>>> NOW TO THE EVER EVOLVING SAGA OF THE TRUMP ADMINISTRATION TARIFF POLICIES WHICH BUSINESS LEADERS SAY ARE RAISING ACROSS THE COUNTRY.

RYAN PETERSEN IS THE CEO OF FLEX PORT.

HE JOINS US TO TALK ABOUT HOW COMPANIES ARE RESPONDING TO THE CHANGING LANDSCAPE AND WHAT CONSUMERS CAN EXPECT.

>> THANK YOU FOR JOINING THE SHOW.

>> THANK YOU FOR HAVING ME ON.

>> YOU HAVE THIS COMPANY CALLED FLEX PORT WHICH HELPS PEOPLE SHIP GOODS ACROSS BORDERS.

TELL ME WHAT THE ON-AGAIN OFF- AGAIN NATURE OF TARIFFS IS DOING.

>> IT HAS BEEN DIFFICULT.

WE HELP BUSINESSES SHIP THEIR PRODUCTS ACROSS 147 COUNTRIES.

THE BIGGEST DESTINATION IS THE UNITED STATES.

COMPANIES THAT ARE GOING THROUGH THIS WHIPLASH EFFECT HAVE BEEN ON SOME LEVEL SOMEWHERE BETWEEN PARALYZED AND STUCK.

THEY DO NOT KNOW HOW TO PLAN ANYTHING.

IT'S A MIX OF EMOTIONS.

ANGER, FEELING LIKE EVERYTHING THEY BUILT GOT TAKEN AWAY.

THE NEXT DAY IS RELIEF AND CELEBRATION .

IT HAS BEEN A CRAZY COUPLE OF MONTHS SINCE THE ELECTION.

>> DOESN'T MAKE THINGS HARDER FOR PEOPLE TO PLAN?

>> THAT IS EXACTLY RIGHT.

THE SUPPLY CHAINS ARE LONG-TERM THINGS.

YOU DON'T SET UP A NEW FACTORY OVERNIGHT AND DO IT ON A SHORT- TERM BASIS.

YOU SAY, THIS WILL BE THE NEW SOURCE OF SUPPLY FOR THE NEXT 5 TO 10 YEARS OR MORE.

IF THE TARIFFS ARE CHANGING EVERY SINGLE WEEK, IT IS VERY HARD TO MAKE A DECISION.

TARIFFS ARE HIGH ON CHINA WE SHOULD MOVE THEM TO VIETNAM.

NEXT THING YOU KNOW, TARIFFS ON VIETNAM GO UP AND YOU TRY TO MOVE IT TO EUROPE OR MEXICO.

IT IS DIFFICULT TO MAKE PLANS.

>> YOU PROBABLY HAVE A HIGHER VISIBILITY THAN ALMOST ANYBODY OF WHAT IS COMING INTO THE UNITED STATES.

TELL ME WHAT YOU ARE SEEING.

>> THE MOST INTERESTING THING WE SAW WHICH WAS AFTER APRIL 9 WHICH IS WHEN THE TARIFFS TOOK IS WHEN IT WAS A 145%.

IMMEDIATELY, THAT WEEK THE IMPORTS OF GOODS FROM CHINA, THE BOOKING OF NEW SHIPMENTS FROM CHINA WENT DOWN BY 60%.

THAT IS TRUE IN THE OWN CUSTOMER BASE FOR FLEXPORT, BUT ALSO TRUE ON THE OTHER INDUSTRIES.

>> WHAT DOES IT LOOK LIKE NOW.

CAN YOU SEE WHAT IS COMING IN.

>> THAT LASTED ABOUT FIVE WEEKS.

WHEN THE TARIFFS WERE RELAXED AND DIALBACK YOU HAD THIS HUGE SURGE OF BOOKINGS.

IT IS BASICALLY PEOPLE MAKING UP FOR LOST TIME.

NOW THEY ARE WORRIED THE TARIFFS MAY BE GOING UP AGAIN.

THEY WANT TO GIVE AS MUCH AS THEY CAN.

THEY HAD AN INCREASE OF 80% ABOVE THE PRE-TARIFFS, PRE- APRIL 2 NORM THAT WE HAD.

IT'S A HUGE SURGE.

THE OCEAN CARRIERS THAT OPERATE THE SHIPS, THEY PULLED ABOUT 25% OF CONTAINER SHIPS AND MOVED THEM DOWN TO LATIN AMERICA, AFRICA TO SOME OTHER TRADES.

THERE IS CAPACITY TO MOVE THE CONTAINER SO THE PRICE OF FREIGHT HAS GONE UP ABOUT THREE TIMES.

SO THEY GET RELAXED AND EVERYONE IS HAPPY AND AND THE PRICE OF FREIGHT GOES UP.

