Flexport CEO Ryan Petersen: tariff chaos continues as 90-day pause expires, companies stuck waiting to plan

minute now. Ryan, how you doing? You just threw me in here. I'm eating food. I didn't realize I was going. Yeah, it's okay. Surprise, surprise. What are you having for lunch? We've been under attack today, so the stream's been late. What you got? Looks like Chinese food, but it's a fancy salad. Oo, nice. Oh.

Oh, is that Blue Barn? Yes. Oh, Blue Barn's fantastic. Great spot. Uh, anyway, what is new in your world? Can you give us the update? Uh, we we we lived through the tariffs. We checked in with you a few times. uh give us the temperature check on uh where we are with tariffs, global trade broadly in your business.

There's no strategy with the tariffs. They're purely to torture Ryan Peterson. It's all all caps. We're learning how to read and write in all caps all over again. Someone said the the art of letter writing was dead and then Trump just proved us all wrong.

You know, he's writing letters to national uh to countries with really amazing capitalization standards. Yeah. They would just call you Mr. for flexport is that the best part is that he's dictating because he doesn't type himself. So he's telling them no like capitalize tariff and capitalize country. Yeah.

And all caps for trade. Certainly has a certain aesthetic to it. Um it's it's a yeah whether there's a strategy to it or not is a really good open question because we got new tariffs that are at above like on our allies Japan and Japan and 25% tariff. I don't know.

I couldn't tell you what what the plan is there but it's uh every day new things basically. Yeah. What about uh what about just the general mood of customers, the flow of shipments? I mean, initially it was like, you know, the the the boats are sitting at the port not moving because people are just terrified.

We heard about, you know, iPhones going in the bellies of 747s on rush flights to get out of the get out of the the airport like minutes before the the tariffs went into effect. Has has there been any more clarity?

Are we in some sort of return to normaly where at least CEOs can feel like they can plan ahead for what's coming or is it just as much uncertainty? It's um you know today's the day. So the tariffs are the the 90-day reciprocal tariffs came out and they were paused for 90 days. Mhm. 90 days ago today. Mhm.

Um so they are going unless something is announced which he announced like six or eight countries yesterday with their new tariff rate but everybody else um that's happening today. They'll go back to the 90day to the original rates from April 2nd that freaked everybody out uh tonight at midnight.

Um now then I believe he tweeted earlier today or truth social um that it'll be on August 1st that those new duties are due. So there probably will be a bit of a race here for the next three weeks to try to get stuff in at the 10% rate instead of the higher rates that's coming back.

Um the thing that freaked everybody out uh 90 days ago was more the China rate which was 145%. Yeah. And that's come back down to 30 and people are kind of like okay with it. I don't know. We'll see. We'll take the temperature here and we'll see what happens with with freight bookings.

But see things seem kind of normal with the customer base, but we haven't got enough data yet. I mean, it's brand new information. The new rates that came out yesterday and that are going to go into effect in the next just as a little extra data. Right now, the S&P and NASDAQ are basically flat.

Uh, but copper prices have hit all-time high on this planned 50% tariff. I am interested in China. I remember when you were explaining the nature of the tariff. There were a few different elements. You were talking about the the energy prices into China basically being passed through.

I believe that was a tariff on oil that then was getting passed through to the cost of goods in some way. How are you thinking about the you said 35%. Is that all in or is that just a piece of the overall tariff picture if you're considering doing business in China going forward? Um it'll depend on your product.

The tariffs are driven by three things.

one is the the country of origin and that is a something that actually Trump is changing the rules around in real time uh with this idea of trans shshipment that he said goods that are trans shipped through Vietnam will pay a higher duty but like that very odd I mean those of us in the industry think of trans shipments has no effect on duty rate whatsoever because it's still the original country if you if you ship from goods from China to Vietnam and then from Vietnam to the Unless you did what's called substantial transformation, you change them into a product of Vietnam, they still pay the Chinese duty rate.

Yeah. Uh whereas he's kind of changing those rules in real time and have not yet published something in the code of federal regulations that we could actually understand what he means. So remind everybody that true social is not how laws get and regulations get published.

It's um we're waiting to see what really comes out. Yeah. So okay. Okay.

So you have the country of origin, you have the classification um which is okay what type of goods are they that that drives and do they have the components of steel and aluminum that sets a different duty rate or what is the thing actually classified as? And then the third one is valuation. How are they valued?

And those are the three kind of key drivers of what your duty rate is. Um and right now on the there's just a lot of uncertainty that we're waiting to see what this trans shshipment thing means. the world will find ways to minimize their duty rate. Um hopefully in legal ways.

