The Freight Pod
The Freight Pod is a deep dive into the journeys of the transportation and logistics industry’s brightest minds and innovators. The show is hosted by Andrew Silver, former founder and CEO of MoLo Solutions, one of the fastest-growing freight brokerages in the industry. His guests will be CEOs, founders, executives, and leaders from some of the most successful freight brokerages, trucking companies, manufacturers, and technology companies that support this great industry. Andrew will interview his guests with a focus on their life and how they got to where they are today, unlocking the key ingredients that helped them develop into the leaders they are now. He will also bring to light the fascinating stories that helped mold and shape his experiences.
The Freight Pod
Ep. #63: Tariff Talk: Cargado’s Matt Silver, Caspian’s Justin Sherlock & Gaia Dynamics’ Emil Stefanutti on Navigating Tariff Volatility
In this roundtable-style episode, Andrew brings together a panel of industry experts at the center of cross-border shipping and trade compliance: Matt Silver, CEO and cofounder of Cargado; Emil Stefanutti, CEO and cofounder of Gaia Dynamics; and Justin Sherlock, CEO & cofounder of Caspian.
These leaders break down how complex, ever-changing global trade regulations are impacting shippers, brokers, and carriers and how AI is being used to bring order to the chaos. From tariff classifications and regulatory confusion to duty refunds and compliance risks, this episode uncovers the real headaches businesses face and the tech that's helping them navigate it.
Andrew’s conversation with Matt, Emil, and Justin covers:
- The challenges businesses face in navigating the volatile landscape of tariffs and trade regulations, including the complexities of product classification and the impact of geopolitical events.
- How AI is being used to streamline trade compliance processes, offering solutions to automate classification and other time-consuming tasks.
- The impact of recent tariff announcements on businesses, with real-world examples illustrating the challenges companies face in managing increased costs and supply chain disruptions.
- Insights into the potential implications of trade policies and the importance of adapting to the evolving global trade environment.
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*** This episode is brought to you by Rapido Solutions Group. I had the pleasure of working with Danny Frisco and Roberto Icaza at Coyote, as well as being a client of theirs more recently at MoLo. Their team does a great job supplying nearshore talent to brokers, carriers, and technology providers to handle any role necessary, be it customer or carrier support, back office, or tech services. Visit gorapido.com to learn more. ***
A special thanks to our additional sponsors:
- Cargado – Cargado is the first platform that connects logistics companies and trucking companies that move freight into and out of Mexico. Visit cargado.com to learn more.
- Greenscreens.ai – Greenscreens.ai is the AI-powered pricing and market intelligence tool transforming how freight brokers price freight. Visit greenscreens.ai/freightpod today!
- Metafora – Metafora is a technology consulting firm that has delivered value for over a decade to brokers, shippers, carriers, private equity firms, and freight tech companies. Check them out at metafora.net. ***
Hey FreightPod listeners. Before we get started today, let's do a quick shout out to our sponsor, rapido Solutions Group. Rapido connects logistics and supply chain organizations in North America with the best near shore talent to scale efficiently and deliver superior customer service. Rapido works with businesses from all sides of the logistics industry. This includes brokers, carriers and logistics software companies. This includes brokers, carriers and logistics software companies. Rapido builds out teams with roles across customer and carrier sales and support, back office administration and technology services.
Speaker 1:The team at Rapido knows logistics and people. It's what sets them apart. Rapido is driven by an inside knowledge of how to recruit, hire and train within the industry and a passion to build better solutions for success. The team is led by CEO Danny Frisco and COO Roberto Lacazza, two guys I've worked with from my earliest days in the industry at Coyote. I have a long history with them and I trust them. I've even been a customer of theirs at Molo and let me tell you they made our business better. In the current market, where everyone's trying to do more with less and save money, solutions like Rapido are a great place to start To learn more. Check them out at gorapidocom. That's gorapidocom.
Speaker 2:All right.
Speaker 1:Welcome back to another episode of Freight Pod. I'm your host, andrew Silver. We've got a panel today, not just one special guest, two special guests and my brother Just kidding Three special guests. I am joined today. Thank you, sherlock. Ceo of Caspian.
Speaker 1:These are three companies who are very much impacted by the word of the month tariffs. So we will be talking tariffs. We're going to spend a little bit of time as we get started just getting to know certainly Emil and Justin. For those who have not listened yet, check out my brother's full episode. There's plenty in there on what he's building with Cargado. We'll get a quick refresher for any audience members who haven't heard that episode.
Speaker 1:But we'll spend a little bit of time starting with Emil and then Justin on their businesses and how they kind of got into the space, and then we'll move into a panel-style interview conversation around everything that's going on what the impact of these tariffs are to companies like Gaia Dynamics and Caspian and Cargato who are effectively working with shippers, carriers, brokers that are navigating. The impact of the tariffs and then just kind of anything related to that is kind of the goal today. So, emil, let's start with you. If you don't mind, give us kind of a quick background of kind of who you are, how you got into this space and what you're building with Gaia.
Speaker 3:Yeah, absolutely, andrew, and thanks for having me.
Speaker 3:I come from many years in the legal tech space and compliance technology space, and last year working with our co-founder, andrew Ng, who is one of the you know top names in AI these days.
Speaker 3:You know we decided to give it a go and go after the cross-border regulation compliance space, which essentially means everything that happens for people to be able to import and export products from one place to another. Anytime you do that, there is a bunch of rules that you have to follow and things you need to comply with. So the question that we are using AI to answer, which is a simple question with a very complex answer, is if I have this product made of these materials or components or ingredients in this country of origin and I need to send it to this other country of destination, what do I need to know? And that's going to be a combination of defining what the product is, with classification and you know what are the tariffs, of course, that you're going to have to pay, and then what regulations are applicable to it in the country of destination, and we'll talk more about that, but that's kind of what we're building at, guy, is a very simple way for people to answer a very complex question.
Speaker 1:So I was going to ask that Is that challenging today? Is it not as simple as, like, I just go online and I search. Okay, I'm buying something that's being made in Vietnam and I need it brought to me in the States. I click a few buttons and I know what I'm doing. It's not that easy.
Speaker 3:I mean, I'll give you some of the stats right.
Speaker 3:There are about 56 million cargo shipments coming in and out of the US every year and, according to the World Bank, it takes about 10 hours per shipment to deal with regulation compliance stuff.
Speaker 3:That is anywhere from figuring out what paperwork do I need, what's my classification, what are the duties that I need to pay, and then actually preparing all those materials, getting them validated and submitting them to CBP in the case of bringing stuff into the US.
Speaker 3:So if you assume that the blended hourly rate of full-time employees and brokers and lawyers and professionals working on this stuff is somewhere around $187 in the US, times 10 hours, times 56 million cargo shipments per year just in the US, that's a huge amount of money and a huge amount of waste. And you will think that people get it right because they're spending so much time and money doing it. But even according to CBP, 30% of the time, even just classification stuff, they get it wrong, right. So you know, one of the reasons why this is tough is because these regulations change all the time. So just in the last five years, there's been close to 7,000 changes to global regulations, right, and that's about 120 per month, and this is before even Trump became president, right? So that has probably accelerated quite a bit in the last few weeks, and that's what makes it really, really tough.
Speaker 1:What drives so many changes? Who? And is it just country leaders across the world deciding they want to make more money off of an opportunity, or how does what's kind of driving all that?
Speaker 3:um, I mean, there are very. There are different reasons, uh, from good news and bad news, I guess you know so any geopolitical kind of situations, from free trade agreements to trade wars, to you know things more more complex, things like anti dumping regulations and countervailing duties and you know a bunch of other things. Like, in the US alone, there are a bunch of agencies, right, fda, and you know USDA, and the EPA, and you know. So all of those are kind of evolving as we go, right? So if you just look at the HTS, which is the Harmonized Storage System in the US, if you look at it today, we have had 10 updates in, just, you know, the last three months, right, and that's a huge amount of updates, right.
Speaker 3:Obviously, if you read the news, you know why there's so many changes. But you know it's a complex world, right, and some of these rules have been designed for products that didn't exist. You know when these rules were put in place, right? So we are continuously inventing new things and adding new products and those things have to kind of be absorbed by the system and things will just update, right. So, you know, I don't think there's a simple answer to your question, but yes, there are a lot of moving parts that actually make things change, and regulations have to sort of keep up with that.
Speaker 1:And how does your team? You know you mentioned your co-founder being a kind of leader in the AI space. I'm curious how are you leveraging AI to kind of, I guess, assist businesses in navigating these trade compliance issues?