>> HOW DOES THIS WORK IN THE PORT OF NEW ORLEANS OR LOS ANGELES.

TODAY HAVE A SHEET TO TELL YOU WHAT IT SHOULD COST?

>> IT IS SIMILAR TO TAXES.

IT IS UP TO YOU TO GET IT RIGHT.

FLEXPORT IS ONE OF MANY CUSTOM BROKERS IN THE UNITED STATES.

YOU NEED GOOD TOOLS SO YOU CAN ACTUALLY FILE YOUR CUSTOMS ENTRY OF ABOUT FIVE DAYS BEFORE THE GOODS ARRIVE .

THEN YOU PAY YOUR DUTIES AND YOU ARE ON YOUR WAY .

>> YOU PREVIOUSLY SAID THERE WOULD BE MASS SHORTAGES THE SUMMER GIVEN THE TURMOIL AND TARIFFS.

WE ARE PRETTY MUCH GETTING INTO SUMMER.

DO YOU SEE THAT?

>> MY VIEW IS IF THEY DON'T DO ANYTHING ABOUT TARIFFS.

I WOULD NOT SAY MASS SHORTAGES ONLY 40% OF REALLY DEPRESSED VOLUME.

NOT ENOUGH SHIPS TO MOVE ON THE CARGO.

YOU ARE GOING TO SHE -- SEE THAT DEGREE OF SHORTAGES.

WHENEVER THERE IS SCARCITY OF GOODS THEY CAN CHARGE WHATEVER PRICE THEY WANT.

THAT IS THE REAL DRIVER.

>> GIVE ME SOME OF THE EARLY INDICATORS YOU SEE WHERE THINGS WILL COST A LOT MORE.

>> ONE OF THE BIGGEST IS APPAREL .

>> THIS ALLOWS YOU TO SHIP ONE ITEM AT A TIME INDIVIDUAL PRODUCTS DUTY-FREE FROM OVERSEAS.

THAT WAS TAKEN AWAY FOR GOODS MADE IN CHINA .

ANY APPAREL MADE IN CHINA WILL GO UP QUITE A BIT.

TAKE HOLD WHERE SOME OF THESE e- COMMERCE BRANDS HAVE RAISED PRICES IF THEY WERE PREVIOUSLY USING IT WHICH A LOT OF THEM WERE.

THEN JUST BROAD CATEGORIES.

FURNITURE IS A BIG ONE.

THEY WILL GET HIT BY THESE HIGH PRICES BECAUSE HE CAN'T FIT THAT MANY COUCHES AND A CONTAINER.

IF THE PRICE GOES UP A LOT IT'S NOT SHARED BY THAT MANY ITEMS.

IF IT GETS HIT BY THE HIGH PRICES, ACROSS THE BOARD .

ANYTHING MADE IN CHINA.

IT IS REALLY BETTER STUFF THAT IS NOT AFFECTED LIKE ELECTRONICS, SEMICONDUCTORS.

>> YOU SAID THOUSANDS AND MILLIONS OF AMERICAN SMALL BUSINESSES INCLUDING MANY ICONIC BRANDS WILL GO BANKRUPT THIS YEAR IF THE TARIFF POLICIES ON CHINA DON'T CHANGE.

NEED TO BE DONE TO PREVENT THAT FROM HAPPENING.

>> THAT WAS THE 145%.

IT SEEMS LIKE THEY ARE NOT HAPPY AT ALL.

I DON'T THINK IT WIPES THEM OUT.

THEY SAID AUGUST 30 FOR A LOT OF PRODUCTS.

IT WILL GO BACK UP TO 54%.

WHEN THEY FIRST ANNOUNCED 54% THAT WAS REALLY A CATASTROPHIC DAY .

IT IS SOMEWHERE IN THAT RANGE WHERE IF THAT COMES BACK YOU WILL SEE A HUGE WAVE OF COMPANIES START TO FAIL.

WE WOULD LIKE TO SEE EITHER THIS GET EXTENDED OR A DEAL IS DONE.

I DON'T HAVE ANY IDEA WHAT IS HAPPENING WITH THE NEGOTIATION.

>> THE WALMART CEO AND OTHERS HAVE SAID IT WILL HAVE TO BE PASSED ON TO SOME EXTENT TO CONSUMERS.

WHEN YOU ARE TALKING TO YOUR PEOPLE, TO WHAT EXTENT WILL THEY PASS THIS ON AND WHAT EXTENT DO YOU THINK THEY CAN ABSORB THE NEW TARIFFS.

>> IT IS RELATIVELY STRAIGHTFORWARD.

IT IS ALL ABOUT WHAT IS THE PROFIT MARGIN.

