Speaker 1: And the more than a year long trade war between
Speaker 1: the U S and China. Last Thursday was one of
Speaker 1: the few good days. Story of the morning, US security
Speaker 1: futures jumping after China's commerce industry saying the U. S
Speaker 1: and China have agreed to phase out the tariffs that
Speaker 1: were imposed during the trade war. Stocks rallied on the breakthrough,
Speaker 1: but the euphoria didn't last for long. Just the day after,
Speaker 1: China said the two countries agreed to roll back tariffs
Speaker 1: on each other's goods, which, by the way, US officials
Speaker 1: echoed to President Trump himself came out and denied he's
Speaker 1: agreed to anything. This left down that they couldn't even
Speaker 1: agree on whether there was an agreement. It was just
Speaker 1: one more reminder that this trade war is far from over.
Speaker 1: What hangs in the balance is, of course, the health
Speaker 1: of the entire global economy. It was about seven hundred
Speaker 1: billion dollars in trade between the US and China last year,
Speaker 1: but with numbers that big, it's easier to forget that
Speaker 1: this is about more than just geopolitics or foreign exchange
Speaker 1: rates or corporate earnings. It's also about the lives of
Speaker 1: a lot of people around the world. Whose jobs and
Speaker 1: businesses depends on the two countries getting along. For them,
Speaker 1: this last year has been their own personal nightmare, a
Speaker 1: lot of sleepless nights considering an uncertain future, caught in
Speaker 1: the middle of two quarreling superpowers breaking tonight, serious punching
Speaker 1: and counterpunching taking place right now in what has become
Speaker 1: a full fledged trade war between the US. Today, in
Speaker 1: the show, reporter Shelley Banjo brings us the story of
Speaker 1: one such person, an American named Michael mcgliny, who sells
Speaker 1: espresso makers manufactured in China to American customers on Amazon.
Speaker 1: Michael bet his entire career on the idea of global
Speaker 1: trade and the hope that technology was making the world
Speaker 1: an open and interconnected place, only to watch all that
Speaker 1: unravel in recent months. Amako, you're listening to Decrypted Stay
Speaker 1: with us, Hey, Shelly, welcome back to the show. Thanks
Speaker 1: for having me. You know, you found a really interesting
Speaker 1: guy for today's episode. How did you get to know him? Well,
Speaker 1: the trade war was in full swing and we started
Speaker 1: to wonder what was happening to e commerce sellers who
Speaker 1: had kind of built these big businesses on Amazon making
Speaker 1: stuff in China. And selling them in the US, and
Speaker 1: so I wanted to find someone who could really tell
Speaker 1: us about what that was like. So tell me about him.
Speaker 1: Michael grew up in Hartford, Connecticut, to a blue collar,
Speaker 1: working class family. Michael had to work his way through
Speaker 1: high school working at grocery stores. Then he worked in
Speaker 1: a machine shop with his uncle. I was interning in
Speaker 1: a machine shop in Connecticut where I grew up at Hartford,
Speaker 1: and I was getting shut down. I mean I was there.
Speaker 1: Was like a smart guy, Alex, and he says, you know,
Speaker 1: everything is going overseas. I don't know what we're gonna
Speaker 1: do here. And uh. He went to New Jersey for
Speaker 1: college and ended up getting a job on Wall Street
Speaker 1: in New York working for Deutsche Bank. But you know,
Speaker 1: the one in the Wall Street wasn't necessarily for him,
Speaker 1: and he kind of for fun starts this bartending supplies
Speaker 1: store called New York bar store dot com, where he
Speaker 1: would sell things like um cocktail shakers and beer pong
Speaker 1: accessories on eBay. I was really having a lot of
Speaker 1: trouble trying to buy from China walls on Wall Street,
Speaker 1: and I remember being on Skype at like ten eleven
Speaker 1: pm on my fifth floor walk up. But you know,
Speaker 1: we were just felt a huge disadvantage. I'd wait like
Speaker 1: a week or two weeks for a sample to come,
Speaker 1: you know, and they spoke English, but he didn't understand.
Speaker 1: So in March two thousand and seven, right before the
Speaker 1: financial crisis, he decided to quit his job. Then he decides,
Speaker 1: you know what, I'm going to go to China and
Speaker 1: kind of find those factories that are making these beer
Speaker 1: punks accessories and bar supplies and kind of figure out
Speaker 1: how to turbo charge that business. So I just felt
Speaker 1: like I needed to go there because I felt like
Speaker 1: all of the knowledge and information is getting sent there.
