Tariff Changes and the BRICS Currency Shift: Strategies for Businesses

Andy  00:44

Hey folks, we’re on for simply trade podcast. It’s been a little while since Lyle and I’ve been in the studio together. We’ve been doing some public appearances and traveling around and hitting different topics. A lot of things going on. So it’s going to be an interesting discussion today, because we’re going to get to talk about tariffs and currencies and international trade and whatnot. So it’s going to be actually a very good discussion. But with that, I guess you know, Lala, welcome back. I It’s kind of neat to be back in the studio here. We’ve had kind of a you and I have gotten to see each other, you know, recently in in Michigan. So that was cool. So how are you doing? My friend?

Lalo  01:30

No, pretty good. Thank you. I I’ve been trying to catch up. I mean, like you said, we’ve been traveling and doing some stuff. Um, we’re heading out again in about a week or so, or you are anyway for IE Canada, and going to be presenting there in IE Canada. But yeah, I mean, it’s just been, it’s just been a little crazy. So we were at AEI last week. So no, I’m sorry, a i, a G, oh my gosh,

Andy  02:03

yeah, I know it’s like the alphabet soup here, yes.

Lalo  02:06

And so we were able to record a little bit of our air on in case you all missed that podcast or episode where we had Andy and the CEO of a i, a G and the committee chair for the conference that we went to, which is the customs and trade Town Hall, that thing that they hold every year. So anyway, you all should listen to that that aired a couple weeks ago. So anyway, yeah, so it’s pretty good. A lot of people really liked your speech that you had there. And I thought, I thought it went well. So so it was, it was pretty good.

Andy  02:45

And appreciate that too. We’re going to broadcast that, I think, on as one of our podcast shows. So it’ll be getting into the economy and and trade deficits and things of that nature. So that’ll be cool. So well, let’s bring on Chris. Galisi, you right? Yes.

Lalo  03:04

Galisi, yeah, yeah. So for today’s show, we had, yeah, we had a Chris. We met him prior to icpa, and we had him. And when we were at icpa in the fall, we, you know, we got some time to catch up. And he’s like, Hey, Lalo, I’m going to send you a paper that I just published, and it’s just a perspective on and it’s kind of strange, because Chris never pitched it to me as a political thing, I mean, but it’s just like a lot of people nowadays. Back then, we were still in the middle of the election period, so by now it’s all done. But, you know, it was in the forefront. People were talking about terrors and talking about, you know, protectionism and all the, you know, depending on which candidate you were going to vote for, etc. But so he wrote this paper. I read it. And so we’re today, you know, we’ll be diving into some nice insights on those global trade shifts, basically, you know, from tariffs to currency changes. You know, what impact are those businesses and the economy would be, etc, you know. So Chris, he brings in a perspective on here that helps us understand these challenges. You know, maybe look at a practical strategies to stay competitive and maybe resilient. We talked a lot about that during the last four years, during the previous administration or current administration, let’s just say that for various reasons, COVID. And then there was also geopolitical Oh my goodness. There’s so many different things. So anyway, just so everybody understands, isn’t that not necessarily about politics and for against one side or the other or anything. It’s just a view. And we just recently learned that Chris is a history buff, and he’s basing a lot of his thoughts and ideas behind the history. And so it’s really interesting. We do get guests that that come on our show that are big. History buzz, like Larry. Larry Hanson,

Andy  05:01

I just he did a thing with the it was the initial introduction of the institution of the World Trade Organization, wouldn’t

Lalo  05:13

Yeah, it was like a

Andy  05:16

history class,

Lalo  05:18

Ivy League history class, and it was amazing. So anyway, we kind of like these because of that. You know, we’re going back in history looking they always say, you don’t want to repeat history. Well, then study history.

Andy  05:31

But you got to, you got to study history to avoid Well, Chris, hey, welcome. You are with pharaoh now, right?