IF IT IS A VERY PROFITABLE BUSINESS WHERE THEY GET THE GOODS CHEAP AND SELL THEM FOR A LOT MORE, IT IS ON THE COST OF WHAT THEY PAY FOR.

THE REALITY IS THAT THEY ARE TRYING TO BE COST LEADERS AND TRYING TO HAVE LOW COSTS.

THEY DON'T PUT A HUGE AMOUNT OF MARGIN ON THE PRODUCT.

WHEN THE COST GOES UP THEY ARE FORCED TO PASS IT THROUGH.

THAT IS THE REALITY FOR MOST COMPANIES.

THEY WILL HAVE TO PASS IT THROUGH CLOSE TO 100%.

THAT'S WHAT WE SEE IN THE e- COMMERCE WORLD .

A LOT OF THEM ADDED A LINE ITEM IN THE CHECKOUT THAT SAYS IMPORT CHARGES OR CUSTOMS CHARGES.

CUSTOMERS ARE PRETTY UNDERSTANDING ABOUT THAT.

THERE HAS NOT BEEN A LOT OF PUSHBACK SO FAR.

THE REALITY IS WE DO NOT KNOW UNTIL IT STAYS FOR A WHILE AND YOU SEE HOW MUCH HIS DEMAND REPRESSED.

WHEN PEOPLE START SPENDING THEIR MONEY ON OTHER THINGS, IT CAN BE SERVICES, GOING OUT TO EAT, TRAVEL, ET CETERA.

>> YOU TALK ABOUT HOW PEOPLE HAVE TO CHANGE THE SUPPLY CHAIN.

IF SOMETHING HAPPENS ON CHINA MAYBE THEY WILL TRY VIETNAM.

HOW EASY IS IT TO SAY LET ME SHIFT MY SUPPLY CHAIN BASED ON THE CHANGING TARIFF REGIMES.

>> YOU HAVE TO BUILD A RELATIONSHIP AND PRODUCT.

ONE OF THE THINGS THAT MADE IT A LITTLE BIT EASIER IS THAT CHINESE COMPANIES TO WORK WITH THE SAME COMPANIES.

>> THEY MIGHT TRY TO STOP THAT ?

>> I ASSUME THIS IS ON THERE.

.

THEY SEE A LOT OF THIS IN CAMBODIA.

IT'S A LOCAL ENTITY .

THEY ARE DOING IT IN TERMS OF MAKING A PRODUCT OF YOU ON.

THERE ARE A LOT OF CHINESE PRODUCTS THAT GO INTO THAT.

A PROCESS THAT IS CALLED SUBSTANTIAL TRANSFORMATION.

IT JUST MEANS YOU'VE DONE ENOUGH TO LEGALLY QUALIFY IT UNDER U.S. CUSTOMS LAW AS MADE IN VIETNAM OR THAILAND.

THAT MAKES YOU SUBJECT TO THE DUTY RIGHTS IN THOSE COUNTRIES.

WHAT THE TRUMP ADMINISTRATION WOULD LIKE TO SEE IS THOSE COUNTRIES TAKE THE AMERICAN SIDE AND SAY, YOU HAVE TO PUT DUTIES ON CHINESE IMPORTS INCLUDING THE COMPONENTS THAT ARE GOING INTO YOUR PRODUCTS.

THAT IS PROBABLY THE BEST MECHANISM THEY HAVE.

THE TARIFFS ARE AT 10% AND IF YOU WANT TO KEEP IT THERE YOU HAVE TO AGREE TO SOME KIND OF A DEAL.

THERE IS DEFINITELY SOME ROOM FOR NEGOTIATION.

>> YOU HAVE EXPLAINED A PRETTY COMPLICATED RIGMAROLE.

HOW DOES THAT ADD TO THE EFFICIENCY AND THE COST IN GENERAL?

>> FIRST OFF, THE LABOR COST IS HIGHER.

NOT JUST RAW HIRING SOMEBODY OFF THE STREET, BUT THE SKILLED LABOR.

A LOT OF THESE ARE CRAFTSMAN JOBS, PEOPLE DOING APPAREL.

IT IS THE BEST TECHNIQUE AND SKILLED WORKERS THERE.

IT IS REALLY FUNNY FOR PEOPLE MY AGE WHERE THERE WAS NOT THE IDEA 20 YEARS AGO AT ALL.

SHIPPING ITEMS MORE THAN ONCE , FROM VIETNAM TO THE U.S. YOU MIGHT INCREASE TRADE FROM A TECHNICAL TERM .

THAT IS TWO INSTEAD OF ONE.

YOU ARE SEEING AND ADDS COMPLEXITY AND COST, INEFFICIENCY.

TIME IS MONEY .

IT TAKES LONGER TO KEEP MOVING THINGS AROUND .

THERE IS NOTHING EFFICIENT ABOUT IT.

