Scott and Ed discuss the rally in the Euro and German bonds, Chinese state-backed funds pulling out of U.S. private equity, and Bill Ackman’s investment in Hertz. Then Ryan Petersen, the founder and CEO of Flexport, a leader in global supply chain management, joins the show to unpack the real-world impact of tariffs on American businesses. He breaks down how the levies will drive inflation, shares his outlook on the trade war with China, and explains how supply chains are rapidly reshaping. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What is the impact of tariffs on American businesses?
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We're back with Profiteer Markets. You mentioned that if he makes a deal and Trump has said, you know, more than 70 countries have called him to make a deal. Do you have any insight into what the deal is or is supposed to be? Just at like a very basic level, what is your sense of the goal of these tariffs? And, you know, if we're going to swerve out the way, what is the deal?
First off, on the short term, I don't think they can make a deal with China in the short term. I think the deal is, hey, we'll just pause this and give ourselves all some time to sit down and have a nice negotiation, and that might take a year or two.
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Chapter 2: How are tariffs affecting small vs. large businesses?
Two is we have a major fiscal problem in this country. $2 trillion deficit, no end in sight. You got to do something to generate more revenue. So tariffs are one way to do that. Not 145%, probably net lowers the amount of trade and the amount of duties collected, but some amount of duties maybe is a reasonable place to, you got to get the revenue somehow for the government. So that's fine.
That's reasonable. Third is it is a valid point around US not having manufacturing capacity in a national security time of war. Like you're, Your car factories become your tank factories. This is why auto is such an important strategic sector, for example.
And then fourth, and I think really what we'll see them hammer, I think they have a valid point, is on the industrial policies of these countries, both currency. Look at Vietnam. Vietnamese dong has gone down in valuation the last three years. Maybe not the last three weeks, but the last few years.
Chapter 3: What are the current tariff rates on imports?
At the moment that their manufacturing sector is absolutely booming, and if this was a normal market, their currency would appreciate as so many more dollars flowed in. So there's some probably terms for a deal around currency, setting the reserve currency, setting the U.S. currency exchange rates at a level that we think is healthier.
Subsidies, these countries provide a lot of subsidies for manufacturing, free land, free buildings, cheap credit. There's all kinds of things that they do smartly from their own perspective, I think, but that don't make the level playing field. Environmental regulations that we have that are way higher than theirs. Organized labor repression.
I mean, Korea for many, many years had like a mandatory six-day work week rule. You know, I mean, that would never fly here. China has a six-day work week. I don't think it's mandatory. It's just, like, culturally, they just work harder than us. I don't know if there's something... But these are all, like, fair grounds for going, hey, like... you know, it's not a balanced playing field for us.
And so maybe there's some deal on one or more of those grounds to get them to change some policy or something. But the duty rates itself is one small piece of it, like how much they charge us in duty versus what we charge them. And they've been pretty clear about this, that the administration cares much more about these non-tariff barriers, they would call them.
Memo to self, mandatory six-day work week. Okay, good. It'd be good for us. Yeah. So let's take tariffs off the table. Pre-tariff, if you look at countries as stocks or asset classes and you get to see who's doing a great job in terms of partnerships and manufacturing. prowess. What countries would you go long and what countries would you go short?
Definitely Vietnam long. It's incredible what they're doing. They have some real geographic benefits to their river network. 80% of the containers flowing out of Vietnam actually go on a barge floating down the river to the port instead of having to use trucks. That's let them kind of
go much faster in scaling because their roads can't really keep up with the demand, the amount of manufacturing boom that's happened there. They've had, I think it's 8% GDP growth last few years in a row. I mean, you only have to do that for so long before you double.
So Vietnam, a lot of the Southeast Asian countries are just benefiting from lower costs of labor and reasonably good policies around industrial stimulus. Who am I short? India still remains a mess. I guess they're probably doing well, but it's just like very complicated to do business there. They don't benefit from logistics network. They don't have inland river network.
So it's more expensive to move stuff. A lot of complexity from a logistics standpoint that falls out of that. Their infrastructure is lagging. But but then again, you know, it's a billion people that are relatively low cost. So maybe I don't know if I'd short it, but we have not seen as much dynamism there as you have in Southeast Asia. Um, Europe seems hard to go long Europe right now.
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