April 8, 2025 • 20 mins
Amidst Trump's dramatic tariff moves, trade in North America remains uncertain. The USMCA hasn't been completely ripped up, but the region is anxiously anticipating a new trade regime. As such, shippers and carriers dealing with North American freight are in a state of limbo, waiting to see how it all shakes out. In this episode, we speak with experienced freight broker Matt Silver, now the CEO of Cargado, a company that sells logistics software to businesses dealing with US-Mexico trade. We talk about the strategies being used right now, what's changing, what truckers are doing, and how all players may adapt to the new reality.
Read more:
Canada and Mexico, Early Trump Targets, Dodge the Worst of New Tariff Salvo
The Freight Recession Isn't Going Anywhere Now
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
I'm Jill Wisenthal and I'm Tracy Alloway. Tracy, we can't
get enough of trying to understand the immediate impact that
the new tariff announcement they are having basically to like
every business in the world, but certainly any business that
touches goods and certainly any business that touches goods that
(00:38):
at some point across a border, which at some point
is all of them.
Speaker 3 (00:41):
I like the implication that we're just going to do
episodes on every single business in the world. That's what
we're saying, right, are we Yeah, I think we are.
We're deep in the process of doing that already. So
here's an episode with another business.
Speaker 2 (00:54):
Well, so yesterday in our episode, our first of the
multiple emergency tariff episodes, were like, we just got to
go down the list and talk to all the supply
chain specialists that we talked to a few years ago
over the last several years, and so we're just gonna
do that. And we have another guest today who I
think we talked to about a year ago, maybe a
little less. We're going to be speaking with Matt Silver.
(01:16):
He is the co founder and CEO of Cargato, which
is a freight brokerage that really specializes in US Mexico lanes.
North America. Knows a lot about North America trucking, cross
border trucking, et cetera. And given the world of tariffs,
you know, suddenly things like knowing about the world of
cross border trucking.
Speaker 3 (01:36):
You know. The last time we spoke to him, I
think the episode was titled like how shippers are responding
to a US Mexico trade boom?
Speaker 2 (01:44):
Oh yeah, so I guess we'll I guess we're going
to check in on whether.
Speaker 3 (01:47):
That you check in on the Mexico trade boom?
Speaker 2 (01:50):
Matt, Is there a US Mexico trade boom happening right
now on April seventh and twenty twenty twenty five.
Speaker 4 (01:56):
Well, first of all, trade for Q one is up
your overear Mexico, so it is definitely still going in
the right direction. One thing to clarify, We're not a brokerage,
we're a software business. But yeah, so we work with
freight brokers and trucking companies that are moving across border freight.
So we hear it from everybody involved in the process,
and there's definitely anxiety and concern over how these tariffs
(02:20):
are going to impact trade with Mexico and Canada. The
thing is, like the news that we heard this week
revolved around basically every country besides Mexico and Canada and
the USMCA got some sort of a reprieve, if you will,
but they were still hit by tariffs over the last
couple of months. And so the companies, like the automakers
(02:40):
that are producing cars throughout North America, they're not getting
hit the same way the companies that are bringing their
cars in from overseas, from Europe or Asia. And so
you know, the trucking companies that are moving this freight,
they're going to continue to move the freight that they
can still move that's consistently shipping. But they understand that
things might get a little bit rocky as all these
(03:02):
discussions get worked through, and so they're gonna stand strong
and I guess ultimately and wait and see what happens
with the market, right.
Speaker 3 (03:10):
I mean, I think even if Mexico was exempted from
the reciprocal tariffs that were announced last week, and I
should just mention we're recording this on April seventh. Lots
of things could still change, but even if they were exempt,
I mean, the direction of travel seems fairly clear at
this point. Give us a reminder of why US Mexico
(03:31):
trade had been on a sort of upwards trend line
because a lot of people were saying, well, this is actual,
genuine trade between the US and Mexico, and then other
people would say, well, this is China re routing some
stuff through Mexico in order to get further away from
the Trump administration's first round of tariffs back in circa
(03:52):
twenty eighteen.
Speaker 4 (03:54):
Yeah, so going back to twenty eighteen, that's on Trump
updated NAFTA to the USMCA, and that encouraged more manufacturing
to happen in North America on less overseas. And so
you've got the pandemic that scared everybody and thinking that
it's not such a great idea to rely on China
for manufacturing. Couple that with the general relations that the
(04:14):
US and China have had for the last decade or so,
which has been contentious and it's not super friendly. Then
you've got the latest round and everything even up to
the last few hours when Trump said that if China
goes through with the increased tariffs that they announced. I
think he said ninety percent would be placed on all
goods coming from China, and so things are only escalating.