Speaker 1: And I was like, yeah, I just let all of
Speaker 1: our technology, let all of our money, just send it
Speaker 1: all to China. What does outsource everything? So this is
Speaker 1: right before the financial crisis. I remember it was a
Speaker 1: really different time back then. You know, the consensus in
Speaker 1: Washington was very pro free trade, generally receptive towards China,
Speaker 1: and it was just a different mood. That's right. China
Speaker 1: was opening up to Western businesses. There was this general
Speaker 1: feeling that China was the future. But Michael felt a
Speaker 1: lot of resistance when he justified this move to his family.
Speaker 1: I spoke to Michael's uncle, Gary Garno. Michael had worked
Speaker 1: with Gary in a machine shop in Hartford. Gary now
Speaker 1: lives in Florida and he's unemployed. I knew America was dying,
Speaker 1: you know, we were losing all our industry. China was
Speaker 1: was was was heading up. You know, there aren't learning
Speaker 1: up swing, you know, And here's what was happening. And
Speaker 1: during that time, in my opinion, we were shutting out
Speaker 1: factories all over the place, and we were sinking hundreds
Speaker 1: of billions of dollars into China. What was your first
Speaker 1: thought when when Michael told you that he was going
Speaker 1: to move to China. I was kind of hate losing him, really.
Speaker 1: I didn't want to see him leave, but I figured
Speaker 1: he knew what he was doing. He's pretty smart guy
Speaker 1: and he likes to sell stuff, and I guess China
Speaker 1: is the place to go. He told me to get
Speaker 1: a factory in China. I don't fit in with the
Speaker 1: rest of the family. They're not so supportive, honestly. I
Speaker 1: uh my mom cried about it, but they just feel
Speaker 1: like they're much more patriotic than I am. I'm not
Speaker 1: like anti American I'm just more people are humans. I mean,
Speaker 1: all these borders just don't make sense to me. Okay,
Speaker 1: So Michael gets to China. What does he do there?
Speaker 1: So Michael immediately starts to hustle. He's dabbling in and
Speaker 1: out of e commerce. He meets his wife who's Chinese.
Speaker 1: He sets up a consulting company that focuses on cross
Speaker 1: border trade, and then he starts a business manufacturing old
Speaker 1: school Italian espresso coffee pots. These are made in a
Speaker 1: factory in China, and then he sells them on Amazon
Speaker 1: to US customers. And when is this So this is
Speaker 1: right around the time that Donald Trump gets elected. We
Speaker 1: can't continue to allow China to rape our country. And
Speaker 1: that's what they're doing. It's the greatest And of course
Speaker 1: Trump campaigned on very anti China, anti trade rhetoric, right
Speaker 1: And among the voters who voted for Trump was Michael's
Speaker 1: own uncle Gary, who you know, saw jobs moving from
Speaker 1: his hometown of Hartford to China, and he agreed with Trump,
Speaker 1: we gotta start protecting America. Don is right, we gotta
Speaker 1: bring back that industry's gonna keep you gonna bite us.
Speaker 1: But you know, the Trumps presidency starts in that's right.
Speaker 1: And at first Trump and President Chi Jimping of China
Speaker 1: are really getting along. They share chocolate cake, they visit
Speaker 1: each other's countries, and they make this plan that they're
Speaker 1: going to resolve the whole trade difference in one days.
Speaker 1: But near the end of the U s starts implementing
Speaker 1: tariffs on steel and solar panels. These are two major
Speaker 1: industries that China is really proud of, and so China
Speaker 1: hits back and puts tariffs on cars and agricultural goods
Speaker 1: from the US. What does this do? We're now seeing
Speaker 1: the United States made a move and now overnight China
Speaker 1: has made a move, and the trade war keeps escalating.
Speaker 1: Businesses are scrambling to try to figure out what to
Speaker 1: do next. I don't want to use the word because
Speaker 1: it's a highly respected show, but they are taking advantage
Speaker 1: of us. Okay, I'll use a different set of words.
Speaker 1: They are taking And what's Michael up to during this time?
Speaker 1: About a year and a half into Trump's presidency, Michael,
Speaker 1: his wife, and his two kids decided to leave China.