Don't don't don't make sure you work with an attorney and don't just go do this. But it'll be very interesting to see like can you actually save duty by shipping from China to Vietnam somehow uh in this world like I don't know I don't know what the definition of trans shipment is going to be.

The interesting the other interesting thing here is that from a trade perspective, logistics and customs companies are kind of happy about this stuff because it adds complexity.

You need leader, you need partnership from experts more and you're doubling the amount of trade because there's going to be um in if there's incentive now to move goods from one country to another, transform them and ship them onward, that's two shipments, one from China to Vietnam and one from Vietnam to the US.

M um or like you know one of the sad ones that came about here is we have a customer longtime customer that makes bicycles in the United States and they import components and assemble them in the US and sell them. Well bicycles got an exemption. They're duty-free but the components did not. Oh interesting.

So these guys are actually better off shipping their manufacturing offshore now and that's what going to happen. That's very odd. Uh have there been Yeah.

You feel like it feels like there's a little bit of this like game theoretic dynamic where Trump puts these blanket tariffs all over the place, but there's potentially an incentive for some country to just jump head first and say, "Hey, we're playing ball.

Give us the lowest rate possible because we want to grab as much manufacturing capacity over here and be as friendly as possible. " Have there been any um like I mean I know that the the the situation with Japan has been mo more difficult than expected.

Have there been any countries that have popped out as like new favorite trading partners of American companies in your feeling? Companies wise is different from the government probably. Sure. Yeah. Yeah.

the government, it looks like the UK so far and but the UK's got a 10% duty rate and some nice exemptions that they got on auto um which I guess is like Land Rovers and Bentleys, maybe Aston Martin. Yeah.

Um they don't make a lot of those, but um Jaguar is that is that how they make I don't think they've been making many cars. No, no. Jaguar Jaguar actually took a year off. They skipped a year producing cars. They were taking a year off business. We're just going to sell down our inventory. Oh, okay.

It wasn't just because the commercials were that bad. No, no. Then they launched the rebrand after they had announced that, hey, we're we're not producing any new cars, which was like your job. You belong in a Jaguar commercial. Look at you. You belong in the north of England.

I actually I didn't understand the convertible. I didn't understand the hate on the actual silhouette of the new Jaguar. I thought it was cool. It was very cool. I mean, it was one of those prototype cars that didn't have like mirrors or anything. So, they clearly needed a lot to do to make it a real one.

Um, but uh yeah, I mean a lot of but so uh come back to your question. The UK is interesting because uh they actually have a trade we have a trade surplus with the UK and they still got a 10% duty rate. So, that told everyone, oh, the best you could possibly do is 10%.

uh even if you have a trade even if we maintain a trade surplus. Vietnam is probably the best example of someone that tried to play bowl and they said, "Hey, we're going to do everything duty-free on American products being imported. " Uh and they ended up with um what was it 25 20%.

And then this weird trans shipment thing that I already got to that we don't understand yet. Um so that's probably the thing that Trump would like to get is that trans shshipment. What he would like to have is that these countries put duties on China and Chinese goods coming into Vietnam.

They want them to get hit with high duties so that you're not effectively laundering, washing Chinese goods through that country. Y doing some minimal transformation and then shipping them to the US. They want to make it so like it's a you know like create this coalition of the willing against China.

That's my that's my read on it. And it's hard it's kind of hard for them. Yeah. There's kind of two narratives. One's like Trump likes tariffs. He wants to throw tariffs all over the place, make us a high tariff country.

On the flip side, there's like this is about a trade trade war with a rising nearpeer competitor and the entire narrative is really just US versus China and everything else is in service of that. Is is that a reasonable narrative that you think people should It's one of those two probably. Yeah.

maybe some balance and I'm not sure they know and there might be different factions within the US government that want different ones of those and it's it's it's pretty hard to get a read on it.

Um, but from a company perspective, they're just looking for whoever makes the cheapest stuff that's high quality that they can sell. I mean, I don't think these countries, there's not that many companies.

They might on the surface like claim to be patriotic or have some views or something, but that's not that's not what companies are meant to do. They're meant to make money. Uh, and so they're going to they're going to route, you know, they're wait till the rules get set and then they're going to water flows downstream.

They're going to downhill. They're going to go figure out where the best place to make stuff is. Yeah, we saw this with Nvidia where there were chip bands and Nvidia is, hey, the speed limit's 65. I'm going 64 miles an hour.

And so I'm going to make a specific chip that is as good as possible while not breaking that regulation. Like that's not the spirit of the law. And it's like, yeah, I'm a three trillion dollar company. My job is not to adhere to the spirit of the law. I got to adhere to the letter of the law.