(04:36):
And between the fact that Mexico is primarily on the
same or similar time zones as the United States, it's
only a few hours to get there, whereas it's I
think fourteen or fifteen hours to get to China. And
then the culture and language barriers are a lot simpler
and easier to get through with Mexico than it is
with overseas. And so there are a lot of reasons
(04:57):
why companies already do manufacture in Mexico and why they're
going to continue to do that. Yes, there's Chinese investment
in Mexico, but it's not as heavy as people make
it out. To me. It's just you start to hear
it more because everyone's going, well, here's how China's reacting
to this trade war. They're investing in countries nearby like Mexico.
But I still think we'll see more American companies investing
(05:17):
in Mexico than we will Chinese.
Speaker 2 (05:20):
Time zones in language two of the great non tariff
trade barriers that affect our world. All right, why don't
we applause here give us the status of the terriffs,
because it seemed like Trumpe was like, really, you know
for a while, like talking about blowing up the USMCA.
Right now on April seventh, what is the status of
what's newly being tariffed, what isn't in the cross border
(05:40):
US Mexico trade.
Speaker 4 (05:42):
So you hear about the big separator being what qualifies
under the USMCA. I think most agricultural products still qualify
under that, and so we're not seeing an impact on
most of those goods, although the US for a long
time said tariffs on sugar, Mexico has had it on
some dairy products. Like the irony right now is like
the RFK movement talks about trying to reduce the reliance
(06:04):
on highfritose corn syrup, and like the biggest counter to
that would be sugar, which we could buy from Mexico.
And so on one side, like you've got goods that
fall under the USMCA that have those requirements. So like
take a car, for example, if seventy five percent of
the value of the car came from Mexico, the US
or Canada, it falls under the USMCA, and it's qualified.
(06:28):
The difference now, though, is that the parts that are
not falling under the USMCA will get taxed right now
at that twenty five percent rate. And so if let's
say on a forty thousand dollars car, ten percent of
that car, so about four thousand dollars worth of value
is coming from overseas that could still have tariffs applied
(06:50):
to it. And if it's twenty five percent tariff, then
it'd be twenty five percent on that four thousand dollars,
So about one thousand dollars would get added to the
forty thousand dollars car, and so they're only taxing that piece.
Speaker 3 (07:02):
Who actually does those calculations though, because that seems seems
like a lot of paperwork to break cars down by
like components and where those components are made.
Speaker 4 (07:11):
It's the customs broker. Oh wow, and there's yeah, I
mean there's there's a startup called guy Dynamics that's also
doing that using AI, and so companies are able to
use them for that stuff now too. But like it's
very specific, like if you're using something made of steel
versus aluminum versus and other raw material even if it's
(07:32):
a screw, it's still it depends on what it's made
out of, and it depends on the size of it
and all that other stuff. So like they're very specific.
It's called harmonized tariff codes that are assigned to each
good and then there's a potential tax related to that
along with requirements very specific.
Speaker 2 (08:06):
Okay, so let's say I'm some company and you know,
I don't know what the future is of US Mexico trade.
Some things are getting tariffed now that weren't so much
like what am I passing along and what am I eating?
Speaker 4 (08:19):
So it depends on what if so the who is
a land Rover Jaguar the name of their brand is
now like they announced that all their cars coming in
from overseas are pausing for a moment until they figure
out exactly how to manage this. And historically even cars
like that that were coming from Europe were still or Asia.
(08:41):
We're still getting grandfathered in under kind of almost like
a side letter to the USMCA. And so some of
those companies were able to get by and now all
of a suddeny're getting hit with these terriffs, and so
they don't want to go turn around to their customers
and raise prices. They know it's not a good look,
and so rather than raising prices, they're saying, hey, hang
on a second, we're not going to put more cards
on the lot. We're going to stop shipping for a
(09:03):
moment until we figure this out, and they're you know,
over the next call it five to ten days. As
like the US and the EU navigate and negotiate, and
I think I just saw recently that that conversation is starting,
and you'll see similar with a lot of other countries
or trade organizations that ideally that'll get back to some
(09:23):
level of a more balanced trade agreement where there's ideally
no tariffs in either direction. And so those companies that
are getting affected by it, they just have to wait.