Speaker 3:Yeah, I mean in the simplest of terms, and obviously there's a lot more complexity than this, but when you look at compliance, it really comes down to a lot of regulations, right, and when you say, what do I need to know? If I'm bringing, let's say, a pair of shoes manufacturer in China into the US, then you're going to see a bunch of different rules that have been written. So there's a lot of written content, right, typically in the form of laws, and you know even federal register updates, right, and if you read any of those things and for a human being, keeping up with all of that and remembering all of that is very tricky. So you know, on average today, based on the conversations we've had and some of the tests we've done, a good broker or a human expert would take probably half an hour uh per product today to even classify it right. And classifying means that you assign a code to it and there is a kind of a universal coding system that most countries use and there are about anywhere between 10,000 and 15,000 possible codes for any product out there and it's very hard, right, like a bicycle is not a bicycle, it's some sort of transportation vehicle that is not a train or it's not a boat, that is not a bicycle, it's some sort of transportation vehicle that is not a train, or it's not a boat, that is not a plane, or it's not this or that. So it becomes really, really hard.
Speaker 3:So AI, especially modern AI, generative AI, has this great capability of reading a lot of content and being able to kind of make quick decisions and recommendations based on those huge amounts of content very quickly, right? So if I had to answer the question you know what is the classification for, you know this hub, you know I would have to go into the web and look it up and figure out what it is made of. And you know, and, and you know whether it's a bigger or smaller or heavier or lighter, that these are that, and then go into an HDS system and figure out okay, is this, is it? You know this, or is it that? And isn't? You know it's, it's, it's a lot of. It's like a decision tree kind of process, and that would take me potentially half an hour to figure it out, whereas Gaia, right now, can do the same work in five to eight seconds.
Speaker 4:So that's the big, the big improvement, I think, in terms of processing that that he can do right now and just to clarify, like with the cup example, a plastic cup versus an aluminum cup versus a glass, those, those might all get taxed a little bit differently, for sure.
Speaker 2:Different tariff codes. Yeah, there's so many things here to back it up. The tariff code is getting constantly updated, even before Trump. It's six times a year at a minimum usually that the International Trade Commission will update the tariff codes, and that's because companies are lobbying for classifications and applying for rulings from customs all the time for new products. There's a lot of product tariff codes that are just other other meaning, like they don't really fit in a defined category and you actually want to get classified properly and file a ruling to be classified properly so that you can potentially get a more favorable rate.
Speaker 2:There's the code itself is hilarious 0101, like the. The beginning of the of the of the code is for live asses, mules and hinnies. Under header 01 is live animals, like you. You just there's stuff in here that has been in here since the formation of the economy and like we're still using this system, and so you can imagine why there's constant updates and it creates a total nightmare for customers that have long product catalogs and I think like that it makes a ton of sense to be using a product like what Emil's using to do classification, a product like what Emil's using to do classification.
Speaker 2:When I took the customs licensing brokerage licensing exam. 16 of the 60 or 80 questions I think it's 80 questions or 20 of the 80 questions are classification questions. They give you like four sentence description of a product and where it's coming from and you got to figure out a duty rate or an eight or 10 digit classification. They're really hard questions to answer. Or an eight or 10 digit classification? They're really hard questions to answer and so this stuff is seriously complex and constantly changing.
Speaker 1:So if I learn anything today, it's the first thing ever tariffed was the live mule.
Speaker 2:Yeah, I actually I wonder what the first thing. I mean, I think customs has been around since before money was invented, but I don't know what. The first thing ever. It might have been a mule.
Speaker 1:Okay, we'll keep that. Let's use this as a good segue into your own story, justin. So same thing, kind of give us some kind of background on yourself and Caspian, what you're building. Let's start there.
Speaker 2:Yeah, absolutely so. Thanks a ton for for having me. Um, it's a pleasure to chat with all of you guys about. About the topic of the day terrace um, I think it's a truly crazy time right now to be in trade. Uh, it's, it's exciting because there's lots of excitement, but it's also, uh, sometimes like paralyzing because the news is changing so so rapidly. So we could talk about about that, um, but uh, basically we, we are building caspian to do all the post-entry analysis, audit and and and corrections, and and and and tariff refunds that you might encounter. And because, like, the situation on the ground is so fluid in supply chain world even before Trump came into office, there's a lot of movements and clearances that get done in a non-compliant or suboptimal way and we want to go back and help companies correct that after the fact. And so we're basically building this audit layer for global trade.
Speaker 2:We're starting with a company called a product sorry, called duty drawback, which is basically a refund for products that are exported from the U? S. Most developed economies have a drawback concept. It's an export incentive. It helps businesses, help support manufacturing businesses and then brands that are importing, storing locally and then shipping back out all over the world. So, generally speaking, those are US companies if you're applying for a US drawback. It also helps global businesses move inventory into the US and then move it back out if they need to for inventory management purposes, and so it kind of reduces risk for global businesses to operate from the US. So it's net-net like a bipartisan thing that most people agree is beneficial to help grow export volume and grow GDP.
Speaker 2:It's a super complicated area of supply chain services. It's really hard to gather all of this data. We can get into some of the specifics of it. It's really hard to gather a structure, analyze all this data and then calculate and submit these claims. You have to be a licensed customs broker to do that work, which we are. You have to have a direct connection with customs to transmit entries, which we do, and that is what we've been working on for the past year or so since we incorporated.
Speaker 2:So, yeah, happy to talk more about how we're using AI in the product. It's a real thing. That is not, you know, me waving a magic wand and saying, like AI, like it is still a human in the loop process. But yes, we're using both both more traditional AI and LLMs every day in the customer experience and yeah, it's been a blast. I mean we started the company with myself and three other XFlexport customs folks, so the team has a ton of background in customs and then has built AI products in freight audits at Loop, which is another exciting AI logistics tech company. And then I ran Flexport Capital, which is the lending and finance group at Flexport, working with finance stakeholders of these brands who are basically saying, hey, we don't have good tools to manage our duty exposure, can you help us? So that was kind of where the motivation for Gasping came from.
Speaker 1:I was literally just about to ask you that. I was like what was the inspiration for starting the company?
Speaker 2:Yeah, well, I was at Flexport during Trump's first term and the COVID supply chain crises and the Ever supply chain crises, like the Evergrande clogging the Suez Canal, if you remember that, and like all the 90 container ships parked off the port of LA, and it was just like an insane, insane time. And during that time I think it was really hard to get products into the country at all and freight prices, cross modes were skyrocketing. Um, I think that's really where, like that focus on mexico and near shoring started to really ramp up in that time frame. Um, uh, which which obviously is where matt's matt's working right now um, and a lot of people at that time really looked at their rate costs going up and they were like, why are they hammering their providers on rates? Why are you charging me so much on my logistics rates? And they didn't realize that it was the Trump tariffs also building in another 25% into their cogs for China imports.
Speaker 2:And at Flexport we were very heavily focused on Trans-Pacific Eastbound cargo from Asia to the US. So that was a big percentage of our customer base. And, yeah, and then at the end of my time there, we worked on a product called Instant Drawback which Flexport offers, which is a pretty cool product. Basically, they file your drawback claim for you and they actually advance you the funds immediately, and so Flexport Capital actually is the group that finances that payment, and it's kind of just fully no risk at all to the customer. So I think we'll hopefully launch something similar to that in the next year or so.
Speaker 1:And am I right in saying to both you, justin and Emil, that your customer base are the shippers, the manufacturers themselves?
Speaker 3:In our case it's a combination right, and it's been growing rapidly, I think. On one hand we're helping brokers and consultants that are helping you know, companies to you know, to figure out how to import things. Then we're getting a lot of customers directly. You know that are importers or exporters, and then more recently we've been having a lot more interest from e-commerce platforms, right, and especially as the Minimis it's going away. That introduces a lot of complexity and I don't know for those that don't know much about the Minimis, even though that's been in the news everywhere lot of complexity and and I don't know for for those that don't know much about the minimis, even though that's been in the news everywhere, it's up until now, in the us, every package under 800 in value didn't have to go through the scrutiny that most you know shipments go through in terms of classification and descriptions and duties and and so on.
Speaker 3:That was kind of abused by a few companies, some out of China, like Shane and Temu and so on. So, in a nutshell, the administration has decided that that's actually going away, right, and that represents close to 4 million shipments per day. And that represents close to 4 million shipments per day. So a lot of companies that are in the e-commerce space have never really had to classify their products or deal with tariffs in a big way and all of a sudden it's like, okay, now we have to rush and get all these things done. So we've been seeing also, like I said, some, some e-commerce players knocking on our door and trying to, you know, get ahead of this as quickly as they can.