I got to make as much money as possible. And so that's what that is what companies are supposed to do. So government needs to set the rules and then we all figure out how to make money giving those rules. The problem right now is that the rules change.

So you can't make any decisions in the next I I I advise people wait. Yeah. at least tomorrow. I mean, we'll see what what new trade deals drop tonight, but I think every few weeks. No, no. If if any if if if history is a guide, as soon as you leave this Zoom, Yep. there will be news and someone check Twitter right now.

What uh what what's what's the EP how how cooked are are Teeu and Sheen right now? Um there had been some reporting last week around, you know, people bas you know, US shoppers ditching them because the loophole. I didn't know how how real that was. I haven't seen the latest data of um I think they're both back live.

You can buy stuff on their apps again. So, I think they're they're set up in a way that lets them transact and just pay the customs duties. Um and I I think they're I don't know how the consumer is responding to it all. They had to stop selling for a couple weeks. So, that probably hurts you pretty significantly.

Um, but if it's a $30 couch and then you're paying $90 or or whatever, it's like, well, it's only 30% on their on their wholesale price, not on the price that you pay. Oh, right, right, right. So, I think they may be fine.

It's all But I have heard that um apparel companies who is who most directly competes with Sheen at least, actually sales are up quite a bit despite the tariffs and having to raise prices. And that's probably in part because Sheen's volumes have come down and the com consumer is shifting their spend onto other brands.

So we've seen that a little bit in our customer data and our fulfillment business where customers are exceeding their forecasts.

So the world is not all doom and gloom from a ecom perspective which it's a big departure from 90 days ago where I was screaming everyone's going to go bankrupt and companies were screaming that to me.

Um, I think that relaxing the Chinese tariffs uh made a big difference, but again, we're going to figure out what happens in the next 24 hours of with these new duties and how people respond to that over the next few weeks. It's going to be exciting.

Um, what about uh some of the smaller players in the market like just the the the broad like drop shipping economy?

Georgia and I were talking about this this morning, how it feels like um and Sean Frank from Ridge was talking about how like the the default road to entrepreneurship a few years ago was like spin up a Shopify store like white label some stuff like you know get get a business up and running and then it shifted to like courses and influencer stuff and AI and and info products info products and now it's it's [ __ ] and Cluey and these other things that they were kind of talking about like the modern uh you know first time entrepreneur uh track.

Uh is are are these like you know small lean drop shipping operations still going? Do you think do you do you ever run into any of these people?

Do you ever see them kind of like you you used to hear about like oh someone just found this really interesting niche on on ads and they scaled this like very simple business to like tens of millions of dollars.

Are you still seeing that or or do you think that's kind of like I think you mostly see it in China and Vietnam but selling into the US. Yeah. Okay. They're entrepreneurs.

They're entrepreneurs who figured out how to do marketing and branding and the more that that was something I predicted would happen 20 years ago that it would take but that it would take a generation because that they have to speak English.

They have to know enough about they have to have enough humility to go I speak English but not that well. I should probably hire an American to do the writing. instead of like the writing myself and have it be English but terrible. On on Sunday I wanted to get a new hose.

What is not a not a spigot but one of those things that you can like control the flow nozzle or whatever. So I go on Amazon I I search hose nozzle. And I went five pages without finding a legacy US brand that that would sell me one.

And they're all these names that are basically some com five, six letter combination of English letters that that doesn't even read well. I think Amazon has a real problem in that regard. Yeah. And I I I would I would happily like I want to check a box that's just only buy from brands that have been around for 50 years.

And I would h I would just happily like those are the products that I want to buy because I don't want to buy the $6 product that's going to break in a year and I got to buy another one.

I just want to buy the thing that that you know it's not it's been and the thing to watch on this front those companies don't 60% of all the sellers on Amazon don't even have a US entity they're being they're like the goods are actually imported from abroad interesting and there's a there's a bipartisan movement in DC to block this policy to block this law to make it so that you have to have a US entity you can't just import as a Chinese company or whatever country country company.

You can't just import stuff into the US like without someone here who can be held accountable to following the customs law to whatever other child safety laws, you know, other stuff that's downstream that can happen.

Um, and I think Amazon has business exposure there that people like you are going to at some point I I start gravitating towards Shopify and like the shop app where you're like I don't know there's something higher quality about people trying to build a brand on Shopify today.

Anyways, um and then they have political exposure. I mean, what did Trump call them? A treasonous I forget what the for passing through the the tariffs into Yeah, he called him. For me, for me as a consumer, it's not like I want my hose nozzle. It's not like I need an Americanmade hose nozzle.