And I think a lot of them are just waiting,
and they're okay with less inventory for the time being
and keeping the prices the same because those cars already landed,
rather than trying to charge more to the consumer or
eat that cost.
Speaker 3 (09:44):
So if we were to assume that maybe things don't
change from what's been declared, like let's just assume that
we don't see a bunch of deals like Trump is
advocating for and these tariffs were stuck with them for
a while. How would you expect some of your clients
to actually react and maybe reorient their businesses for this
(10:04):
new reality. What would they do?
Speaker 4 (10:06):
Our customers are logistics companies, and I think what you're
thinking about is more on the manufacturer side, which is
their customers. And so I'll put myself in the shoes
of a logistics company that's working with manufacturer. My first
thought is like, let's build some consistency around the freight
that you're moving, because if you have to move that freight,
one of the levers that you have is how much
(10:27):
you're spending on moving it. So if you're getting an
increase in the taxes and duties that you're paying on
your goods, then I would be looking at ways to
reduce my costs, which would be relying more on a
logistics company or a third party logistics provider that can
help kind of spread that price risk and the operational risk,
and they can take that on with more volume. So
(10:47):
you think about how more density builds over time with
more freight moving in an individual lane, well, all of
that that's going to drive ideally a better price control
and so for a shipper thinking about their freight moving
across the border, I might rely more on a logistics
company to try to navigate that and reduce my cost
of actually procuring different trucking companies and potentially be able
(11:10):
to scale that business up by outsourcing more of that.
And so if I'm a shipper, that's how I'm thinking
about it. If I'm a trucking company, from what I
understand is right now, trucking companies are not running out
and buying more trucks. They want to see what's going
to happen right now. They're waiting, they're not panicking, they're
not picking up and switching how their business operates. So
(11:31):
like I was in Canada recently and I met with
a handful of trucking companies that move freight from Mexico
to Canada and vice versa, and they told me, you know,
look like there's definitely anxiety here. Like there's this much
outrage that I heard from every trucking company and burger
that I met with in Canada a few weeks ago,
that I've seen on social media about everything going on
right now in politics. And so most of those trucking
(11:54):
companies are saying like, hey, we're going to stay calm,
We're going to focus on supporting what we can support.
We know some customers might not be shipping right now
if they're freight is getting taxed heavily, and so we
have to find freight elsewhere. But for the time being,
we're going to stand strong. We're going to wait and see,
because we don't think this is how it's going to
stay long term. And so they're of a more long
(12:16):
term mindset of waiting and seeing what happens, rather than
panicking and trying to switch what they're doing or shutting
something down or slowing down their fleet. They might just
not grow as much right now, but they're not going
to stop their trucks.
Speaker 2 (12:28):
But it sounds like no matter who you're talking about.
And it's funny because look in the financial markets, one
gets the sense that there is a widespread belief that
the CURL rules can't stay in place, like this can't
be the ultimate status quo, and no one really wants
to accept that the new tariff schedules are really the
whole thing. And I think there's a widespread belief that
if somehow you at a crystal ball and these were
(12:51):
the permanent tariffs for years to come, the markets would
go a lot lower. It sounds like actually from you
that that's kind of the same in industry, whether we're
talking about manufacturers or whether we're talking about truckers. Yeah, okay,
so pausing, We're not gonna move new inventory in right now.
We're not going to change our business model. But at
the moment still the sort of widespread belief that this
(13:13):
can't be the final set of rules.
Speaker 4 (13:16):
Correct, And like, keep in mind that, you know, the
big market that everybody talks about is the US market
when it comes to freight. And obviously ocean freight's going
to slow down. We're already hearing about that on both
social and from customers directly that they're seeing volume coming
in through the port slowdown. And then two that freight
comes into the port, it goes to a warehouse at
(13:38):
some point, it gets repackaged or labeled and then packaged
and palatized. It goes on a truck after that. And
so what people in you know, the US market would
say is considered domestic freight moving from like Los Angeles
to Dallas. That freight very well is going on a
truck and it is considered a domestic shipment at that point,
(13:58):
but it's really part of an international move and so
if international freight slows down coming in over the ocean,
that is ultimately going to impact over the road throughout
the US. And so I don't think we're going to
see a spike in rates by any means. I think
we might see some weird fluctuation over the next couple
months as these things settle, but I think overall the
(14:18):
market's going to be a little bit slower for freight
in general, not just for cross border or international.