Speaker 1:Are you looking to grow your brokerage? Are you struggling to land new customers in these challenging market conditions? Look within so many companies that tender you freight throughout the domestic United States also have business coming out of Mexico. A year ago I understand why you might not have seen that freight as an opportunity, but today Cargado exists and that means any load coming into or out of Mexico is now an opportunity for you to support. In just over a year I've been able to see Cargado go from ideation to launch to rapid growth. It's amazing to see how many logistics companies have been able to use Cargado to expand into Mexico to grow their business. Cargado is the first platform that connects logistics companies and trucking companies who are moving freight into and out of Mexico. If you move Mexico freight or are planning to reach out to Cargado today at cargadocom, that's C-A-R-G-A-D-Ocom. Thank you and Justin. Your customer base largely shipper manufacturers.
Speaker 2:We go direct to shippers yeah, both brands and manufacturers. We also have started having some conversations with brokers that want to offer some of these more consultative products, but they don't really have the headcount to invest in it and so we can step in and white label stuff for them. We haven't launched anything official or public yet, but we'll have some of those partnerships later this year. Live.
Speaker 1:And for both of your companies. The recent, recent news the announcement of the tariffs that is like monumental impact to your business, right, like it's pretty significant change in what your customers are coming to you for, or how much they're coming to you for. Is that right?
Speaker 2:yeah, absolutely. I mean. I just to give you a concrete, maybe two concrete concrete examples. One we have a customer that imports electronics from China and of course they were paying 25%, section 301% on their next set of shipments. I spoke to the CEO last night and they're trying to figure out when they should make that inventory purchase. Their buying season is in Q2. They have to have it in stock. What do they do? And that's a massive increase in their cost of goods.
Speaker 2:The other example is a less alarming one, which is an agriculture company, a grower like St Citrus Fruits, and they import and export. They grow in North America, us and Mexico. They import from all over the world and that's a really seasonal business. And now, you know, historically the tariff rates on agriculture products have been pretty low. Looking at, you know cents per kilogram, and now they're going to be paying 10% of the value of the products. So they, they were their, their tariffs have gone up like 100x. So they're, they're, it's, it's still. You know 10 of cogs. It's not the end of the world, but it is a. You know, some of these businesses in distribution and wholesale have pretty slim margins. You can't, you can't really absorb stuff like that overnight.
Speaker 1:Yeah, all right, matt. I want to come to you now and your business is a little bit different, because I don't feel like and correct me if I'm wrong with calls from your customers being like oh my God, this is changing everything for us, but there is potentially massive impact to your business down the road as a result of how supply chains may shift to be more North American, us, mexico-focused right.
Speaker 4:Yeah, I would, I guess. First of all I would clarify both of them mentioned brokers. They're both talking about customs brokers, not freight brokers, which I know a lot of your audience is freight broker-oriented. So to clarify that, one thing number two this feels like that last leg of the nearshoring wave that really kicks over an influx of that volume, and so I think between the initial update from NAFTA to the USMCA, then you've got the beginnings of the trade war during the first Trump administration between the US and China. You've got everything like that balloon that was flying over the United States from China and the CHIPS Act continued to encourage more and more reliance moving away from China and over to Mexico, and then the pandemic on top of it kicked everything over, and now you've got the tariffs, and so for so many different reasons it makes sense for manufacturers to move to Mexico, and I think over time we'll see that affect our customer base, in particular the freight brokers that are serving those companies, but it also has a major impact on both of your customer bases too.
Speaker 1:So it's like the smart brokers are thinking how do I grow my business? Like not today, not tomorrow, but over the next five years? Those are the ones that are saying okay, if I'm looking at the global trade environment, I should probably start playing ball in Mexico, because that's where a lot of business is going, and if they want to do that, they probably should start talking to you. Is that right?
Speaker 4:they probably should start talking to you Is that right? And, more importantly, start talking to their customers about how to support them if they are starting to make that move. I remember at Forger we had a customer overnight. They effectively bought a plant in Mexico when they realized they could not get filters out of China anymore during the pandemic and so they bought a plant in Mexico, started manufacturing down there and shipping to the United States. And so, as a broker if I were sitting in a freight broker's shoes right now working with shippers, especially if they were relying on imports coming in from, let's say, drage moves from Long Beach that are all of a sudden dropping off you're probably going to want to start talking to your customer about where to source capacity in Mexico, about how to support their network as they shift to Mexico, and maybe even offer up some good markets in Mexico where to set up shop, like Monterey, querétaro, the Bajio, mexico City and Puebla and Guadalajara.
Speaker 1:And let me give you just a minute to well as long as you need, but just to kind of define your business, what you're building at Cargato, for those that have not listened to our episode together in the past, yeah, so we support over 200 freight brokers, 3pls, freight forwarders that are moving cross-border freight.
Speaker 4:They're able to post their loads and lanes in Cargato. To post their loads and lanes in Cargado, it's a marketplace or a load board where trucking companies about 750 of them can bid on that freight. They get notified based on their capacity and their preferences. They bid, they negotiate through the platform and then get connected via email.
Speaker 1:I'm just curious how has the last month impacted your business, if it has at all, or is it more just kind of things for you to talk about with your customers? Help me understand if there's been an impact there.
Speaker 4:It's consumed all of my time writing things on LinkedIn and in my blog. Well, I think you were already consuming all your time writing things on LinkedIn?
Speaker 1:and your blog but I think you just got more content to do that. I got more content.
Speaker 4:Well, so it became a topic. In every single conversation I've had over the last month or two leading up to our fundraising announcement and all that stuff and talking to investors, I had to answer questions about tariffs. I know that even Adriana, my wife, was looking for experts that could talk about tariffs and everything related to trade at Tegas or AlphaSense. So I'm not only hearing it about it in my own work calls, but I'm hearing about it after work too.
Speaker 2:And the Studio Ghibli memes happened at the exact perfect time as well.
Speaker 4:It's been perfect.
Speaker 2:Your image generation has gotten a lot better for your memeing.
Speaker 4:I pivoted with the image generation. We'll see what comes up next. Maybe we'll do some legos or the new uh, what are those new sets that everybody's posting?
Speaker 2:about the starter kits. It's the starter kits.
Speaker 4:You'll see, I'll post you with your got it all right.
Speaker 1:Moving off of your nonsense, it's great. I appreciate the intros from each of you. Let's just start with a kind of very general what are the most significant changes in tariffs that have kind of come into effect in the last month? And I'm also curious which industries are most impacted that you've seen and at this point I'm not going to call on you guys I will call on you guys individually here and there, but if I don't call on someone individually, it's whoever wants to grab it. Try not to speak over each other.
Speaker 3:Yeah, I can give you my two cents based on what we've been seeing and it's been nonstop drinking from the firehouse a little bit in the last few weeks. Apparel has been interesting, right. There is a lot of stuff in the retail industry especially apparel, you know footwear accessories coming from China. So that's a, you know, hair on fire kind of space. You know there is a lot of people kind of trying to figure out first of all, what all of this is going to mean to them and then what are their options, if any, and also, I guess, even trying to understand, like with this stop and go and stop and go kind of, okay, we're going to do tariffs and then we're going to stop the tariffs, so then we're going to definitely do the tariffs, but not for the next three months. So even those are trying to move things from one place to another are trying to figure out is, you know, by the time we move all of our manufacturing or do whatever we need to do, is that is everything gonna have be changed again? Uh, so we, we've seen that a lot.
Speaker 3:And then automotive has been crazy, also active. Uh, we've seen a lot of that. Just last week we, you know, had a broker come to us with a list of 30 000 parts, uh, that needed to be classified, right? So if you, if you take, you know, roughly 30 minutes per product times, 30 000 products, that's a crazy number of hours, 180 days for 10 you know 10 people, uh, at a you know 250 bucks an hour type of rate. So it's, it becomes crazy. Um, so I would say those are the two that I've seen recently, like, really, people showing up with their hairs on fire trying to figure out what they're gonna do, but I don't know.
Speaker 2:I, you know love to hear what, uh, you guys are seeing too yeah, um, the, I think for, for for me it's been like the, the. The margin profile of the customer directly determines, like, how sensitive they are to the, so the tariff impact. So, like we spoke to a defense the defense company, their margin profile is really high on their hardware. They said that tariffs could go up to 600% and they would never switch away from supplying from China. So companies like that, the reality is that Chinese manufacturing is really high quality and really affordable, and so there's some sectors you're just not really going to see shifts unless it's explicitly legislated. Other sectors are less resilient.