It's just like this this commitment to like this this relationship that you have when you're buying a product, which is I want to trust that this company put in a real effort to design a product that is going to be effective and durable and I'm happy to pay four, five times what the what the the entry ticket price is.

So, Lindyism, I like it. Yeah. I mean, people are clamoring for this on Pinterest.

like they want to search Pinterest from like be any image that's posted on Pinterest before 2023 like before the AI images came because you search for anything and it's just a lot of like a sneaky AI stuff stuck in there and if you're looking for something very specific you're like I don't necessarily want an AI image and there's no real good filter other than just like is it in the Pinterest database with date created before 2023 like that is the provenence of that image and it's kind of the same thing like on on Amazon on being able to filter for did this company exist, you know, 10 years ago.

What was the what what was the post-mortem on the on the conflict in the Middle East from a trade standpoint? I remember there was one night that her well it looked like two tankers had been blown up and I and I was seeing that like open source intel on it being like, "Oh, like I just was feeling bad for you.

I didn't I didn't send you a message or anything, but I was like, "Oh, this is the last last thing that that uh the that global trade needs right now, but we seem to get out of it.

" Yeah, it's um the trade of muse is incre much more important for the wider economy than just for certainly not for containerized trade trade. It's pretty small like only about 2% of containers go in and out of the um interesting straight of Bormuse and that's basically going to Dubai Jibali port it's called.

It's a top 10 port in the world, but it's mostly a trans shipment port, meaning cargo comes in there, gets unloaded. Think of it like a packet switcher, the cargo comes on, it gets rerouted. Um, it's not that important of a port in the wider scheme of things. The big the big thing obviously is oil.

It's like 20 something 5% of the oil in the world flows out of there. And it it's fascinating. Look, if you look at the oil prices, look at the price of diesel. There's no sign that anything ever happened in the Middle East at all. Like you don't even see a blip upward. Um, wow.

And when Iran threatened to close the straight of Hormuz, the oil price went down 6%. Instead of spiking. Yeah. Weird. Why? My read is like no one thinks that's a credible threat. Because if they close it, China gets all their oil out of there. Yeah.

And China is like kind of necessary to keep if Iran stops, you know, if Iran screws with China, like what's left? Like you gonna be against China and the US? Like this is probably bad strategy. Yeah.

Uh I thought that would maybe if when I saw that they might do that I was like this is kind of some 4D chess by Trump if he gets Iran to shut down the straight of war moves. We don't need it in the United States. We got we produce our own oil basically.

That's an overstatement but um when the oil price goes up America does better now, right? We produce we're the number one oil producer in the world. Like that might be good for us as a country. That is a crazy story.

Like just the idea of us I mean I grew up with the idea of like energy independence and the idea of America needs oil and we got to go to these wars to get the oil and oil drives everything and now you know we're a net exporter. I think there there is it's not like purely that we produce it.

We can just keep it here and be self-sufficient, right? Isn't it that we're we're producing it like it has to be there's different grades of oil in our refinery capacity is like different. Yeah, sure. There's some of that, but um that's uh nonetheless a higher price of oil would benefit American companies.

Now, yeah, like normal people, you and me, you know, our energy bills will go up and it'd be bad, but on debt for this for the country, you probably income inequality goes up or something, but we high price of oil is good for the number one oil producer in the world.

How how do you think uh retails broadly are uh thinking about interest rates in the next 12 months? You know, there's certainly pressure on that front. On Powell, it would be, you know, retailers have had to get used to high rates and if you're financing inventory and things like that, it is meaningful cost.

I' I've heard rumors of of um aggregators, you know, shutting down um that were heavily debt fueled probably can't sustain in in this type of environment. So, I assume like everybody else, I don't think they're that I don't think we're that sophisticated in our business.

Like, but cheaper interest rates would definitely help consumers buy more stuff uh and drive a lot of growth. And I think most of us would realize like, hey, we we kind of took it for granted for too long. We probably should have borrowed more money when it was 2% and bought more stuff and done capital investments.

And the next time around, I think it'll be a a massive spending splurge or investment splurge if they drop interest rates back down. People won't take it for granted. Totally. Um Europe and SF, there's been a bunch of massive trade deals and SF uh AI engineers going to Meta. Uh what's been the mood on the ground?

Do you have any advice for the folks picking up uh nine figure checks? I just Well, I love First of all, I love asking people because if you didn't get an offer, what's wrong with you? No.

And and if if you're not if people aren't po if there's not like whispers that that people from your company are being poached, you're probably not at the right lab, you know, or lab. Oh man, maybe I should make some posts about this getting angry at Zach for taking my best people. Yeah, the scops need to continue.