05:40

I am, I am, I’m in the I am in I’m in Ferrell. I’m in the private sector. I spent a good number of my career, half my international career, working in the NGO space, nonprofit World Trade Organization, Canadian consulate County, and doing international business development on the export side. And you know, I really enjoy trade. I always, I think I share with Laszlo the we always, always call it the five fingers of trade, right? And it was market development, supply chain and logistics, international finance, international law and trade compliance. And that’s really what my made, my transition going from the non government, nonprofit world, to the evil private side. They call it right and and I always like the compliance, because these are the folks that are a critical part of a company’s organization. You know, they’re they’re usually over, utilized, undervalued, understaffed salespeople. Want to look at them as killing the sales deal. Senior leadership looks looks at them as a cost. And I have to say to this day, thanks to COVID, it really opened up the opportunity that trade compliance is really the evolution of the people having seats at the table. You know, we see some of our friends at icpa becoming Chief compliance officers, Vice President of trade compliance, where that spin off of logistics from the 90s. These people are doing are really evolving to their coming to the C suite, which is really exciting.

Andy  07:10

Well, with all said and done, as we’re looking at it, there’s a lot of wailing and gnashing of teeth right now with some of the things I so we’ve obviously gotten through the election. Trump has been elected. Part of the things that Trump was saying out on the campaign field is that he’s looking at hitting tariffs across the board on all goods coming in the US and whatnot. And so now everybody’s like, Oh, the sky’s falling and it’s in the world and as we know it. But that said is in looking at it, you’ve got some points in here that I definitely want to get into and talk about as we get it, but taking basically the initial, I guess, threat of putting tariffs across the board, and that alone, just looking at that and nothing else happens. This is where a lot of things are coming into play. Saying, you know, there’s, it’s going to be a negative to the US economy. Is what you’re some of your points you’re putting in thus far, right?

08:16

Based on, not, not in my perspective, but based on some of the research they’ve done in the past, you know, going back to the days and the Smoot hotly act in the 1930s the Nixon shock in the 1970s where some of these tariffs were put into place, we’ve seen countries, both countries, you know, as our favorite trade partners, but other countries as well, have gone in retaliatory tariffs, which have affected the economy. So one of the things I struggle with, and we’re coming from an export driven world, some of the most successful companies, what they do is not only that they import, but they export at the same time. So whether they import a lot or they export a lot, but the ones that are doing that balance, those are the ones that are succeeding and those are thriving and are considered true global companies that are taking advantage of all the different opportunities that are out there to help them grow and be successful.

Andy  09:11

Well, and with that, that’s the one thing that I always say. And folks, before we go any further, let me, let me stop for a minute. This show is going to be something that you should be looking at from, you know, gaining some information from a strategic planning perspective. This would be one definitely from your import, export compliance, your transportation, your upper echelon. These are items that we’re going to hit that should stimulate your thoughts on, you know, looking at the markets as a whole, and I’m saying markets, I’m like, if you’re trying to penetrate current markets in other countries, or even domestically, and things of that nature. So as we’re talking through this, this is one of those that you need to. Look at things, in my opinion, definitely more holistically, rather than just one little item and all that. So Chris, as far as that, once you go through a little bit here of what you’re saying, as far as the initial accusation, I will say, I don’t know if I fully agree with this, but this is going to be a good discussion. Okay, so let’s, let’s go ahead and throw on out there.