Speaker 2:So I think, e-commerce, with the Section 321 de minimis loophole going away, lower value products if you're selling T-shirts or Amazon seller type products, say, msrp below $100, it's a really big. This whole tariff situation is a really big deal. So, yeah, like Emil was saying, footwear, lower value apparel, luxury items again a little bit more insulated and now certainly paying more duties per unit or duties per shipment, if you will, because tariff rates are going up on an ad valorem basis, per shipment, if you will, because tariff rates are going up on an ad valorem basis. But there are ways for those companies to get some of those duties back that don't require them to change their supply chains or change a whole bunch of operational setup. So yeah, that's my high level.
Speaker 2:I think manufacturing is kind of TBD for a lot of manufacturers right now because they kind of need to plan on a little bit of a longer time horizon and most manufacturers I talk to are just trying to do absolutely nothing until there's clarity, because they can't afford to make some sort of sudden move or change to their sourcing or to their supplier base until they to to to their, for their supplier base, um, and until they, until they really know what's going to happen with, with the tariffs so I, so I get how there's still some ambiguity around what the final answer will be or, like you know, numbers will look like in terms of who gets tariffed how much, when it's all said and done, when, when they finally say, hey, these are the numbers, this is what it is now moving forward, what options?
Speaker 1:what are like all the options that a company has. Let's say I go, and you know, I'm in the middle of a rebrand for the podcast, the Freight Pod, and I got a new logo coming soon. And let's say, I start selling merch and hats and t-shirts and I make them in China or whatever. And then this happens, and I've been doing this for a while. Let's say, what choices do I have to navigate this?
Speaker 4:to navigate this. Thank you, vietnam. It seems like Vietnam is really quick to come to the table, if it's. If it's, you know, clothing and apparel I think there is some made in Mexico for sure. I don't think all of a sudden you're going to be making hats in the United States, though so it's.
Speaker 4:It's definitely still going to have to come from another country, and we saw, immediately after the States, though so it's definitely still going to have to come from another country, and we saw immediately after the worldwide tariffs were placed, that Vietnam is one of the first countries to come to the table and say hang on, one second, we'll negotiate, and so I think they'll be rewarded by being the first ones to come forward. And there are companies that, over the last four or eight years, they just relocated all their manufacturing from China to Vietnam and to other countries in Asia that had a friendlier relationship with the United States, and they're relying on that, and they're absolutely lobbying right now to get exemptions in place or to be able to have a longer term path to not have to relocate yet again, unless you know, yeah, know, yeah, of course I'm going to advocate for mexico, but not all of them can.
Speaker 2:They don't have the resources or the raw materials to be able to produce there yeah, I mean, andrew, I think you should just put a like trump tariff fee on your, on your invoice to your customer. I mean?
Speaker 1:is that a?
Speaker 2:realistic thing that's going to happen. I thought it was something I mean today, but I was thinking about that. I mean I think in an e-com brand that makes a ton of sense to me. I mean, gosh, I live in San Francisco. The tax portion of every receipt when I go to a restaurant it's like five lines, at least in SF. I think that would go over. Well, I don't know, maybe the rest of the country. But I mean there's definitely things you could do on pricing On the supplier side. Some of the creative ideas. I've heard some creative ideas Like FX is moving around a ton right now and so it's kind of a.
Speaker 2:You know the foreign currencies have devalued against their dollar for a long time now and then that started to correct with the tariffs. The dollar's appreciated a lot recently. You can look at the local price that you're procuring in. Most procurement is done in US dollars, but you can look at the price per unit in local currency and see if you're actually paying a lot more now than you were when you negotiated that supplier relationship in the first place. That's one interesting one that I heard recently from the FX team at JP Morgan. They were advising some customers on that. The other things. There's terms and working capital. How can you just delay paying duties at all? There's like a bonded warehouse is something that I've heard consistently in the last several days. I think Shipmonk just launched their bonded warehouse offering today, but in a way that you can delay.
Speaker 1:Oh, go ahead. So I, just for the audience's sake, can explain how does bonded warehouse work? What's, how is that a solution?
Speaker 2:Basically, you just, you just don't pay. You don't pay the duties until the goods leave the warehouse into the United States for consumption. You enter them for consumption when they leave the warehouse and get shipped out to a customer. So when they, when you bring them into the country, you, you, you don, you basically get duty deferral. But this has been like I think it's been mentioned on a lot of podcasts recently talking about this. So, yeah, matt, were you going to add something?
Speaker 4:there. Can you actually explain what a bond is?
Speaker 2:Yeah, a customs bond is. Basically you have to put this up with CBP to cover the duties that you may owe. So it's like insurance that customs makes you buy in case you become delinquent with customs. So if you don't pay your duties on time, customs will clot out of your bond and you have to be able to go to the bond provider and they'll get paid by the bond provider and the bond provider will chase you as the importer and so yeah, there's significant costs to doing this right. Yeah, go ahead, matt.
Speaker 4:So a bonded warehouse is putting up a deposit effectively to say I'll hold onto these materials, I won't let them get consumed until taxes and duties have been paid on this. They're certified to do that, They've got the right infrastructure for it and they're they're enabling it Right.
Speaker 2:And it costs like 50% more than regular warehousing, so it's not necessarily the but, what's the value of?
Speaker 1:that. Is there an expect? Is there a hope that the cost, the tariffs, will go down by the time you release them, or what? Why that's why?
Speaker 2:Yeah, it's just like there so much uncertainty, just delay paying tariffs, and time is like preserved time right now. It's kind of the thinking generally is that you know, hopefully there will be some trade deals negotiated, even on the 10% base reciprocal tariff, like maybe that'll get negotiated away for certain countries, or certainly the 145% on China. I think it's going to get a little bit worse in the near term, but I think people are hoping that in the next several months there will be some type of resolution there that you won't have to pay 145%. So if you can get the stuff into the country and then have it sit there for several months and wait and then pay duty when you ship it out to customers, maybe that's a better move.
Speaker 1:Attention freight brokers and 3PLs. Greenscreensai is transforming how freight professionals price and quote freight. With AI-powered pricing and real-time market intelligence, Greenscreens delivers accurate, reliable predictions to help stay competitive in a constantly shifting market. Whether managing spot rates or long-term contracts, Greenscreens empowers brokers to quote with confidence and boost profitability, removing the guesswork from freight pricing strategies. Trusted by over 220 brokerages, Greenscreen is leading the way in the future of freight pricing. And now there's Illuminate, Greenscreen's latest product. Designed to shine a light on deeper freight market insights. Illuminate provides unparalleled visibility into spot and contract freight trends, giving users a clearer view of pricing fluctuations and market conditions to inform smarter, more profitable decisions. Visit greenscreensai, slash thefreightpod and discover how Greenscreens and Illuminate can help win more business more profitably. It's interesting to think about the cost of the tariff being so substantial that it's worth it to have products sit in a warehouse that you're paying up to 50% more than it would in a warehouse otherwise. That just feels like a really good way to understand how significant that cost must be. Yeah.
Speaker 2:And it's so hard to generalize about these things because each customer's situation is totally different. So, if your unit economics can sustain like we were talking about that 600% tariff comment earlier if your unit economics are profitable with 145% tariff and your competitors are not, buy a lot of inventory and put your competitor out of business, like you know, take over the market because they can't sell products at a loss. So there's all sorts of crazy game theory now that customers are trying to think through.
Speaker 4:I remember we had back when I was brokering Freight and working with a suit manufacturer that was importing a lot of the raw material from overseas. They would hold it in a bonded warehouse. It would be a large roll of fabric, probably a million dollars worth of material, but they would keep it in a bonded warehouse and they would cut a 20th of it at a time and pay the duties on $50,000 worth of that material at a time, as opposed to having to import all of it at the same time. So I think part of it. You could look at that the same way where, with e-commerce, you might pull in a million dollars worth of materials but not want to pay duties on all of that, yet you might only want to cut or sell what you're going to want to pay taxes on before you'd start to process the rest of that, basically spreading the money out.
Speaker 2:Mm-hmm yeah.
Speaker 1:So in light of these kind of challenges like how, let's say, someone wants to move a supplier and go from China to Vietnam, can you explain what that process is like, how long that takes? I mean, are you having to stop your business for months at a time? Like, how do you navigate that in a timely manner? I'm just curious what that looks like, if any of you know.
