planning because you simply don't have time to do reshoring near shoring or friendly shoring.
35:18
If you wait until all the dots I's are dotted and the T's are crossed, you have to move now.
35:24
And that's what is the impact of his negotiating style.
35:28
And that's something that has to be done.
35:31
Didn't need to be done before because we always had politicians dealing with politicians.
35:35
Now we have business people dealing with politicians, and this needs to take place.
35:40
Okay.
35:40
And appreciate you highlighting all the challenges and how difficult and complex it can be for companies to deal with the situation given that it's so fluid.
35:49
So just for a minute talk about how Tompkins Ventures helps companies work through these issues and find a suitable plan.
35:58
Well, we're working with them in all situations.
36:02
We're dealing with them assuming that it's a low cost item with high labor content.
36:11
And therefore we're saying, where should we reshore?
36:14
Where should we take that for our near shoring or friendly shoring?
36:20
So what countries should it go to?
36:23
Once we decide which countries we should go to, then what we say is, from who should we be purchasing the product, which company, and then how do we put in place the contracts and the procedures to get that
36:34
product made to make sure they're producing it quality and make sure they're producing its schedule, Then how do we get it transported to the United States?
36:40
What three PLs do we need?
36:42
How do we get this as an integrated portion of the supply chain?
36:45
What technology is needed?
36:47
And so how do we make that work?
36:48
If it's not a low cost item, which is going to be either done by a near shoring or friendly shore, it's something we're going to reshore.
36:58
We then got to get to work on.
36:59
Okay, we now know it's going to be in the United States.
37:02
Where in the United States should it be?
37:04
Should it be one facility, should it be two?
37:06
Should it be three?
37:07
How do we tie that in with our distribution and our fulfillment network?
37:10
How do we make those factories number one in the right place?
37:14
And and then what real estate do we use for those factories?
37:17
How do we get the buildings built?
37:18
Or how do we retrofit the buildings we find?
37:20
How do we hire the labor?
37:22
How do we get that labor in there and getting them working, aligned and focused on the value props of the companies and producing quality product and how can we do that quickly and with the right technology and the
37:33
right level of automation?
37:34
So just like the decision is different for the 60%, which is the product that can be automated, and the 40%, which is a product that can't be automated, they have two totally different approaches from a tariff point of
37:49
view.
37:49
They also have two totally different approaches than what Tompkins Ventures can help them with.
37:53
And we can do both.
37:54
We can help you find the right country and make it happen there, or we can help you bring it back to shore and figure out how to make it happen there.
38:01
So it's tremendous opportunities, but we got to get going, we got to get moving.
38:06
Absolutely.
38:07
All right, well, we'll link all the Tompkins Ventures info in the show, notes for everyone in case they want to learn more and get in touch.
38:13
Jim, it's been a pleasure.
38:14
Thank you as always for your insights on this topic and we will see you next time.
38:19
Dave, appreciate it.
38:20
Good to see you.
38:20
Have a good week.