10:22

Yeah, please, and please interject at any time. And you know, one of the things, as I mentioned, from, from my career in starting in, you know, international development and trade, and then also being a history buff, looking back to the days. And you know, 1930 in the smooth Hartley Tariff Act. You know, when the US, when the Great Depression happened in 1929 we know there was this need for protectionism that we needed to come back and look at redeveloping these businesses and industries in the United States. And as a result, they created this additional tariffs on countries, not only just like countries from a distance, but countries even as Canada, France and some of their favorite trader partners back then, that didn’t go very well. And there’s been a lot of papers that were created saying that, you know, and studies done during the Great Depression that that actually extended the great depression for a few years afterwards. And it wasn’t until World War Two that pulled the United States out of there, you know, and I, where I see the correlation is between tariffs and our currency. We had a lot of things that were happening during that time, and we see, like, obviously, World War Two, it pulled us out now, it pulled us out of the Great Depression, but it really put us in the global economy. And it really made us, you know people as we know people that win wars three, right, history and because the US was a big benefactor of, you know, playing a big part of winning World War Two, Brenton Woods was created. And then the agreement among these countries to say that we’re going to adopt the global currency as the US dollar. You know, one of the most prosperous times, as people have said, is between 1948 1971 after, you know, after World War Two. And people go, why is that date that we look at and we look at because, you know, 1971 that’s when we look at Richard Nixon the Nixon shock. We call it, right? Nixon shock does the same thing where he created these 10% tariffs as a result. Come to countries were retaliating because of these tariffs, and it resolves on being on impacts, not only on exports, but affecting those local companies as well, you know, coming from the export stages. Yeah, go ahead,

Lalo  12:30

because I was going to interject here real quick and say, although that may be true back then, how global or how interconnected? Where were we all, you know, as a, as a, as a, as manufacturers, as a society, as you know what I mean, like, how much did we all depend so much? Like, if they retaliated against us, I feel like they may have depended a lot more in the US, either now or then, or what I don’t know. I mean, like, in perspective then to now, you know what I’m saying? Like, yeah,

13:06

and you’re absolutely right, let alone. And they did, there was a lot of reliance on when rebuilding Europe after World War Two, and depending on these US manufacturers to to do to this. But as we fast forward from when the tariffs were put pre World War Two in 1930 to current day, 1971 you know that both was the backlash of these, of these countries saying, you know, we need to have fair trade. You know, there it is. And I agree. I we definitely have to have tariffs, but we can’t, and we live, as I always say, it’s not our grandparents economy like it was years

Andy  13:41

ago. All right, let’s look at China. China, their market is not open, not only to the US, but to other countries around the world, and yet they make up 23% of our trade deficit. So as we’re looking at this, and we’re talking about tariffs across the board, I’m looking at it from the standpoint that Trump is looking at getting these people to the table, negotiation table, but if you only put in the tariffs, then, yeah, there’s, there’s going to be gloom and doom. But if you don’t do anything, then we’re going to just going to continue on with trade deficits and and and world sacrifice, quote, unquote cheap imports at the expense of US exports.

14:30

So I’m gonna, I’m gonna hear me out on this one, and I’m gonna, I’m gonna pitch this to you and see what might see what the thought and the feedback is on this, and you might take this wrong way or not, but let’s see how it goes. When I was in China, and I’ve been there a couple times already, in country, I was out standing at the corner, and at the corner I saw a Maserati dealership. I saw a Mercedes dealership, and I saw a black Buick dealership. It was almost like that Sesame Street. One of these doesn’t belong here, right? Singing the song, and I’m standing there watching the corner. And. I’m looking around. And I went to my Chinese counterpart, and I said, Something doesn’t fit here. I could see the Maserati. I could see the Mercedes. And there was another one. It was another fancy car, whatever it was, on the four corners. And I said, what’s up with the black Buick? And he said, Oh, Chris. He goes, when you make it in business in China and you cut your teeth for the very first time, you you buy yourself a black Buick. He goes not because of the cost of the Buick. It’s because of the cost to import it in the country. Hear me out, what the US is doing wrong, what the US is doing wrong. And this is going back to my approach of a buy and sell local, a trade regional and a buy and sell global. Approach is we shouldn’t be punishing the countries. We should be punishing the businesses. And you just hit it on the Andy and hear me out. If a company and they say it’s equivalent to every $250,000 in exports equals one created job. And if what happens is, if I am importing more than I am exporting, I should be paying those tariffs, 6070, whatever those percentages are going to be. But if I am using some of that product and I’m exporting more into the into the countries, let’s say, let’s just use raw numbers, million. If I am importing a million dollars and I am exporting $500,000 worth of product, not just as a whole, as a whole, dollar for dollar, then I should be paying those exuberant duties on the 500 the difference of the trade deficit to balance that trade. Okay? Now what happens is the companies are now having that ability to shop the world for the best components, the best products that they can bring in and selling now, in our in the world, at Farrell, what we do is we do help companies like that. We have a it’s duty recovery, duty drawback. Those are programs that, if it’s brought, if it’s imported the US and it’s re exported out, and they show the paper trail and the activity, they can apply for that drawback. But as an overall, you know, they take advantage of those programs. But overall, the companies, why should we target the countries? China has 1.3 billion people in this country. Can you imagine how many black Buicks that we can sell, or how many new commodities that we should be bringing into so the US should be investing more into its companies. As saying, let’s invest in these STEM companies. Let’s invest in these startups. Let’s help culture these let’s teach these companies how to export. If the US ranks at the very bottom, towards the bottom of countries around the world that exports through their products throughout the world, we’re more selling within what that’s whether that’s the first problem. China is selling number one importer to 120 countries around the world, and Canada is our number two traded partner. China is Canada’s number two partner. So where we’re doing here is, and this is where I’m saying. It doesn’t say, you know, where we open up trade, because China has closed border. It is a tactic in such a what they’re doing. But can you imagine if we open up the border between China, open up said China, we’re gonna do free trade with the United States, but we’re gonna penalize our countries, our companies, if they’re exporting more or less than what they’re importing, then we’re gonna put those tariffs on there, and then use that tariff money to reinvest into export programs to help teach these companies how to do business abroad in these countries. It helps develop it everybody wins, and it creates diplomacy across the board.