Speaker 3 (14:23):
I mean, on this note, one of the things we
learned from the twenty twenty pandemic and the supply chain
disruptions after that, one of the things we really internalized
is just how cyclical the trucking business actually is and
how you do tend to get these boom bust cycles.
And it feels like the more sort of one off
shocks we have to the system, the worse that cyclicality
(14:46):
kind of gets. How bad should we assume things are
going to get if this tariff uncertainty sticks around for
a while.
Speaker 4 (14:56):
I think it really depends on what happens with China
all the other countries like it all has an effect, right,
Like if you think about what happened during the pandemic
when all of a sudden there's a shortage with semiconductor
chips and what that did to everything. Like all of
a sudden, cars were not rolling off of lines because
of how many chips are going to a car, And
so the whole ecosystem is really tied in more than
(15:20):
you'd think. But China is really the big one that
it's all going to depend on, right Like if we
come out of this with significant tariffs from both sides
on China, yeah, and from China to the US, then like, yeah,
it's going to slow things down if things go to
a new normal. But to me, normal still means that
supply chains don't have to be completely redone in a
(15:42):
really quick fashion. Then I think the market should pick
back up and there should be excitement from the new
agreements in place where people might start buying again. People
are not obviously happy about their bank accounts right now.
Speaker 2 (15:56):
Yeah, obviously not. No. I mean like this is sort
of the big one because if some of these levels
that are being discussed, and again we're talking about this
April seventh, two thirty five pm Eastern time. If some
of these levels for China tariffs remain in place, I mean,
people are talking about the end of US China trading,
which is the sort of the defining economic relationship of
(16:18):
the entire world. Matt Silver, thank you so much for
coming back on oddlocks.
Speaker 4 (16:23):
Absolutely thanks for having me.
Speaker 2 (16:37):
It really feels tracy, even with all of the market volatility.
I love catching up with Matt. By the way, it
really feels though, with all the market volatility that we've seen,
with all the selling, like no one just believes that
this could be the the new normal right now.
Speaker 4 (16:51):
Everyone's like waiting.
Speaker 2 (16:52):
It's like, Oh, we're gonna see what happens with negotiations.
I'm like, what negotiations? But you know, there's got to
be something, right, Everyone assumes there must be some deal
to be cut.
Speaker 3 (17:00):
Yeah. Well, I mean ostensibly that's the whole point of
this process, right, It's to use leverage to strike deals.
But in the meantime we're all sort of grappling with
all this uncertainty of what's going to happen. But I
thought that was really interesting, good to catch up with Matt.
I did think his emphasis on the importance of China
is a really big deal, and you've said it very
(17:22):
well at the end as well, like the world's two
largest economies, there's a real chance that they're basically decoupling
from each other, which seems like it could reverberate around
supply chains and industries around the world. So again, no
matter what happens, you know, if the US strikes a
deal with I don't know, like some small Pacific island
(17:44):
or something like, maybe it doesn't really matter because the
US China relationship is much much bigger and weighs much
much much more heavily on the global economy.
Speaker 2 (17:54):
Yeah, it seems like the big one. And so it's like,
even if you're talking about US versus Mexico trail aid,
the future of US and Mexico trade is contingent to
some there still China of US China trade because A
there's a question of well, can Chinese good to get
through Mexico and then to the US, which happens to
some extent. And then B if you're really shut off
from China, how much actual actual capital I investment do
(18:18):
you then make it in North America? And how much
you make in Mexico versus the United States. Many big questions,
But like investors, it sounds like the world of shippers
and carriers are also in a certain kind of light
and see mode.
Speaker 3 (18:30):
Yeah, And I mean the other big thing happening here
is the difference between now versus twenty eighteen is you
don't have those outlet countries necessarily, right, So you can't
just re route stuff into Vietnam or into Mexico away
from China like that is no longer an option. So
that seems to make it much much more complicated as well.
(18:51):
Shall we leave it there?
Speaker 4 (18:52):
Let's leave it there.
Speaker 3 (18:53):
This has been another episode of the Authoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (18:58):
And I'm Jill Wasn't the You can follow me at
the Stalwart. Follow Matt Silver, He's at Matt Silver. Follow
our producers Carmen Rodriguez at Kerman armand dash Ol Bennett
at Dashbod and Kelbrooks at Kelbrooks. From our Odd Lots content.