Speaker 3:And I guess it depends, of course that's the most obvious answer it depends on what it is that you manufacture and, of course, what you know, how sophisticated, uh, you know the, the infrastructure and equipment and all that and manpower that you need, right? So there are, like uh, justin said, there are certain things that it's just really hard to move. Even if you, justin, said there are certain things that it's just really hard to move, even if you wanted to, you may go into a place where the type of engineers or the type of you know people that you need the talent that you need to manufacture certain things, it's just not going to be available, right? So, assuming that you are one of those in one of those industries where you can actually move, and that you know the infrastructure is already kind of available or can be made available to move, it's still, you know, I don't think I haven't heard of anybody that is just doing this thing you know, like very quickly, obviously, if you're doing like I don't know T-shirts or sweaters or something that is relatively easy, then you can move relatively quickly.
Speaker 3:But if you're doing consumer electronics, if you're building iPhones, you're building very complex auto parts or things like that, it's going to take years, I think, for many of these people and whoever actually can find the resources and the equipment to actually do it at all, right. So I don't think it's so simple, right and to be able to do it. That's kind of what we're hearing on a daily basis people figuring out how to deal and begging almost that the Chinese trade war kind of with the US eases up a little bit because you know they don't have any options right now. I mean, some of them are really struggling with that.
Speaker 1:Yeah, it just seems so challenging to think about a multi-year near-shore effort or just change effort from one country to another, especially given that you know, as you think about politics in our country, every four years you could see a monumental shift in the entire perspective of the government.
Speaker 1:And you know we're seeing what feels like the most drastic shift from one government to another in this current establishment. And this is not by any means meant to be for or against either party, more just a matter of how do you navigate such volatility in terms of governmental regulation? Because if I'm sitting here saying, okay, trump's following through with the tariffs, it's going to happen and it's going to be really bad for China, anything I'm making there and challenging things I make there, I need to move and it takes me two years to do that. But theoretically you could say there's a 50 chance. I know it's not 50, but, like you know, one or the other party wins in four years and if it's the other one, it's reasonable to assume all this stuff gets pulled back and it's like you can't just like pick up and go back to where you were right. So I just how do you know? How do people, how do companies think about that.
Speaker 3:Any idea like how do you navigate that plus you have to keep in mind yeah, sorry, and you have to keep in mind that the other countries are not staying put. It's not like everybody's just waiting for us to make whatever decisions. They're also kind of reacting, and reacting in a retaliatory way also, right, so it's not getting any easier. Sorry, matt, that you were going to potentially provide a better answer than this.
Speaker 4:No well, I think you're correct that other countries will start to make other plans.
Speaker 4:I don't think there's been any inconsistency about how US presidents over the last four or five administrations have felt towards China, so I think that will stay and if whether it's JD Vance or whoever it is the next president after Trump, they're probably going to go all right. Well, thank you for taking care of that. And there's a race right now. There's an arms race, there's an AI race to competing with China for the United States. So anything the US can do to get ahead against China, I think we're going to keep moving in that direction and that's where I think we're going to see a new do. I think it's going to forever be 125 or 150 percent? No, I think that will eventually calm down, but I don't think it goes back to what it was like before, and I think more and more companies start to realize that after, like I said before, everything else between the updated trade agreements and the pandemic and now these tariffs there have been so many reasons now that say it's not safe to rely on China anymore.
Speaker 1:That makes sense. Let's move to kind of the operational impact, and I'm curious both to your companies and to that of your customers. So let's move to kind of the operational impact, and I'm curious both to your companies and to those of that of your customers. So let's start with your own companies, like can you give some examples of how you've had to adapt operationally to navigate the last I don't know two months?
Speaker 3:I'll start. I mean, it's been all about acceleration for us. It's we. You know we.
Speaker 3:We had an original plan that was defined, you know, right before the you know Trump won the elections and you know we had to accelerate that plan four or five times already. You know we were supposed to launch a product somewhere you know around now actually. And then we, when we heard the rhetoric around tariffs, we said no, we got to go faster. We need to launch our tariff tools and our classification tools. And we did, on January 20th, tariff tools and our classification tools. And we did on january 20th right, no coincidence there for sure.
Speaker 3:And uh, and then it's um, we, we were expecting to be selling mostly to customs brokers first, and then, you know why, a while later, really talking to importers and exporters, and then, a while later, you know, to be talking to e-commerce and all of the sudden, it's like they're all knocking on our door right now and it's a great opportunity.
Speaker 3:But we had to scale very fast and the team and all that Granted. There's arguably been a better time in the history of software development than now to be able to scale fast and to be doing, be able to do a lot with a lot less um. So you know, thank god for that, you know, because otherwise it would have been really really hard but um, but yeah, I think that that for us it's been really about how how can we move much faster so that we can help and support a lot of these people? I know there's nothing we can do about the geopolitical situation, right, there's no way we can influence that. But you know we're trying to sort of be able to help those that are now dealing with the fallout of all this mess, right, and that they need very quick reactions and tools and stuff that can get them back on track as fast as possible.
Speaker 2:Yeah, I second that in our roadmap from a development perspective now, because the this awareness at a c level right now of of tariffs is so much higher than it was in the fall. Um, and I think everyone kind of knew they knew all all c teams like how to companies had some perspective that like tariffs were going to probably shift but we weren't really really getting the level of inbound that we're getting now. And now, if you know, every single C-level executive all over the world has tariffs on their mind every day and that's just a completely different world to live in when you're doing, planning and developing a product. I think we can take a lot more bets now. That may have seemed like, oh, let's do that later in the year, let's do that when we're closer to our Series A or whatnot, and actually starting to pull some of those experiments in faster is one big change for us.
Speaker 2:The other big change is just that the rate of change is so fast and it's impacting our customers so immediately that when we have clients that are filing drawback claims on a quarterly basis, the mechanism of how we actually aggregate their data, structure it, parse it, create claims out of it that's changing a lot and it's changing more rapidly than we anticipated it would be, and so I think that's changing a lot and it's changing more rapidly than we anticipated it would be, and so I think that's been something that we just have to be responsive to, and we've spent a lot of time building our versioned HTS database, for example, where we have, every time the tariff schedule changes, we have a date stamp version of it.
Speaker 2:Time the tariff schedule changes, we have a date stamp version of it and we can look at historical customs entries and identify the tariff rate, even if that tariff rate no longer exists currently. Things like that that are. You know, when you think about building a technology product, you have to think about building these sorts of assets, um, that you're going to rely on for future product launches, and we've had to deal invest in some of that stuff more recently.
Speaker 1:That makes sense, matt? Are you seeing any of this, or is yours more about, like, longer term conversational preparedness?
Speaker 4:So the again, one of the biggest impacts is definitely social media strategy, but the it's, if anything you know. So we have two different types of customers that we work with. It's. On one side, there are brokers that are starting to see Mexico Freight for the first time. They'll use Cargada to convert those first opportunities.
Speaker 4:That category of brokers we've seen be a little bit more skittish around going after Mexico Freight for the first time if they weren't already doing it, and so that could have a near-term impact on sales. For example, for the brokers that are already moving Mexico Freight, though they're going to lean more into it. They are leaning more into it and getting aggressive with quoting freight, and so it's not been anything that's needed, any sort of product adjustments. For us, it's more about just providing as much information to our customer base as possible, making sure the sales team understands how to talk through it and explain it, and being able to leverage the data that we've got, that we've collected from bids from carriers, and share that data with the market so that people understand what's happening in rates.
Speaker 1:I don't understand why, in the near term, you're saying why would people be more skittish now to get involved?
Speaker 4:in mexico, well as of the last week. They can feel better about it.
Speaker 1:Finally because because it.
Speaker 4:Yeah, it came out that that the usmca was basically mexico and canada were not affected by any of these tariffs. Uh, and, and that clarification only came out in the last week. So for the last three months leading into the end of January, we all thought that there were going to be some version of tariffs placed on Mexico and Canada. Then, a few days after the end of January, the beginning of February, basically you have the agreements in place with Mexico for preventing drugs and illegal immigration, specifically for targeting fentanyl, and then, going into March, you have the same problem coming up again. Where there's a threat of tariffs, people start to get scared, they start to accelerate, pushing more volume out from Mexico and Canada, and you start to see that spike happen again and then you see it dip and so, as brokers think, all right, so the market's compressing Because, remember, this whole trade war is affecting domestic volume too.
Speaker 4:It does not only affect international freight, because a lot of international freight coming into the ports through Long Beach are getting cross-stocked in LA or somewhere in the LA area. That becomes domestic freight and so domestic freight starts to drop off. Brokers start to see margins compressed, they see volume compressed. They get a little bit more anxious about investing in new areas, and so in the immediate term, you know you could see a broker that might be less willing to invest in trying out a new motor service. But that was, I would say, as of a week ago. Now, with that clarification that Mexico and Canada are not affected, if I were running a brokerage that saw margins starting to tighten up from the lack of imports into the US ports, first thing I'd be thinking about would be expanding to Mexico and Canada.