>> IT SEEMS TO ME THAT THE RESPONSE OF A LOT OF CEOS IN THE BUSINESS OF IMPORTING AND MAKING THINGS HAS BEEN MUTED.

YOU TALK TO THESE PEOPLE AND THEY HAVE ANXIETY BUT I HAVE NOT HEARD A LOT OF OUT GUY.

WHY IS THAT?

>> WHEN YOU TALK TO COMPANIES WHERE IT IS KIND OF FOUNDER LED.

THEY HAVE A HARD TIME GETTING THEIR BOYS OUT.

THEY ARE NOT PART OF A BIG FAMOUS COMPANY.

THESE BRANDS ARE DEFINITELY OUT THERE.

THEY ARE REALLY APPRECIATIVE OF WHAT WE HAVE BEEN DOING AT FLEXPORT, TRYING TO TELL HER STORY FOR THEM.

I DON'T KNOW WHAT IT IS.

THESE BIG COMPANIES MAYBE BECAUSE THEY HAVE INSIDE ACCESS THEY ARE ABLE TO GO TALK DIRECTLY TO THE WHITE HOUSE AND GET THEIR VOICE HEARD THERE RATHER THAN NEED TO DO IT VIA THE PUBLIC AIRWAVES.

MAYBE A TO DO SOMETHING ABOUT MORE RISK.

IT IS RISKY TO COME OUT AND CRITICIZE THE GOVERNMENT AND THINK THERE IS BEEN BACKLASH.

MAYBE THEY ARE HIGHLIGHTED BY THE BOARD.

>> THESE TARIFF UNCERTAINTIES YOU'VE TALKED ABOUT HAVE LED TO SUPPLY-CHAIN SHOCKS .

WE HAD THAT YEARS AGO WHEN COVID LED TO THAT.

DO YOU THINK THERE'S LESSONS THERE WE MAY HAVE TO REEVALUATE.

>> WE LEARNED A LOT IN COVID.

THE PRICE OF FREIGHT IS VERY ELASTIC.

YOU DON'T MISS A LOT BECAUSE THE FREIGHT IS PRICE IS CHEAP.

YOU DON'T GET LESS STUFF BECAUSE IT IS EXPENSIVE.

YOU SHIP THE AMOUNT OF STUFF.

THEY CAN ABSORB A LOT HIGHER PRICES OF FREIGHT THAN WE EVER ASK ACTED.

TARIFFS ARE DIFFERENT .

50% TARIFF, THE AVERAGE PRICE OF A CONTAINER IS ABOUT $100,000 IN GOODS.

THAT IS $50,000 EXTRA .

THE PRICE OF FREIGHT WE SAW DURING COVID WENT TO $20,000 AND PEOPLE PAID IT BUT 50,000 IS ANOTHER STORY.

WE WILL SEE HOW PEOPLE ARE SHIPPING THE SAME AMOUNT.

THAT IS JUST SUBJECT TO BIG PRICE SWINGS.

SHOULD RETHINK MY REGIONALLY HAVING SUCH COMPLEX SUPPLY CHAINS.

THE REALITY IS THAT COMPANIES ARE ALWAYS GOING TO TRY TO MAKE THEIR PRODUCTS AS CHEAPLY AS THEY CAN.

THAT IS THE JOB AT THE END OF THE DAY.

MAKE GREAT PRODUCTS CHEAPLY .

WHOEVER DOES THAT THE BEST WILL WIN THE CONSUMER AND GROW.

IT IS A DARWINIAN ECOSYSTEM.

THAT IS THE GAME ON THE FIELD.

THE GOVERNMENT JOB IS TO SET THE RULES.

COMPANIES HAVE TO GO AND FIND A WAY TO MAKE MONEY.

THIS IS A LONG TREND.

COVID WAS A MOMENT IN TIME.

THERE IS A CHANGING LANDSCAPE.

WE HAVE ABOUT 4% ANNUAL GROWTH SINCE THE MONGOL INVASION.

FREIGHT HUNDRED YEARS YOU HAVE THIS STEADY EXPONENTIAL GROWTH.

MY VIEW IS THERE IS REPOSITIONING BUT YOU WANT TO FIND THE BEST MANUFACTURER AT THE LOWEST PRICE.

YOU DON'T REALLY CARE WHAT COUNTRY THEY ARE .

YOU ARE LOOKING AT THE ATTRIBUTES OF THE PRICES .

YOU WILL WANT TO DO GOVERNMENTS WILL TRY TO RAIN THAT IN.

THE MARKET FORCES ARE SUCH THAT IT WILL BE VERY HARD.

THE CAT IS OUT OF THE BAG IN A SENSE.

>> RYAN PETERSEN, THANK YOU SO MUCH FOR JOINING US.

>>> MY PLEASURE