Go to Bloomberg dot com slash odd Lots, where we
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(19:43):
and follow the instructions there. Thanks for listening.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
I'm Jill Wisenthal and I'm Tracy Alloway. Tracy, we can't
get enough of trying to understand the immediate impact that
the new tariff announcement they are having basically to like
every business in the world, but certainly any business that
touches goods and certainly any business that touches goods that
(00:38):
at some point across a border, which at some point
is all of them.
Speaker 3 (00:41):
I like the implication that we're just going to do
episodes on every single business in the world. That's what
we're saying, right, are we Yeah, I think we are.
We're deep in the process of doing that already. So
here's an episode with another business.
Speaker 2 (00:54):
Well, so yesterday in our episode, our first of the
multiple emergency tariff episodes, were like, we just got to
go down the list and talk to all the supply
chain specialists that we talked to a few years ago
over the last several years, and so we're just gonna
do that. And we have another guest today who I
think we talked to about a year ago, maybe a
little less. We're going to be speaking with Matt Silver.
(01:16):
He is the co founder and CEO of Cargato, which
is a freight brokerage that really specializes in US Mexico lanes.
North America. Knows a lot about North America trucking, cross
border trucking, et cetera. And given the world of tariffs,
you know, suddenly things like knowing about the world of
cross border trucking.
Speaker 3 (01:36):
You know. The last time we spoke to him, I
think the episode was titled like how shippers are responding
to a US Mexico trade boom?
Speaker 2 (01:44):
Oh yeah, so I guess we'll I guess we're going
to check in on whether.
Speaker 3 (01:47):
That you check in on the Mexico trade boom?
Speaker 2 (01:50):
Matt, Is there a US Mexico trade boom happening right
now on April seventh and twenty twenty twenty five.
Speaker 4 (01:56):
Well, first of all, trade for Q one is up
your overear Mexico, so it is definitely still going in
the right direction. One thing to clarify, We're not a brokerage,
we're a software business. But yeah, so we work with
freight brokers and trucking companies that are moving across border freight.
So we hear it from everybody involved in the process,
and there's definitely anxiety and concern over how these tariffs
(02:20):
are going to impact trade with Mexico and Canada. The
thing is, like the news that we heard this week
revolved around basically every country besides Mexico and Canada and
the USMCA got some sort of a reprieve, if you will,
but they were still hit by tariffs over the last
couple of months. And so the companies, like the automakers
(02:40):
that are producing cars throughout North America, they're not getting
hit the same way the companies that are bringing their
cars in from overseas, from Europe or Asia. And so
you know, the trucking companies that are moving this freight,
they're going to continue to move the freight that they
can still move that's consistently shipping. But they understand that
things might get a little bit rocky as all these
(03:02):
discussions get worked through, and so they're gonna stand strong
and I guess ultimately and wait and see what happens
with the market, right.
Speaker 3 (03:10):
I mean, I think even if Mexico was exempted from
the reciprocal tariffs that were announced last week, and I
should just mention we're recording this on April seventh. Lots
of things could still change, but even if they were exempt,
I mean, the direction of travel seems fairly clear at
this point. Give us a reminder of why US Mexico
(03:31):
trade had been on a sort of upwards trend line
because a lot of people were saying, well, this is actual,
genuine trade between the US and Mexico, and then other
people would say, well, this is China re routing some
stuff through Mexico in order to get further away from
the Trump administration's first round of tariffs back in circa
(03:52):
twenty eighteen.
Speaker 4 (03:54):
Yeah, so going back to twenty eighteen, that's on Trump
updated NAFTA to the USMCA, and that encouraged more manufacturing
to happen in North America on less overseas. And so
you've got the pandemic that scared everybody and thinking that
it's not such a great idea to rely on China
for manufacturing. Couple that with the general relations that the
(04:14):
US and China have had for the last decade or so,
which has been contentious and it's not super friendly. Then
you've got the latest round and everything even up to
the last few hours when Trump said that if China
goes through with the increased tariffs that they announced. I
think he said ninety percent would be placed on all
goods coming from China, and so things are only escalating.