Speaker 2:Yeah, this is such an important point that Matt's making about USMCA products eligible products not being subject to the tariff. Could you just repeat that, because I think that is something that is commonly not understood and really changes how you think about who's paying for which countries are really getting affected.
Speaker 4:Yeah, so it's over half of the goods that come out of Mexico and Canada fall under the USMCA, and for the goods that didn't fall into the USMCA but then got grandfathered in afterwards, you hear about all the cars that are not made in North America that were going to get taxed, those cars that have been coming in from Sweden, for example, for Volvo, and from Europe or Volkswagen and Audi and a lot of the other European car companies, and same thing with some of the Korean and Japanese car companies that are importing from Korea and Japan. Same deal They've had deals in place. Those deals are not going away. None of those deals are going away, and so car manufacturing is, I would say, fairly safe.
Speaker 4:Automotive parts, the assembly aspect of it yes, there's going to continue to be more encouragement to bring assembly to the United States. We've seen that for a long time. We see Hyundai, which owns Kia, investing extensively in the US right now, but again, a lot of their parts are going to come from Mexico. Same as we see for Tesla, same for Rivian. Even the cars that are assembled by American brands in the United States still come from Mexico, and all that stuff is safe, and so, thankfully, we should not see any sort of giant price increases on cars. We've averted that crisis, thankfully, and I think consumers will be happy with that. But yeah, the stuff that you randomly get distracted by and order off of Instagram, all of a sudden that price is going to go up pretty extensively.
Speaker 1:At Molo we built a great company and I'm proud of the work we did. We knew when to ask for help, and sometimes that meant going outside of our own company. I'm proud we built an ecosystem of trusted partners like Metaphor. When we needed differentiated industry expertise in business consulting or technology services, we looked at Peter Ryan and the team at Metaphor. They've consistently delivered value in the transportation and logistics space for over a decade for mid-market and enterprise brokers, for shippers, carriers, private equity and freight tech companies.
Speaker 1:At Molo we use Metaphor to solve problems we simply couldn't on our own. Metaphor is the only partner you should trust to help you win, whether that's doing ops and tech diligence, growing revenue, optimizing spend or selecting and building software. Go check them out at metaforanet. That's M-E-T-A-F-O-R-A dot net. What does it say about? You know this is going to be conjecture and an opinion that's? You know this is going to be conjecture and an opinion that nobody knows for fact is how it is and kind of the um heavy, aggressive, uh placement on china. Like what is he really saying here?
Speaker 4:keep in mind that mexican, mexican, canada are neighbors, right, and and that's that provides protection. You know there's, it's a land component that provides, prevents people from coming into our country or is supposed to, especially other countries from invading, and so we need to continue to, to keep alignment with Mexico and Canada, and I think it was really clear from early on that there was, there were, I would say now, two potential driving factors initially that I understood there to be. One was that American dynamism, if you will thinking about the US first, among anything else, was to get manufacturing back to the United States, it was get control back to the United States when it came to trade, and so that was leveling the playing field if there's a trade deficit between the US and another country, whether it's Mexico or China. And so that was one piece was how the US was viewed, or, in Trump's mind, how he views the US and the world, and whether we're winning or losing.
Speaker 4:And then the second piece is what are we relying on? Who are we relying on? Do we align with that country? Do we have political alignment with them? Are we friendly with them? And again, with mexico, we, we have that friendship, to an extent, I would hope, uh, and same thing with canada, but with china we don't, and so it was. It was strengthening the trade partnership piece of that that he had done in his first term, and then the third piece, I think, is uh related to um the sorry, I'm drawing a blank on it now. The third piece is related to um uh, removing reliance on china overall and being able to to strengthen you know, us like pro-america culture and, and I think that piece was, is, is going to continue to be, something we hear about, but not necessarily something that completely drives policy.
Speaker 2:Yeah, 145% tariffs are just effectively an attempt at an embargo, so it's really like the message is that the Trump administration doesn't really want you sourcing from China. I think, unfortunately for a lot of brands, there aren't a lot of other great options that they can move to quickly, but that is clearly the tone of the message. To answer that question, and yeah, I think like the there. I was talking about this recently with some economists, but the Chinese economy is really weak right now. They're in a deflationary environment. Trump sees this as a negotiation and he is going to negotiate when he feels he has leverage, and he, you know he. That's why my view is that this, the China-specific trade war, is going to continue to worsen in the immediate future, because China isn't going to take kindly to being approached in this manner and, similarly, the US administration feels like they have leverage, and so that's going to be challenging for companies that are working with Chinese factories.
Speaker 1:What do you think best case scenario is? How do you see this If the best case scenario plays out in the next 3, 6, 12 months? What does that look like? I guess? It's hard maybe to think about best case for whom, but I'm just curious your thoughts on that in general. Take it how you will.
Speaker 4:The best case scenario is that we're not talking about tariffs in three to six months. Yeah, exactly.
Speaker 2:I think Emil and I will still be talking about tariffs, but maybe you guys won't have to.
Speaker 4:That is not like a question for everybody every week, because there's this uneasiness of is this going to happen or not, like it's always something that needs to be banished, but there needs to. We need to eventually get to some sort of new normal and and like I don't know if this is the best way to put this, but but that you know there's a a different distraction, that that pulls everyone's attention in another direction besides like worrying about how much we're gonna. You know what type of taxes and dues are going to be applied to every single country over. There's 90 days to negotiate terms with 150 countries. That's not all going to get done and we're going to see another extension happen.
Speaker 4:This will continue to drag on. So this becomes a distraction. It becomes a just it isn't already a distraction for a lot of people. It's a distraction for every cfo at every manufacturer that is involved in trade. It will continue to be a distraction for them, instead of them being able to invest and innovate and everything else that they want to do. So, ideally, it eventually becomes something that is less of a distraction.
Speaker 2:A new normal settles in and hopefully we've got something in place, because I have to imagine that Trump does not still want to be talking about tariffs when midterms roll around and wants a more stable economy to be able to maintain the structure that's in place right now stated policy goal of let's, let's, let's bring, let's near shore or reshore critical industries to some extent to preserve national security and and and secure supply chains of of critical items chips, certain natural resources, certain agricultural products, um, computers, phones, things like that, like high-tech manufacturing, um, if we can have, can come to some sort of agreement with China that lower these you know, e-com products like we're going to continue to purchase those because that's clearly where they have specialization of labor relative to the US, but we're going to start to home-gross again some of these critical industries.
Speaker 2:That would be the dream scenario for me and I think, for a lot of people that work in trade, to resolve this in a relatively quick and easy fashion. But yeah, and then the other thing being that hopefully the deal pipeline is really hot for Howard Ludnick and the administration there and I think, like you, you got to root for them because there's, I want to, I'm rooting for them to close some deals because it's it's it's to Matt's point like the chaos and uncertainty is really damaging for uh companies to be able to plan and invest and grow uh, which is what you know helps, helps all of us in the U S.
Speaker 3:Yeah, and I would.
Speaker 3:I would imagine, and based on conversations that have been, you know, hearing and whatnot, that it would be interesting to see how companies now think about their supply chain strategies moving forward Right, like, I think, like everything now, everybody's spooked and I can see, you know, people now wanting to have a lot of plan Bs and Cs and Ds and figuring out, okay, you know, what are all of our options and how are we going to optimize the way we do things, and I think there's a lot of good opportunity there.
Speaker 3:But, you know, people are definitely spooked. I mean, I think the new normal, which we'll have to see what it ends up looking like, would be very different from, you know, the way companies were just, in a way, on up to some degree, resting in their laurels. You know, you know thinking, well, we, we got it all sorted out in China and it will be there for us. It's always going to be cheap and it's always going to be easy, and all of this thought. And now it's like, well, maybe, maybe not right, and you know how things are, it's, it's a big hype right now with this and there's going to be, you know, um, a short time memory about this, and they will have to see how this evolves into a new normal in supply chain. That's going to be an interesting thing to see.
Speaker 1:What advice would you give to company leaders for how to navigate these uncertain times where there are so many things out of your control and questions you don't have answers to, like what you know, for companies calling you not just for how that you know. I'm sure you're having larger conversations and part of the answer is that your company's solutions can support them. But just from a leadership standpoint. This reminds me just a bit from my own experience of being the CEO of a freight brokerage at the beginning of COVID and not knowing how long and what the impact would be, and I'm just curious how you all think about how leaders can be effectively leading in a time like this.