Speaker 1: They end up settling down in Thailand. I mean, I
Speaker 1: could feel that China wasn't welcoming foreigners anymore. Honestly, I
Speaker 1: could feel it even then. I'll say, you know, from
Speaker 1: the US, and I'll say, do you like do you
Speaker 1: still like Americans? You know, I'm just afraid to refresh
Speaker 1: to news sometimes, especially when I'm inside of mainland China,
Speaker 1: because you never know, they decided that they no longer
Speaker 1: actually had to be in China to run the coffee
Speaker 1: pot business, and things just weren't as comfortable any more
Speaker 1: for Michael to be an American in China. And he
Speaker 1: decides that this would kind of hedge his bets against China,
Speaker 1: kind of create another life in a different country. We'll
Speaker 1: be right back, okay. So before the break, Shelley, you
Speaker 1: walked us through the worsening relationship between the US and
Speaker 1: China and the toll that takes on Michael. That gets
Speaker 1: us to the beginning of Well, earlier this year, it
Speaker 1: seemed like again we were getting close to another deal.
Speaker 1: But then March came, and then April came and there
Speaker 1: was still no deal. And then in May Trump rips
Speaker 1: off a tweet, of course, saying that progress is going
Speaker 1: slowly and China is renegging on earlier promises. So Drump's
Speaker 1: had it at this point, and he threatens to increase
Speaker 1: tariffs up to the US decides to ban American companies
Speaker 1: from doing business with Huawei, China's biggest tech company, and
Speaker 1: the trade war kind of explodes. Quick check in the market.
Speaker 1: You'll see the Tao is plunging. It's a response to
Speaker 1: the escalating stakes in this US trade war with China. Yeah,
Speaker 1: this is when things are looking really bad. I think
Speaker 1: a lot of the sellers are like, like me, we're
Speaker 1: just still waiting. We're still kind of in shock, or
Speaker 1: we're still thinking. Maybe there seems like there's still this negotiation,
Speaker 1: always this and that thing, and um, I feel like
Speaker 1: we're all still kind of waiting. So this is when
Speaker 1: I met Michael. It was a right around the time
Speaker 1: of the G twenty summit in Japan last summer, when
Speaker 1: Trump and She were about to meet in person, and
Speaker 1: Michael and probably everyone else around the world was on
Speaker 1: pins and needles to see what would happen. And the
Speaker 1: much anticipated meeting the twain the Chinese and US presidents
Speaker 1: is just a few hours away at the j twenty
Speaker 1: of And I never even really pay attention to T twenty.
Speaker 1: I've heard of it and obviously this year was more important.
Speaker 1: So yeah, I was definitely like, Saturday morning they will
Speaker 1: be meeting, and it was Japanese time. I'm rose Osaka,
Speaker 1: so I'm like, it's a little bit ahead of you know,
Speaker 1: where I was in Thailand, So you know, of course,
Speaker 1: I'm like kind of refreshing the news waiting for the
Speaker 1: update of his meeting. The US and China agreed to
Speaker 1: restart trade talks, but it's certainly not a done deal,
Speaker 1: and at this point, Michael needs to make a decision
Speaker 1: about Christmas. Christmas is super important because it's when he
Speaker 1: brings in of his sales, and he's ordering goods from
Speaker 1: a factory in China. It takes a few months to
Speaker 1: make the coffee pots and then ship them all the
Speaker 1: way to the US. Other Amazon sellers are ordering less stuff,
Speaker 1: but Michael holds off. He ends up taking a big gamble.
Speaker 1: He decides not to change his coffee pot order, and
Speaker 1: he figures he'll just eat the cost of whatever tariffs
Speaker 1: might hit him. What is the other option, like, kind
Speaker 1: of make it in America. Um, from what I saw
Speaker 1: involved in making these products, I don't think I could
Speaker 1: make it in America. At least I guess I could
Speaker 1: fly there to try to teach somebody how to do
Speaker 1: like all of this again, but basically there's no I
Speaker 1: feel like there's no other options. So what that means
Speaker 1: is everybody in my market is buying this from China.
Speaker 1: Maybe in the long term, somebody will win that could
Speaker 1: beat me by being making it somewhere else, but nobody's
Speaker 1: gonna be able to make it somewhere else and before
Speaker 1: at least for Christmas maybe, So I think you got
Speaker 1: to say in the game, if you run a stock,
Speaker 1: you're basically giving up. So, um, what do you think
Speaker 1: it's going to happen in six months? I think Donald
Speaker 1: Trump is probably also realizing he's going to shoot himself
Speaker 1: in the foot. I do feel like American economy is
Speaker 1: based on the important cheap Chinese goods. I feel safe
Speaker 1: for Christmas. I don't think he's gonna screw it. I
Speaker 1: don't think he's a mess with chrisma us. I think
Speaker 1: he's going to just keep extending this and and uh,
Speaker 1: I hope he doesn't because he wants to get reelected.