Andy  18:30

But overall, Chris, I would say, for your perspective, is that in in looking at this is, I always say, look at holistically, that this whole situation is trade scenario. Because, yeah, trading reasoning helps trading with partners are going to help us and all that. And we need to kind of maybe shift this into the BRICS currency scenario here as well. But on these, these trade relations and things, if nothing else is done and and Trump puts in in the Trump administration, puts in tariffs across the board with no strategy and no idea of what they want from the other countries, just like that was the downfall of Nixon and all of putting those things in. And yet it’s like, well, what is it we want to do on it, and they didn’t. They stopped international trade, and they didn’t, then we’re going to be in a in a world of hurt. I’m looking at it going, these are tools to get people to the negotiating table to say, We want fair trade, Canada, US, Mexico, all of us want the playing field to be fair when we’re dealing with international trade with other countries. Oh,

19:46

I agree. We’re definitely saying the same thing. And, you know, and say we talk about pre trade, and then there’s obviously what we should look at, is what is fair trade. But it is. It’s amazing to see how you know these companies that you know we’re. We look at, you know, these, how many, 20 million company, 20 million companies or so that are currently in the United States, how many of the only us, very small amount percentage is actually selling abroad, you know? Then it goes up a little higher. When you look at Canada, it looks at more favorite states, but it’s favorite countries. But it’s amazing that, you know, and I agree with Andy that we need at the macro level, if we have instances like Germany that are punishing the tariffs coming in for us, cars going in there, we need to put a stance, dig our stance in the ground and say, look at, you know, we’re going to put these tariffs on you because you’re not giving us that lane open. You know, it should be, it should be reciprocal on both between both countries. But then peeling the onion back, we need to look at the companies to say, okay, what are you do? Are you exploiting, you know, bringing in cheap product from countries then and selling it at high margins, and then, you know, basically, you know, profiting from it, or what are you exporting? What are you creating jobs? Are you, what are you building in the economy? And I think that’s where our program needs to be voted it’s almost like a two tiered approach, you know, like you said, Great, that open, that free lanes between countries that trade fairly with one another, but then go to the companies to say, well, how much are you importing and how much are you really exporting? You’re the one that’s creating. The balance of trade being off. So