Speaker 3:Yeah, and I'll start by saying it has felt a little weird, right. I feel I was joking the other day and saying it took me almost 50 years to become this popular, and it's, it's, and it's funny, right, it feels a little bit like somebody who had something close to a vaccine for COVID, you know, four years ago, right, and we're getting a lot of calls like, oh my God, we're freaking out. This startup is changing again and we have 10,000 products and we need to know what impact this is going to have on us, right, and how quickly can you do that? So I think what we've been telling people is you know, stick to the data and don't freak out.
Speaker 3:I mean, there's so much stuff going on and people even politicizing a lot of what's happening, right, so it's, you know, it's someone's fault and you're a lot of, you know, finger pointing and and all of that, and I think it's, it's, uh, it's too much to keep up right, and also make good decisions on the business side at the same time. So it's almost like you know, just stay focused on the data, on the things that we know for sure, on the things that you can kind of manage and control. There's just too much craziness going on right now with what all of these kind of means from the political perspective and polarization and all of that so that I think it's important, of means from the political perspective and the polarization and and all of that so that that I think it's it's important. Um, it's just to keep a little more calm and and stick to the facts yeah, I think that.
Speaker 2:Yeah, the first point on checking in with your employees who are on the front lines trying to keep abreast of these developments and just giving them some support, is, like, definitely a great move right now, for, given given how I mean, it's not, it's not just, it's not just business owners and c-level executives that are that are being affected by this, it's like real people in operations and and and in in uh legal roles that are just getting absolutely hammered right now from all directions, and so that's a great point, emil. The other piece I would second, on the data and visibility like having your duty matrix at your fingertips where you know all of your products, their classifications, the countries of origin, the duty rates and the duties per unit, or some understanding of how tariffs flow into your unit. Economics is something that I think every C-level executive wants to really be able to understand quickly. So they're going to want some heuristic If I'm selling this product for $1,000 a unit, I'm paying, how much duties am I paying on that and how is a change or some rate affecting my margins?
Speaker 2:That's kind of, I think, how every exec wants to be able to approach it, and that's actually not straightforward to get that information and so you know execs are kind of sending their teams off on these analysis missions to go and spin those things up, but building a strong process around keeping that up to date is really important. I think you want to map out all the options and there's dozens. We've only talked about a couple, but there's a lot of creative solutions and really trust your service providers to come up with creative solutions that work for your business center and are compliant. It's probably it doesn't maybe my three. I'll stick to three.
Speaker 4:I'll add one little anecdote, which will when I don't have one piece of advice, which is I recently last week, I saw an entrepreneur that is currently working in Doge and he talked about a little miniature project that he and a couple engineers worked on, where they moved the login button on a website that was somewhere buried in the middle of the page within a bunch of other links, to the top right corner, where every other login button is for every other website on the planet, and was told that it would take 103 days, and then got an engineer to do it in one day. And you don't hear about those stories. You hear about the stuff related to, like social security that like sounds like fake almost, and you hear about like a lot of these things that are exaggerated or turned into hysterical tweets basically, and a lot of people follow those and they latch onto the really hysterical stuff and it ends up in sibling group chats even sometimes. But it's important for people not to get stuck on those hysterical points and, to Emil's point, to look at the data and understand what's actually happening.
Speaker 4:Talk to your customs broker. Your customs broker is responsible for helping you with this stuff, and so we're like getting a real grounded understanding of what's going on before making a decision is exceptionally important to doing this. You know, to running a business and especially when it comes to being heavily manufacturing oriented, relying on import and export and all the duties and tariffs that come with, you know, with importing goods, stay calm and, you know, ride this storm out for a little bit longer before you make any moves, unless you're relying on China and then move to Mexico moves, unless you're relying on china, and then move to mexico.
Speaker 1:So if I'm a logistics provider and what's kind of like the one thing I should be doing right now in response to these tariff changes because we just kind of talked about the other side on the manufacturing side I'm just curious for those that that play in the trade game um, what would you recommend as kind of the one thing those folks should be doing right now, uh, as a kind of response to the tariff changes?
Speaker 3:I mean, this is self-serving, of course, right, but I would say technology, uh, it's a. Technology is a thing that you know and I don't. You know, depending on who you're talking to. We found a lot of not too tech savvy people, right, that we talk to every now and then, right? So I think technology AI is going to help, uh, whether it's us or anyone anyone else, but you, you gotta get your, you know, your tools in place so you can get the kind of speed and efficiency that you're gonna need to deal with this right, and I feel like it's just simply no way you're gonna be able to just cut it. You know, cut it with, uh, simple Excel skills and whatnot, right. So you got to get your game together with some tech. It's cheaper than ever and it's easier than ever, I guess. So that would be one advice, although it's self-serving to some degree, but I do believe that this is something that, for sure, is going to help people deal with this amount of change and stuff that needs to be taken care of.
Speaker 2:Yeah, I realized. I think I referred to Shapiro, but I think it's actually Shipmunk that launched their Bonded Warehouse offering today.
Speaker 1:You did say Shipmunk.
Speaker 2:I did say Shipmunk. You did well Okay thanks, but I think that's a great example of logistics providers. There are tens of thousands, if not hundreds of thousands of them in North America. I don't know if it's tens or hundreds, it's a lot.
Speaker 2:A lot of them don't necessarily have trade advisory products and so, again, I'm talking my book here. But we can help companies launch trade advisory products and I think that that example from ShipMonk is a great example of moving quickly to be responsive to the market demand for something that is more customs heavy, that they didn't offer before, and in partnership with Livingston, I think it is. I think that's an awesome example of hey, if you're a freight forwarder that doesn't offer duty drawback, we can help white label a solution for that, and there's, I think, a lot more appetite for all these tariff saving and tariff optimization or just even duty visibility. In the first place, Looking at customers' ACE data and understanding their classifications. You know people want to be armed with this data and I think it's kind of a great time to explore some of those service line expansions service line extensions.
Speaker 1:Let's say I could get you in a room tomorrow not me but let's say you're in a room tomorrow with Don and Howard and you each have a unique perspective. That is very relevant, given how close you are to the actual impact of these tariffs and your customers are like actively dealing with the challenges that come with them. What would you, what would be like the most important thing for you, to get them to understand as they contemplate how to move forward with policy decision-making?
Speaker 2:I'll jump in here. So the number one thing I would say is timing. So the number one thing I would say is timing, like providing a timeline that can be aggressive but gives companies an ability to adjust and respond in the way that they want. Like that would be the number one thing. So if we want to reshore certain industries or we want to nearshore certain industries, well let's put in place some timeline to to do that and some process for doing that. And I think I think generally like there's pretty bipartisan support for some of that stuff. I mean, the biden administration increased tariffs on solar panels, electric vehicles and lithium-ion batteries from china to 100 percent and they increased steel tariffs. So it's like this isn't necessarily just a Republican policy. This has been going on for 10 years now, almost eight years. So let's get a timeline in place to be able to make these changes and then I think folks will really really jump on it.
Speaker 3:Yeah, and I think to your, to your points just sort of kind of piling up on that. I think it's also in a perfect world. I would love to see a clear picture of what the world that you're trying to get us to actually kind of looks like. I think right now, part of the problem is that it's not clear just what the plan is, but what exactly is it that we're trying to accomplish here? Right, and obviously there's a lot of the you know politics and what's true and what's not true and what you know what things are or are not. But I think right now, part of the problem is that I think if we were all clear what the picture of this great new world is, I think everybody would be more willing and able to kind of, you know, get us there.
Speaker 3:Right now it's just too confusing, like why are we doing this? I know it's hurting me, but it's like in any other war that I think the US has fought in, like, okay, it's painful for a while, but we can see why we're doing this and what's the value for all of us collectively to do it Right now. I think that's very blurry. It just seems like a bunch of piece in context going on, but we don't know exactly. Like the regular person, and even some of us that are more in the nitty gritty of things, it's still hard to see sometimes what that picture looks like.
Speaker 1:Yeah, I mean that's leadership 101. If you want buy-in, be very clear with your vision. That's a great point, Matt, anything you want to add on that one?
Speaker 4:I love the vision piece, and like half your podcasts or episodes are about talking about leadership anyway. So yeah, I mean I like fully agree with having a vision, or understanding what the vision is and where this needs to go, and I think people would be much more on board with it than feeling like it's being decided on a whim and everyone runs to the left and all of a sudden, no, it feels like the boat's tipping too far that way. Hurry up, run to the right and then the boat tips back the other way. So we just saw that with the 90-day pause and as we get close to the 90-day pause, do we think we're going to have all the deals in place by then? Probably not, and so I would encourage more communication.