Speaker 1: So what happens next? And then all of a sudden
Speaker 1: on August first, welcome back to some dramatic breaking news
Speaker 1: on tariffs. Trump starts tweeting again about more tariffs. And
Speaker 1: these are the tariffs that really worry people because they're
Speaker 1: on consumer goods like electronics and clothes and things that
Speaker 1: are really going to hit retailers and consumers where they hurt.
Speaker 1: Right before Christmas, right, people start talking about Trump destroying
Speaker 1: Christmas exactly. So this is when things are starting to
Speaker 1: look really bad. Yeah, and it gets even worse when
Speaker 1: the US declares China currency manipulator, which is kind of
Speaker 1: an official way to accuse a country of cheating on trade.
Speaker 1: So I started thinking about Michael, and I give him
Speaker 1: a call because I'm wondering what Michael's thinking at this time.
Speaker 1: So turns up, Michael has big news. He decides, you
Speaker 1: know this, these tensions and this back and forth is
Speaker 1: just really getting too much for him, and he decides
Speaker 1: to actually sell the coffee pot business, uh to a
Speaker 1: company that kind of rolls up other Amazon businesses, and
Speaker 1: UH join that company, so it kind of spreads out
Speaker 1: his risk. Wow, I can't believe he sold his business
Speaker 1: because of the trade war. You know, I don't think
Speaker 1: it was just the trade war, but I think he
Speaker 1: can kind of feel these growing tensions between the US
Speaker 1: and China that you know, he doesn't want to build
Speaker 1: and keep his whole life tied to China. The bad
Speaker 1: thing about America is you can't play long term. We
Speaker 1: don't know how long Donald Trump will stay. You know, Um,
Speaker 1: the policy just changed, Like Trump comes in and reverses
Speaker 1: what a whilement something Obama did, and then maybe the
Speaker 1: next person comes in and changes what Trump did. You know,
Speaker 1: I think even China's waiting it out, you know, I
Speaker 1: think China can wait until the next president. So in September,
Speaker 1: the tariffs that Trump threatened over the summer come into effect.
Speaker 1: These are tariffs on consumer goods like footwear, TVs and
Speaker 1: of course home goods. And does this include coffee pots?
Speaker 1: It does. So even though Michael sold the business to
Speaker 1: a fund, now that he works for the fund, he's
Speaker 1: still keeping tabs on the business. How much does that
Speaker 1: hurt Michael? The coffee pots go for about on Amazon
Speaker 1: and Michael makes seven dollars on each pot. So this
Speaker 1: new tariff eats into the business, but it doesn't wipe
Speaker 1: out the margin altogether. So, um, did you raise your
Speaker 1: prices on the coffee pots? We haven't raised yet, but
Speaker 1: we it's the scary thing. Well, we've we've taken a
Speaker 1: hit so far and have other have competitors raised their prices,
Speaker 1: It seems just stated about stable honestly. Wow, So everybody's
Speaker 1: kind of just absorbing, holding their breath. So, Shelley, there's
Speaker 1: been so many developments to keep track of with this
Speaker 1: trade war. I'm sure you've been very busy. What's the latest? Who?
Speaker 1: It changes day by day to make it more manageable.
Speaker 1: The US and China have agreed to break up the
Speaker 1: trade deal into phases. Phase one actually looks to be
Speaker 1: gaining some traction. And what's Michael up to? Michael's done
Speaker 1: watching the news. He's really struggling with this roller coaster
Speaker 1: of tariffs, and frankly, he just seems really down. I'd
Speaker 1: rather know I'm gonna have to pay more or more
Speaker 1: and then just be done with it. It's like it's
Speaker 1: kind of like the boyfriend girlfriend thing where you break
Speaker 1: up and you get back together like multiple times. Like
Speaker 1: for me, I just yeah, I want closure. I just
Speaker 1: want to know, am I gonna have to pay a
Speaker 1: lot more? You know? How do you manage the anxiety
Speaker 1: while you're searching for these opportunities meditation, Um, remembering this
Speaker 1: not just me, that everybody's facing this, whether you're a
Speaker 1: small individual seller or a multi million dollars seller. I
Speaker 1: mean realizing I'm I'm flexible. Um, I adapted, I adapt
Speaker 1: so I and I believe I'm more willing to take risks.