Andy  21:20

the growth, and you make it, reference it, what’s great is that for every billion dollars of trade, equates to 10,000 jobs. Of that 10,000 jobs, 6000 of them, almost 6000 are tied to exports. Another 4000 is into the imports of that country. So, you know, the more it grows, the better off we are. And that’s where I’m looking at it going. Okay, so what do we do? Here’s one of the other factors. So let’s, let’s move into you were talking about the BRICS currency, folks for that, there’s Brazil, Russia, India and South Africa have joined forces in trying to to move away from the US Dollar as the like an international currency, almost it’s it’s for business transactions, and they want to stop using the US dollar, and they are looking at potentially coming up with their own currency, or using one of their own country’s currency for business transactions. Now, why don’t you talk a little bit about that in because I see that as an effort to circumvent the sanctions against Russia and China and India and some of the others. Iran’s part of that deal too, and some of these countries that are anti us.

22:42

Yeah, it’s really, it’s really, it’s really fast, it’s really fascinating. And I’m going to go back and step back a little bit back to our history again, back there in 1970s with the Nixon era, you know, Nixon taking us off the you know. And this is actually really, this is fascinating. This is, actually, was a Jeopardy question last night, and it went, and my wife, and they are big Jeopardy fans, and it did you guys aware of like, I think it was 19. I’m just looking at my notes

Andy  23:09

here, 71 or 72 what? 74

23:12

we were actually, well, 71 he took us off the gold standard, right? 74 anytime between now and 1974 we could buy gold. But between 1974 and it was 1934 I believe it was we. They actually the US. You could not hoard gold. And I thought that was really fascinating. So what happened was, so let’s go back and go back in time. So 1974 you know, 1971 Nixon takes us off the gold standard and pegs us to the dollar itself, the faith of the currency of the United States, dollar. At the same time Nixon 1974 they allowed us we could start purchasing gold again. And then the same time, he negotiates with the OPEC countries that we can gold is going to be bought and sold under US dollars. So there was a 50 year agreement made with Saudi Arabia. Henson born the petro dollar. Okay, fast forward in 2020 fast forward in 2019, 2020, COVID comes, and what happens is the countries outside the United States are look countries outside around the world are looking the United States, and they’re saying, Wow, the US is printing a lot of money. They’re issuing a lot of money that’s out there. How is this affecting our economies ourselves? So lo and behold, the bricks, as you mentioned, you know, Brazil, Russia, India, Russia and China got together and said, We need to put a stop on this. First of all, the US is not going to bully us and tell us that we’re going to put sanctions on Russia or our countries if we do something wrong or incorrectly. And why is the US printing all these dollars? And we need to not only get our brick countries involved, but we need to get these other countries to buy in as well. And Andy, like you said, countries such as Iran. North Korea, and actually 52 other countries as well, and growing, including Saudi Arabia, which their PAC, a 50 year PAC just expired, said we’d like to be part of this. And it’s fascinating, because what they want to do was to come up with some type of uniform currency, whether it was crypto monetary, whatever it may be, they couldn’t come to an agreement. Actually, it’s being driven more heavily by India and China and such. So it’s amazing how the dynamics is. It was, it was said, If we would have did this, this show, when here, if Kamala Harris was elected, I would have probably had a different perspective and said that these countries are God, this is something that’s going to be accelerating and moving forward. Lo and behold, last night, I was reading through the presses, it was saying that Russia was this made some concerns that they’re thinking about the BRICS isn’t the BRICS currency isn’t a good idea that they maybe we should be looking back at the dollar. South Africa, for example, is looking at possibly leaving the BRICs. So it’s really fascinating how the dynamics of a US election, whether if this party came in or this party came in, how much that momentum has changed. This is something that bricks has been brought up daily in the new in the win, the global news, and not much in the US economy. In the US papers that when they were moving forward, they’ve had multiple meetings. They have multiple discussions. Now, whether you know a bricks currency is going to happen, it may or may not, whether a cryptocurrency might happen as a universal it may or may not happen, or maybe the dollar will stay the same. No one knows, but only time will tell. But it’s really fascinating how we see over time, in a sense we look at a trade war that’s going on. But in a sense, there’s a financial war going on between these countries and saying, How can we position ourself as is not only a top tier economy, but how that we can get an upper leg on the on the United States? So it’s a good thing. I excited to see that, that there’s some breaks in the brick wall, we call it, right? And it’s happy to see that maybe there people are reconsidering that this might not come to fruition. What

Andy  27:07

is it in your opinion that people should be looking at to counter this?