Speaker 1:And I'll go here, since you mentioned, you know, half the podcasts are about this. Let's say, you know for the next generation of logistics leaders that are tuning in, what's the lesson for them and how each of your companies is navigating this kind of volatile, chaotic, um monumental moment I?
Speaker 4:I'll start. I I got. I've gotten the question from a few people about why we raised money and we just, you know, announced this 12 million dollar round uh, last week and we still had most, most of the money left that that primary backed us with in the seed round. And um I, we took that money on. We've been growing really consistently from pretty much the beginning, but I knew that at some point we'd run into a rough patch and there'd be something that would make things a little bit rocky.
Speaker 4:I thought the beginning of this year we'd be rolling in and Trump would take office and there'd be a lot of communication around tariffs, but that they would not actually happen. I thought they would not happen and I laid out already what I thought was kind of the backing of that, and so my perspective as somebody that is going the venture route and raising capital is to have more capital. If you can get it, if you can take it, if it's available, take the capital, get the funding in place, be smart about spending it. So I'm excited to get more swag for the team and our customers, but we're going to be smart about how we spend this capital.
Speaker 1:You've got to stop connecting your fundraising to the swag. You'll see there's going to be more swag coming soon. It's the opposite of being smart about your money.
Speaker 4:No, but well, we've got a lot of it left, though when are you going to make it? We're going to make it by charging people for the software.
Speaker 1:No, I said where are you going to make?
Speaker 4:the swag. I thought you were saying where are we going to make the money? Where are we going to make the swag? Anywhere besides China, I guess.
Speaker 1:But yeah, but yeah, I don't know, that's, that's a good problem for the slingshot team to figure out for us because they do a great job of swag all right off the swag, who's who's next?
Speaker 2:I think, uh, I the. The one of the big lessons, I think, is it's actually something that Matt's done really well, which is like staying level-headed and understanding that there's grand pronouncements and negotiations that happen and you know, let's. Let's like wait and see where the chips actually fall, is something that he's been pounding the table on since since Trump took office with every turn of the tariffs, and I think it's the way that I say this in custom speak is like let's wait and see what gets actually published in the Federal Register. It's like to say that whatever Trump tweets is not necessarily what is actually going to happen.
Speaker 2:And so when you're, it's easy to get distracted by the news cycle, but finding the like, where the exact signal and where the exact like industry knowledge is, is is that you need to action on as an entrepreneur is not always easy, and then the faster that you can identify like what's a, what's a good customer signal, what's a good industry signal from a, from a false or non-recurring signal or extraneous signal, like that's really, uh, a good skill to develop, and then then, yeah, you know we're, we're going to announce our seed round soon. Same same, same, same deal, I think, same philosophy, which is that when you start to feel a trend coming, even if you're not sure how representative it is, if you develop a belief in a space like, jump on it because you're, you might be one of very few people seeing it, and we, you know. That was why we started this business up a little over a year ago, because we were starting to feel this tailwind even before Trump came into office.
Speaker 4:It sounds like you just announced your seed round.
Speaker 1:I didn't announce it, it was a pre-announcement it was like a tweet about tariffs without actually you have to check for this. Wait for it to be in the register in the news.
Speaker 2:Yeah, it's not in the register right now, you can't react to it.
Speaker 1:That's the lesson. It's just a tweet.
Speaker 3:It's just a tweet, uh I mean it is a great point before you go, emile, I just it's.
Speaker 1:it was funny to me, as someone who spends a little too much time watching twitter, how the stock market tanked and everyone was like see what an idiot. And then a day later it's back up and everyone's like, no, you're the idiot. And then a day later it's back down. Everyone's like whoa, who's the idiot? So it's every day. It's like stop talking with so much finality when this is very much a process ongoing.
Speaker 3:So go ahead, emil.
Speaker 3:Much a process ongoing, so go ahead.
Speaker 3:Yeah, I feel like in three, you know, almost four years, uh, from now you are, we're gonna have be having kind of the ultimate contest of who was, who was an idiot, right, uh, in this game, um, and I was just gonna say that, you know, to your previous question, uh, for, for kind of future leaders and whatnot, I think think is I totally agree with be patient, wait until things actually become true, but then be ready to move really fast.
Speaker 3:I think everything is just moving at such speed these days, whether it is technology and innovation and AI and all that stuff, that I think if you are not ready to move fast the moment, you know what, or you feel like you know, you know which direction is is the right one for you, then you're, you know you're probably not going to have a chance anyway, right, and I think you know I'm not going to announce any rounds just yet, but I think that also comes with that right, it's make sure that while you're waiting, you're getting ready to move fast and use that time wisely to say okay, if these are my different scenarios, you know, if A, then this is how fast I'm going to go in that direction. If B, then this is how fast I'm going to go in that direction. If B, then this is the path. But be ready, because I feel like everything is just so much faster right now than it used to be, even just a year ago.
Speaker 1:Great perspective from each of you. All right, I got a question for us to close with. I want a prediction from each of you 12 months from now. What does the global trade landscape look like? Will the changes stick? Will they escalate? Will they reverse? Who are the winners? Who are the losers? What are we going to see?
Speaker 3:Yeah, I'll start and this is kind of how we're, without trying to reveal our entire playbook, but this is how we're kind of organizing ourselves. I think, in my opinion, it's very likely that, you know, we won't be talking about tariffs all that much, you know, in a year, hopefully, right, I mean, we better not be. I think again, justin and I, maybe a little bit more than others, just because of the nature of our businesses, but I, I believe that he will probably be have quiet down quite a bit, you know, between now and then, uh, in fact, we're building our company to sort of take advantage of the situation right now, but figuring that that's just kind of a temporary thing. That is, it's, it's giving us tailwinds right now, but it's, it's, it's not. It cannot last all that much, right? Um, so I would say that you know, that's probably where we're, what's gonna happen. I think a lot is gonna look exactly the same.
Speaker 3:If you ask me, uh, you know, some, some items may have to keep one way or another in terms of china and the us and what, and everything in between, but I don't know if, uh, hopefully, right, all of this is worth something and we're gonna be able to be better off for it. I don't know right it's, it's um, it's way too complicated and it requires a lot of. I don't know if this is something that we're just gonna get done by brute force. Uh, there's gonna be some finesse that will be needed in the next few months. So we'll be hearing about a lot of negotiation. Hopefully, all the people have been talking about how great of a negotiator they are. We'll be able to prove it now and show us how it's done, but I'm not expecting a huge shift on any particular direction between now and then, other than just Tariq's just quieting down a little bit between now and then, other than just tires just quieting down a little bit between now and then.
Speaker 2:Yeah, I think that we'll see a lot of commitments to build new manufacturing in North America, certainly, and potentially in the US. I think in a year from now you'll definitely see some. Certainly. I think NVIDIA announced a gigantic investment today, so you're going to see more of those over the next year and I think you'll certainly see in a year from now we'll be looking back at a number of new trade deals bilaterals and then also some multilaterals, but these things take about a year.
Speaker 2:Six, you know fastest ever is like six months on a on a multilateral or bilateral trade deal. Um, so we'll, we'll just be getting some of those finalized in a year from now. Um, and uh, uh. I think then we'll be doing like cleanup on aisle five on what happened to those shipments from 2025. How do we go back and fix some of those entries or make sure that we change some of our Decker process to be more responsive, moving forward, and I think that's kind of the world that we'll be in a year from now and I think that's kind of the world that we'll be in a year from now.
Speaker 4:I agree with, I guess, both of those predictions. My spin on it, I would say, is that I think that we will have a name for some new trade agreements is going to be the big thing a year from now. So, like the USMCA being an update to NAFTA, but not still being called NAFTA, we're going to have the same thing with with other trade agreements. Whether it's going to be some big global trade agreement that that has Trump's name or spin on it. I think there will be something branded and tied to a quote, unquote victory in these trade deals, because I don't think Trump wants to be known as the one that caused the stock market to crash, and I think that's very clearly tied to, you know, wanting there to be something that happened and came out of this that's positive, and so I think that's going to be a new name for a lot of these trade agreements that we're going to be talking about a year from now or just having landed on that gets finalized.
Speaker 1:Well, we'll see Any final thoughts before I let you go. I appreciate all of you giving me 90 minutes of your time and sharing so much excellent insight with our audience. It's been great, thank you.
Speaker 2:It's great to learn from all of you.
Speaker 1:This was fun, and we'll be on the lookout for all these rounds that we didn't talk about here Sounds great Well with that Freight Pod audience. Thank you for tuning in and we'll see you next week. That's all you get for TerraTalk, see ya, thank you.