(04:36):
And between the fact that Mexico is primarily on the
same or similar time zones as the United States, it's
only a few hours to get there, whereas it's I
think fourteen or fifteen hours to get to China. And
then the culture and language barriers are a lot simpler
and easier to get through with Mexico than it is
with overseas. And so there are a lot of reasons
(04:57):
why companies already do manufacture in Mexico and why they're
going to continue to do that. Yes, there's Chinese investment
in Mexico, but it's not as heavy as people make
it out. To me. It's just you start to hear
it more because everyone's going, well, here's how China's reacting
to this trade war. They're investing in countries nearby like Mexico.
But I still think we'll see more American companies investing
(05:17):
in Mexico than we will Chinese.
Speaker 2 (05:20):
Time zones in language two of the great non tariff
trade barriers that affect our world. All right, why don't
we applause here give us the status of the terriffs,
because it seemed like Trumpe was like, really, you know
for a while, like talking about blowing up the USMCA.
Right now on April seventh, what is the status of
what's newly being tariffed, what isn't in the cross border
(05:40):
US Mexico trade.
Speaker 4 (05:42):
So you hear about the big separator being what qualifies
under the USMCA. I think most agricultural products still qualify
under that, and so we're not seeing an impact on
most of those goods, although the US for a long
time said tariffs on sugar, Mexico has had it on
some dairy products. Like the irony right now is like
the RFK movement talks about trying to reduce the reliance
(06:04):
on highfritose corn syrup, and like the biggest counter to
that would be sugar, which we could buy from Mexico.
And so on one side, like you've got goods that
fall under the USMCA that have those requirements. So like
take a car, for example, if seventy five percent of
the value of the car came from Mexico, the US
or Canada, it falls under the USMCA, and it's qualified.
(06:28):
The difference now, though, is that the parts that are
not falling under the USMCA will get taxed right now
at that twenty five percent rate. And so if let's
say on a forty thousand dollars car, ten percent of
that car, so about four thousand dollars worth of value
is coming from overseas that could still have tariffs applied
(06:50):
to it. And if it's twenty five percent tariff, then
it'd be twenty five percent on that four thousand dollars,
So about one thousand dollars would get added to the
forty thousand dollars car, and so they're only taxing that piece.
Speaker 3 (07:02):
Who actually does those calculations though, because that seems seems
like a lot of paperwork to break cars down by
like components and where those components are made.
Speaker 4 (07:11):
It's the customs broker. Oh wow, and there's yeah, I
mean there's there's a startup called guy Dynamics that's also
doing that using AI, and so companies are able to
use them for that stuff now too. But like it's
very specific, like if you're using something made of steel
versus aluminum versus and other raw material even if it's
(07:32):
a screw, it's still it depends on what it's made
out of, and it depends on the size of it
and all that other stuff. So like they're very specific.
It's called harmonized tariff codes that are assigned to each
good and then there's a potential tax related to that
along with requirements very specific.
Speaker 2 (08:06):
Okay, so let's say I'm some company and you know,
I don't know what the future is of US Mexico trade.
Some things are getting tariffed now that weren't so much
like what am I passing along and what am I eating?
Speaker 4 (08:19):
So it depends on what if so the who is
a land Rover Jaguar the name of their brand is
now like they announced that all their cars coming in
from overseas are pausing for a moment until they figure
out exactly how to manage this. And historically even cars
like that that were coming from Europe were still or Asia.
(08:41):
We're still getting grandfathered in under kind of almost like
a side letter to the USMCA. And so some of
those companies were able to get by and now all
of a suddeny're getting hit with these terriffs, and so
they don't want to go turn around to their customers
and raise prices. They know it's not a good look,
and so rather than raising prices, they're saying, hey, hang
on a second, we're not going to put more cards
on the lot. We're going to stop shipping for a
(09:03):
moment until we figure this out, and they're you know,
over the next call it five to ten days. As
like the US and the EU navigate and negotiate, and
I think I just saw recently that that conversation is starting,
and you'll see similar with a lot of other countries
or trade organizations that ideally that'll get back to some
(09:23):
level of a more balanced trade agreement where there's ideally
no tariffs in either direction. And so those companies that
are getting affected by it, they just have to wait.
And I think a lot of them are just waiting,
and they're okay with less inventory for the time being
and keeping the prices the same because those cars already landed,
rather than trying to charge more to the consumer or
eat that cost.
Speaker 3 (09:44):
So if we were to assume that maybe things don't
change from what's been declared, like let's just assume that
we don't see a bunch of deals like Trump is
advocating for and these tariffs were stuck with them for
a while. How would you expect some of your clients
to actually react and maybe reorient their businesses for this
(10:04):
new reality. What would they do?
