What Trump's Tariffs Are Already Doing to World Trade

SPEAKER_2 (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:24)

Joe, tariffs. One word, tariffs. I'm just gonna start all the episodes by saying tariffs from now on, at least for the foreseeable future.

Joe Weisenthal (0:32)

No, there's no other story. There really isn't. It's only tariffs for the foreseeable future, and I think we talked about it a little bit last week with Brad. I believe plausibly, I don't know in terms of quote damage and all that stuff, but plausibly this is the biggest story of our lives.

Tracy Alloway (0:47)

The thing I don't want to say like about this story, but one notable thing about this story is it hits both markets, which you and I have been financial journalists for a very long time, as well as the real world economy. We got really into that during the pandemic when we saw all these supply chain disruptions, ports, rerouting ships and things like that. This is a chance for us to unite two of our major interests.

Joe Weisenthal (1:15)

That's right. This is what every guest that we talked to for years about how supply chains work. It's like, all right, let's just go down the list and call them all back up again and find out what's happening. Run it all back. Let's do it.

Tracy Alloway (1:28)

All right. In the spirit of running it all back, we are going to be speaking to someone we've spoken to quite a bit before. Actually, this was one of our first ever sort of ports shipping disruption guests back in the early 2020 days. And I remember, he came recommended to me back when... Do you remember when I was trying to ship a teddy bear?

Joe Weisenthal (1:47)

I do.

Tracy Alloway (1:48)

From Hong Kong to the US and I failed miserably. Well, someone said, you should talk to Ryan Petersen. He's the guy who knows exactly what's going on. So we're going to be talking to him again today. That's Ryan Petersen, founder and CEO of Flexport. Welcome back to the show.

Ryan Petersen (2:02)

Great to be back. It seems like whenever there's something really bad happening...

Joe Weisenthal (2:05)

We call you up.

Tracy Alloway (2:06)

That's right. That's right. Okay. So first question, let's see. We are recording this on Monday, April 7th. The 10% tariffs went into effect on Saturday, I think. And then the higher reciprocal tariffs, like up to 50% are due to take effect on Wednesday, April 9th. How are tariffs actually enacted and communicated?

Yeah, and collected. What exactly happens when tariffs are increased? Like walk us through the process.

Ryan Petersen (2:38)

Yeah. So, well, the tariffs are applied in this case as a blanket based on the country of origin for the products. But typically, they're applied based on the category of the product. So these new tariffs get added to those product category tariffs. So it's cumulative. These are additional tariffs. And it happens with an ACH payment to the US. Treasury that you make via CPB, Customs and Border Protection. Most of the time, you can send a check to. Actually, interestingly enough, if you get a refund on duties, you apply and make some change and they approve it, they'll actually send you a check in the mail and those keep getting lost. But that's a story from another time.

Joe Weisenthal (3:15)

I think it's worth noting. I don't want to have to re-record a bunch of intros to episodes because things could theoretically change so fast. So we are recording this literally at 9.06. If something about this conversation is out of date by the time you listen to this in a few hours, sorry, but we're doing the best that we can. But given all of that, who pays the tariffs? If something is on the water right now, but it's not going to get here until the 10th, do they pay the tariffs? What actually is going to get tariffed and what can avoid the tariffs that hit on April 9th?

Ryan Petersen (3:46)

Yeah, so this is a really interesting and important point. For normally, under normal circumstances, the duties rates or the duty is due based on when the goods enter into the United States, when they arrive at the port and you're cleared customs. For these reciprocal tariffs, they made the rule that it's based on when the vessel departs. And so therefore, there's a mad scramble right now. Here we are, it's April 7th. It went on over the weekend to get cargo loaded and ships out of the port or planes taking off before that April 5th deadline. And that's happening again right now before the April 9th deadline. The difference being, if you got it out before April 5th, you paid no additional duty. You get it out by the 9th, it's 10% and then it will go up to whatever your country's duty rate is. That's new, that's something that's a little different for this time around. Usually it's based on when the goods enter the United States. So we actually won't see those payments made until the goods arrive, right? Because that's the date that they're using to trigger what duty rate is owed. But it won't hit the federal government's treasury for another month usually.