Speaker 1: I'm more willing to do what it takes to stay
Speaker 1: in the game. But he doesn't want to move all
Speaker 1: is manufacturing away from China altogether. For the coffee pot business,
Speaker 1: it's just impossible. The only place in the world at
Speaker 1: the moment that makes those coffee pots are in China.
Speaker 1: So he did look into the US. You know, Uncle
Speaker 1: Gary has said to Michael, why can't you make your
Speaker 1: products in the US, And Michael's tried to explain to
Speaker 1: him that that, um, you know, factories don't make those
Speaker 1: coffee pots in the US, or in Southeast Asia or
Speaker 1: really anywhere else. And the trade deal do you think
Speaker 1: that will help that that will help bring more jobs
Speaker 1: back to the US. We have to do something, man,
Speaker 1: because all the products are made over there, and it's
Speaker 1: not the American people's fault, it's it's these cooperation. Michael said,
Speaker 1: for example, that he can't make his coffee pots in America.
Speaker 1: But nowhere in America he couldn't even find a factory
Speaker 1: to make them because they're all going to got moved out.
Speaker 1: It's it's we've lost a lot of our capacity. It's
Speaker 1: very disheartening, you know. So what do you do? Like,
Speaker 1: let's say you're Michael and you want to keep your
Speaker 1: business growing, and you you know, he said to me,
Speaker 1: I would love to make these coffee pots in the
Speaker 1: United States. Like, what do you do if you're him?
Speaker 1: The word a precarious situation? Man, we really are. I
Speaker 1: agree with you, and I agree with Mike. It's sad,
Speaker 1: you know, there's no simple solutions. There isn't. I think
Speaker 1: the politicians in Washington, these ridiculous people, puppets that they
Speaker 1: haven't Washington. Uh, they don't understand the value of jobs.
Speaker 1: They let all these jobs leave the country. People have
Speaker 1: to have jobs. What would you do with our job? Man?
Speaker 1: What would I do? What our job? We have to
Speaker 1: have jobs. So, Shelley, what did Michael end up doing
Speaker 1: about the coffee pots? It took a lot of agonizing
Speaker 1: on Michael's apart, but in the end, he decided to
Speaker 1: raise prices to recoup some of the costs of the tariffs,
Speaker 1: and so did a lot of his competitors. You know,
Speaker 1: I'm sure this whole ordeal over the last year so
Speaker 1: has been so stressful for him. What does he make
Speaker 1: of all of this now, Well, Michael seems a bit lost.
Speaker 1: You know. He moved to China for the promise of
Speaker 1: this globalized world, and that world started to deliver at first.
Speaker 1: It brought him a lot of good things, his business,
Speaker 1: his wife, his family, and now it's threatened. What do
Speaker 1: you think is the general sense that you have now
Speaker 1: compared to like five years ago when you were living
Speaker 1: in China and really believing in this more of a
Speaker 1: globalized world. Yeah, it's really I guess I'm it's sad
Speaker 1: to me. I mean, I think with internet and technology,
Speaker 1: there's a huge opportunity for people from all different parts
Speaker 1: of the world to be able to communicate with each
Speaker 1: other and work with each other. But it just seems
Speaker 1: like it's going backwards as far as that. And I
Speaker 1: thought five ten years ago it wasn't be more and
Speaker 1: more open, but the governments are just trying to put
Speaker 1: walls up, barriers up. I mean, the reason I came
Speaker 1: here was to try to learn and understand rather than
Speaker 1: just put the wall up and not know anything that's
Speaker 1: happening here, Like I wanted to come here to understand it.
Speaker 1: And I have an amazing Chinese wife, and I have
Speaker 1: two children that speak English and Chinese and are going
Speaker 1: to be educated to learn the bull side, and they're
Speaker 1: going to be better people than me. Shelley Banjo, thanks
Speaker 1: for coming on the show today. Thanks Akio. Decrypted is
Speaker 1: hosted by me Ako. Sean Wyn is our executive producer.
Speaker 1: Ethan Brooks mixes Show Today, and Alistair Barrow was our
Speaker 1: story editor. Joe Leonardtine, Matt Burley, and Dex Bruce assisted
Speaker 1: with recordings. Francesco Levy is the head of Bloomberg Podcasts.
Speaker 1: We'll see you next week.