Speaker 4 (10:06):
Our customers are logistics companies, and I think what you're
thinking about is more on the manufacturer side, which is
their customers. And so I'll put myself in the shoes
of a logistics company that's working with manufacturer. My first
thought is like, let's build some consistency around the freight
that you're moving, because if you have to move that freight,
one of the levers that you have is how much
(10:27):
you're spending on moving it. So if you're getting an
increase in the taxes and duties that you're paying on
your goods, then I would be looking at ways to
reduce my costs, which would be relying more on a
logistics company or a third party logistics provider that can
help kind of spread that price risk and the operational risk,
and they can take that on with more volume. So
(10:47):
you think about how more density builds over time with
more freight moving in an individual lane, well, all of
that that's going to drive ideally a better price control
and so for a shipper thinking about their freight moving
across the border, I might rely more on a logistics
company to try to navigate that and reduce my cost
of actually procuring different trucking companies and potentially be able
(11:10):
to scale that business up by outsourcing more of that.
And so if I'm a shipper, that's how I'm thinking
about it. If I'm a trucking company, from what I
understand is right now, trucking companies are not running out
and buying more trucks. They want to see what's going
to happen right now. They're waiting, they're not panicking, they're
not picking up and switching how their business operates. So
(11:31):
like I was in Canada recently and I met with
a handful of trucking companies that move freight from Mexico
to Canada and vice versa, and they told me, you know,
look like there's definitely anxiety here. Like there's this much
outrage that I heard from every trucking company and burger
that I met with in Canada a few weeks ago,
that I've seen on social media about everything going on
right now in politics. And so most of those trucking
(11:54):
companies are saying like, hey, we're going to stay calm,
We're going to focus on supporting what we can support.
We know some customers might not be shipping right now
if they're freight is getting taxed heavily, and so we
have to find freight elsewhere. But for the time being,
we're going to stand strong. We're going to wait and see,
because we don't think this is how it's going to
stay long term. And so they're of a more long
(12:16):
term mindset of waiting and seeing what happens, rather than
panicking and trying to switch what they're doing or shutting
something down or slowing down their fleet. They might just
not grow as much right now, but they're not going
to stop their trucks.
Speaker 2 (12:28):
But it sounds like no matter who you're talking about.
And it's funny because look in the financial markets, one
gets the sense that there is a widespread belief that
the CURL rules can't stay in place, like this can't
be the ultimate status quo, and no one really wants
to accept that the new tariff schedules are really the
whole thing. And I think there's a widespread belief that
if somehow you at a crystal ball and these were
(12:51):
the permanent tariffs for years to come, the markets would
go a lot lower. It sounds like actually from you
that that's kind of the same in industry, whether we're
talking about manufacturers or whether we're talking about truckers. Yeah, okay,
so pausing, We're not gonna move new inventory in right now.
We're not going to change our business model. But at
the moment still the sort of widespread belief that this
(13:13):
can't be the final set of rules.
Speaker 4 (13:16):
Correct, And like, keep in mind that, you know, the
big market that everybody talks about is the US market
when it comes to freight. And obviously ocean freight's going
to slow down. We're already hearing about that on both
social and from customers directly that they're seeing volume coming
in through the port slowdown. And then two that freight
comes into the port, it goes to a warehouse at
(13:38):
some point, it gets repackaged or labeled and then packaged
and palatized. It goes on a truck after that. And
so what people in you know, the US market would
say is considered domestic freight moving from like Los Angeles
to Dallas. That freight very well is going on a
truck and it is considered a domestic shipment at that point,
(13:58):
but it's really part of an international move and so
if international freight slows down coming in over the ocean,
that is ultimately going to impact over the road throughout
the US. And so I don't think we're going to
see a spike in rates by any means. I think
we might see some weird fluctuation over the next couple
months as these things settle, but I think overall the
(14:18):
market's going to be a little bit slower for freight
in general, not just for cross border or international.
Speaker 3 (14:23):
I mean, on this note, one of the things we
learned from the twenty twenty pandemic and the supply chain
disruptions after that, one of the things we really internalized
is just how cyclical the trucking business actually is and
how you do tend to get these boom bust cycles.
And it feels like the more sort of one off
shocks we have to the system, the worse that cyclicality
(14:46):
kind of gets. How bad should we assume things are
going to get if this tariff uncertainty sticks around for
a while.