The rumor the rumors are true. So he's been he's personally dialing the entire engineering team. Yep. The advice would be it's um you should go read the most important business book ever written. Mhm. It's called The Prince by Makaveli. Oh, sure. And Maki's rule number one is never hire mercenaries.

He says it over and over again. It's the whole theme of the book. Mercenaries are useless. they will run away when the time they'll they'll take your money and then run away when it comes when it actually come to fight.

Uh and that is really dangerous out here in this world of AI poaching people paying this much money, you know, I'd be I'd be very uh worried if I was how do you build a culture out of that? It's going to be challenging. They should all go read the book and figure out what are they going to do about that.

How do you think about the sports analogy? A lot of people are kind of comparing the current trade deals to sports. No one thinks about Otani as a mercenary, you know. Yeah, it's interesting question. Um, sports you have a fixed size of your team, so you can only have so many players.

So maybe there's something to be said for that of like okay you've got therefore it bids up the price of the also if you look at if you look at the the you know we we know nothing about sports but I growing up in the Bay Area watching the Warriors go on this very dominant run I'm sure at any point many of those players could have increased their well not at any point because they have contracts that for years and so it's like a point you know the ultimate is Tom Brady because Tom Brady his secret was marrying a supermodel a wife who made so much money that he could work below market price and they could build out a great team.

So maybe you need to hire engineers who have rich spouses. There we go. There we go. It's a good take. Yeah. Yeah. That's going to be the next the next bull signal. Yeah. I don't I don't do it for the money to the holiday party. Okay. You're getting poached. You're going to the top team.

The holiday party was was popping. Yeah. But it's uh Yeah, it's I don't know. I'm fascinated by seeing how this plays out and it is um you know at the end of the day you got to hire the best talent and Zuck's kind of smart. He's got the war chest and OpenAI did this before. I mean they hired they were hiring everybody.

I love seeing them whine about it because all my friends have had their engineers poached by Open AI who are overpaying by 2x. So yeah. Yeah. A front end engineer was making 350k just of you know HTML and CSS. Yeah. And that it's it's kind of crazy. Yeah.

350 and and then you know tw tens of millions of dollars and probably stocks hopefully not for the front end engineers. This isn't even people. Hey, no slander for front end. I mean it depends on when they got in, right? If they got in a couple years ago it could have 10xed in terms of, you know, net value.

It's, you know, it's one of those it's like trying to be the toughest fighter or something. At some point, you know, you can beat up everyone on your block, but you eventually run into Mike Tyson and you're going to lose. So that's exactly what's happened. Yeah. I mean it's it's maybe better not to try to fight. Yeah.

It's so interesting because like the last the last like big like the I mean we've had it we've had a few like big hypers scale like really fast growing super hot like ordained as like winner companies like SpaceX, Tesla, uh Uber and those companies were not seen as a direct threat to Google or Microsoft or Apple.

And so it's not like there was ever I mean Google was kind of thinking about Whimo as a counter to Uber but it was never like our core business might disappear so we have to spend you know unlimited money to protect that you know what we have people are people are starting to talk about how the competitive dynamic between meta and open AAI being that if you're spending three hours a day talking with chat that's three hours a day that you're not putting comments on your friends Instagram posts or hitting reals.

or things like that. So there there's, you know, we all have 24 hours of the day. We're making more humans, but you know Yeah. Yeah. I I I want to see what ideas they have because, you know, the way to compete with Google was not make a better search engine like 10 years ago, 20 years ago.

You know, it's that a lot of people tried that, you couldn't do it. So I don't know that the way to compete with OpenAI is to make a better chatbot. I completely agree. like they got to come up with some new ideas here and I don't know what they are. I don't know what they have in mind.

Maybe they maybe I want a new I want a new uh thing at the bottom of the Instagram app that's just dopamine and it's just a perpetual loop. You don't have to scroll. Yeah. Yeah. Yeah. Something there. The whole app might be that eventually. Just surfacing content you want to see would be a win. Yeah.

Uh anyway, this has been fantastic, Ryan. Thanks so much for hopping on. Always good. Yeah. Send us a note when when when when uh new po new truce hit the timeline. Uh we would love your reaction. I don't think you guys can handle the the speed at which this is going to happen.

We might need you back on the show tomorrow. Who knows? Yeah. Yeah. I don't think you need that. Well, take care, guys. We'll talk to you later. See you, Ryan. Cheers. Bye. Let me tell you about adquick. com. Out of home advertising made easy and measurable. Say goodbye to the headaches of out of home advertising.

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