Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa A. Bramowitz. Each day
Speaker 1: we bring you the most important, noteworthy, and useful interviews
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Speaker 1: So much focus recently has been the relationship between the
Speaker 1: US and China. Here to talk about that is Patrick Shavannick.
Speaker 1: He is managing director and chief strategist as Silver Crest
Speaker 1: Asset Management. Just back from a tour of Denmark and
Speaker 1: uh Norway. Thank you so much for joining me here
Speaker 1: in our eleven three oh studios. So, Patrick, let's focus
Speaker 1: on China here because we are getting more talks that
Speaker 1: are continuing to fail but maybe making progress. Today. The
Speaker 1: big move is in the Chinese un which is actually
Speaker 1: strengthening by the most verses of dollars. Since what's going
Speaker 1: on here? Are we getting some sort of progress or
Speaker 1: is this just sort of muddling to a new phase?
Speaker 1: So on the trade talks um, there wasn't a lot
Speaker 1: of optimism that the talks over the past couple of
Speaker 1: days would lead to anything, and in fact they took
Speaker 1: place amid um the the likelihood and now the reality
Speaker 1: of a new round of terrorists being imposed on by
Speaker 1: both sides. So, uh, you know, I think I think
Speaker 1: the Chinese are trying to figure out, um, what exactly
Speaker 1: might satisfy the Trump administration if there is a deal
Speaker 1: to be cut here, and I think there's some disagreement
Speaker 1: within the Trump administration about what what would be satisfactory.
Speaker 1: You know, some such Learric Cudlow h insists that the
Speaker 1: that that the trade sanctions are bargaining trip to open
Speaker 1: up trade China. Others don't think so, Others such as Navarro,
Speaker 1: you know, Uh, the impression that I have is that
Speaker 1: he thinks, uh, tariffs are the solution that that China
Speaker 1: won't move. It's kind of you know. And then and
Speaker 1: the actually tariffs are the way that the are the
Speaker 1: way forward, you know. And honestly, we're just speaking with
Speaker 1: Garrett Vank of Bloomberg Technology, and he was talking about
Speaker 1: the US Postal Service and President trying to push the
Speaker 1: agency to renegotiate it's treaty and how it charges small
Speaker 1: packages to China versus the other way around, and that
Speaker 1: doesn't feel like it do feel like things are easy.
Speaker 1: It doesn't feel like cart because it's very specific and
Speaker 1: it's highlighting an issue that's been simmering for a long time. Yeah. So,
Speaker 1: so I think there's this division within the administration and
Speaker 1: I don't know, you know, where Trump falls on this
Speaker 1: about whether the goal is free your trade or whether
Speaker 1: the goal is protectionism. And obviously, you know, if you're
Speaker 1: in the markets, you'd like to know the answer to
Speaker 1: that question. Um, But we'll only know in time. Um.
Speaker 1: But it doesn't seem like this is heading towards a
Speaker 1: resolution anytime soon. You know. I want to sort of
Speaker 1: throughout there a theory that a number of big bank
Speaker 1: strategists have talked about, which is that President Trump, as
Speaker 1: he faces more challenges at home, legally and otherwise, that
Speaker 1: he will aamp up the rhetoric against China and Mexico
Speaker 1: and other places to seem hard in his convictions and
Speaker 1: to appeal to his base. Does that hold water with you?
Speaker 1: So you know, how much can more can you ramp
Speaker 1: up the rhetoric without actually taking action that then subsequently
Speaker 1: has economic impact. And so, you know, I realized that
Speaker 1: the rhetoric and even the actions. You know, protectionism is
Speaker 1: popular with a certain part of his base, but it's
Speaker 1: also deeply unpopular with the business community and with markets.
Speaker 1: And the one thing he's really got going for him
Speaker 1: right now is a strong economy. And if I were him,
Speaker 1: I wouldn't want to do anything to mess that up.
Speaker 1: And if you look in the I s M surveys
Speaker 1: um both manufacturing and non manufacturing, what a lot of
Speaker 1: companies are saying, Hey, we have a strong economy, we
Speaker 1: see a lot of positive new and but boy, these
Speaker 1: uncertainty over tariffs, the impact on our our input costs,
Speaker 1: We're losing export sales. This is the one big negative
Speaker 1: that we see that's making us hesitate to invest more.