Speaker 4 (14:56):
I think it really depends on what happens with China
all the other countries like it all has an effect, right,
Like if you think about what happened during the pandemic
when all of a sudden there's a shortage with semiconductor
chips and what that did to everything. Like all of
a sudden, cars were not rolling off of lines because
of how many chips are going to a car, And
so the whole ecosystem is really tied in more than
(15:20):
you'd think. But China is really the big one that
it's all going to depend on, right Like if we
come out of this with significant tariffs from both sides
on China, yeah, and from China to the US, then like, yeah,
it's going to slow things down if things go to
a new normal. But to me, normal still means that
supply chains don't have to be completely redone in a
(15:42):
really quick fashion. Then I think the market should pick
back up and there should be excitement from the new
agreements in place where people might start buying again. People
are not obviously happy about their bank accounts right now.
Speaker 2 (15:56):
Yeah, obviously not. No. I mean like this is sort
of the big one because if some of these levels
that are being discussed, and again we're talking about this
April seventh, two thirty five pm Eastern time. If some
of these levels for China tariffs remain in place, I mean,
people are talking about the end of US China trading,
which is the sort of the defining economic relationship of
(16:18):
the entire world. Matt Silver, thank you so much for
coming back on oddlocks.
Speaker 4 (16:23):
Absolutely thanks for having me.
Speaker 2 (16:37):
It really feels tracy, even with all of the market volatility.
I love catching up with Matt. By the way, it
really feels though, with all the market volatility that we've seen,
with all the selling, like no one just believes that
this could be the the new normal right now.
Speaker 4 (16:51):
Everyone's like waiting.
Speaker 2 (16:52):
It's like, Oh, we're gonna see what happens with negotiations.
I'm like, what negotiations? But you know, there's got to
be something, right, Everyone assumes there must be some deal
to be cut.
Speaker 3 (17:00):
Yeah. Well, I mean ostensibly that's the whole point of
this process, right, It's to use leverage to strike deals.
But in the meantime we're all sort of grappling with
all this uncertainty of what's going to happen. But I
thought that was really interesting, good to catch up with Matt.
I did think his emphasis on the importance of China
is a really big deal, and you've said it very
(17:22):
well at the end as well, like the world's two
largest economies, there's a real chance that they're basically decoupling
from each other, which seems like it could reverberate around
supply chains and industries around the world. So again, no
matter what happens, you know, if the US strikes a
deal with I don't know, like some small Pacific island
(17:44):
or something like, maybe it doesn't really matter because the
US China relationship is much much bigger and weighs much
much much more heavily on the global economy.
Speaker 2 (17:54):
Yeah, it seems like the big one. And so it's like,
even if you're talking about US versus Mexico trail aid,
the future of US and Mexico trade is contingent to
some there still China of US China trade because A
there's a question of well, can Chinese good to get
through Mexico and then to the US, which happens to
some extent. And then B if you're really shut off
from China, how much actual actual capital I investment do
(18:18):
you then make it in North America? And how much
you make in Mexico versus the United States. Many big questions,
But like investors, it sounds like the world of shippers
and carriers are also in a certain kind of light
and see mode.
Speaker 3 (18:30):
Yeah, And I mean the other big thing happening here
is the difference between now versus twenty eighteen is you
don't have those outlet countries necessarily, right, So you can't
just re route stuff into Vietnam or into Mexico away
from China like that is no longer an option. So
that seems to make it much much more complicated as well.
(18:51):
Shall we leave it there?
Speaker 4 (18:52):
Let's leave it there.
Speaker 3 (18:53):
This has been another episode of the Authoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2 (18:58):
And I'm Jill Wasn't the You can follow me at
the Stalwart. Follow Matt Silver, He's at Matt Silver. Follow
our producers Carmen Rodriguez at Kerman armand dash Ol Bennett
at Dashbod and Kelbrooks at Kelbrooks. From our Odd Lots content.
Go to Bloomberg dot com slash odd Lots, where we
have all of our episodes in a daily newsletter and
you can chat about all of these topics. Twenty four
to seven in our discord discord, dot gg, slash.
Speaker 3 (19:22):
Od lots and if you enjoy odd Lots, if you
like it when we go back and talk to some
of our supply chain and logistics contacts, then please leave
us a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
all of our episodes absolutely ad free. All you need
to do is find the Bloomberg channel on Apple Podcasts
(19:43):
and follow the instructions there. Thanks for listening.
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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