27:12

Absolutely, I’ve been putting a lot of thought into this, and it goes back to the saying that we probably learned from our grandpa, right? It keep your Keep your friends close and your enemies closer. And I say that wholeheartedly, is saying what people need to do is really take a step back and find look at their supply chains. Who are we doing business with? Where are we doing business with? Are we visiting the country? Are we visiting these countries where their plants or we’re sourcing? What are the Free Trade Agreement? You know, it’s almost like peeling the onion and doing that risk assessment. You know, what free trade tree agreements are? We have right now in place, what plants are, what which ones are we don’t in place. What are the countries have we visited and seen the plants of activities that are happening and such, and then doing that full risk assessment, and then also look at the financial part of it too. Is there opportunity that we could take advantage of financial recovery, you know? And that’s right, I swear by that, buy and trade, buy and sell, local trade, regional and buy and sell and global. Because you want to look at not just that little ecosystem where you live in, whether if it’s Buffalo, New York, or Dallas, Texas, or wherever it may be, you want to look you want to really think globally. And then what you want to do is, not only just think globally, look at your positions and where your moves are, and then make decisions from there.

Andy  28:34

Excellent, excellent, excellent. We probably, I was just gonna say yeah. We’re gonna need to try and wrap this up, I tell you, yeah, well, I enjoy the conversation here, but it’s, it’s, well, let me just say this, as far as looking at it, sourcing your your goods, it would be wise to continue to look at, You know, deer shoring, as people call it, regional supply chains and all that. Obviously, the US economy is so massive, it’s like we have a lot in our domestic side of things, but that who you’re doing business with and who they’re doing business with. It may be that, hey, you got a good relationship. But then come to find out, they’re doing some other things that is like, you know what, in the long run, that hurts the country. Hence, you know you, you got to make your own decision on that strategically. But Well, Chris, any last thoughts from you?

29:38

Oh, no, this is great. Well, I’ll tell you, I’m a big fan of what you guys do and helping to spread the word and getting these information out to our our companies and our folks, and that’s why I like about the trade community. It is. It is a big world out there, but we’re all interconnected into here to help and support one another, so it’s good group. And keep up the great work. You. Guys are doing well,

Andy  30:00

I appreciate that Lalo, any thing last moments that we need to talk about here before we sign off,

Lalo  30:07

we’re good to go. Thank you everyone. I mean, we’re, we’re, we’re glad you’re tuning in and and we hope to bring more more of these shows for you. All

Andy  30:17

right. Well, folks, let me just say real quick, is that if there are some things that Chris and I and Lola have been talking about, and you think we’re full of beans, and you know what, let us know. Send us a comment. Do something here, you know, and come on the show. Be willing to talk with us and debate some of this. I will also say this though we greatly, appreciate it. Every time we get to go out and do a public appearance, oh my gosh. It is so cool. People coming up, taking selfies with us and talking with us. It is just phenomenal. So we greatly appreciate that. Please, if you’ve not already done it, subscribe to our show Chris. We’re gonna put your contact information, also in our show notes and whatnot. But thank you so much for coming on the show and talking with us today. I

31:07

appreciate you guys having me. Like I said, I follow you guys podcast. You guys have great topics of discussion, and every time, I always learn something new, and that’s what, that’s what we’re here for. And it’s just, there’s certain you guys just bring the meeting of the minds together, and there’s always great pieces of information to take home. And I really enjoy that.

Andy  31:27

Joel is fantastic. Appreciate that. Well, with that, folks, we’re going to turn it over to you. I hope you all have Y’all have a great day. So take care. Thank you very

Lalo  31:38

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