Speaker 1: And so if that's if that's a reality now going
Speaker 1: further down that path, um, you know, I don't want
Speaker 1: to sound apocalyptic, like, Okay, it's going to end the
Speaker 1: cycle tomorrow, but but it's it's one more thing in
Speaker 1: a in a cycle that's fairly mature. It's one more
Speaker 1: thing that brings you closer to the end of the cycle. Potentially.
Speaker 1: I have to wonder, you know, putting aside the trade tensions,
Speaker 1: how much China itself could be the end of the
Speaker 1: cycle if it mismanages soft landing, And I think that
Speaker 1: people have stopped talking about that to some degree. But
Speaker 1: here we had ten Cent report earnings that were highly disappointing.
Speaker 1: Ali Baba reported earnings that were better than expected, but
Speaker 1: people still weren't that enthusiastic by the start, you know,
Speaker 1: based on the stock performance because of concerns going forward
Speaker 1: about growth. Are are you learning anything? Are you reading
Speaker 1: anything into this that makes you feel like there is
Speaker 1: a more substantial slowdown than people are really giving credit to.
Speaker 1: So I've always been quite concerned about China's economy and
Speaker 1: where it was headed um and the debt issues that
Speaker 1: they have in the past. I always took the view
Speaker 1: that because China was never really a driver of global
Speaker 1: growth because of its because of its surpluses, that a
Speaker 1: slowdown in China's economy would would not derail the global
Speaker 1: economy the US anymore than the slow down in the
Speaker 1: Japanese economy derailed growth in the ninety nineties. Right um,
Speaker 1: because it really isn't a driver of global demands. Um.
Speaker 1: That said, how China responds to a slowdown could have
Speaker 1: a significant impact. So we've seen um, the yuan depreciate.
Speaker 1: There's the prospect that they could have a devaluation, either
Speaker 1: in response to trade friction or a deteriorating economy, that
Speaker 1: would have a global impact. That would be trying to
Speaker 1: trying to exports, domestic internal problems globally, and that would
Speaker 1: create significant headwinds to US growth. That's a far way off, though,
Speaker 1: I mean, clearly you don't think so. Well, we've seen
Speaker 1: you know, we've seen the depreciation in the REM and
Speaker 1: B and and I'm not saying so. I've never had
Speaker 1: the view that China will be forced to devalue, okay,
Speaker 1: because I don't think that it would either be good
Speaker 1: for them or necessary for them to devalue. But back
Speaker 1: you know, two years ago, there were a lot of
Speaker 1: people trying to persuade them that that was in fact
Speaker 1: the case. And whether it is the case or not,
Speaker 1: they could be persuaded that this is the path that
Speaker 1: they should go down, particularly if it's a response to
Speaker 1: trade tensions, if it's seen as a way of of
Speaker 1: defanging US tarraffs by evaluating the currency, you're allowing it
Speaker 1: to depreciate. Um, I don't think it's a good path
Speaker 1: for China to go down, but it's one that they
Speaker 1: could choose to go down that would have global implications.
Speaker 1: Just real quick. I mean, perhaps the China slowdown doesn't
Speaker 1: necessarily have as big of an impact on global growth
Speaker 1: rates to say the US, but certainly for Asia. Yes,
Speaker 1: it has a huge impact and it can trickle out
Speaker 1: from there. Now. So if you're if you are, if
Speaker 1: you have over the past you know, ten years, been
Speaker 1: feeding into China's investment boom, if you're Australia selling iron ore,
Speaker 1: or Chili selling copper, or any number of Germany selling
Speaker 1: machinery to China, yes, it could have the end of
Speaker 1: China's investment boom. Could have a very serious impact. Now.
Speaker 1: It could also have a positive impact in the sense
Speaker 1: that if it helped resolve some of the overcapacity that
Speaker 1: China has been creating over the years. So you know,
Speaker 1: one thing that China's investment boom is done is it
Speaker 1: bit up the price of inputs and it pushed down
Speaker 1: the price of outputs. A reversal of that, I think
Speaker 1: in the long rum positive for the global economy, but
Speaker 1: how you get there could be very disruptive. Patrick Shavannick,
Speaker 1: thank you so much for drinking being with me today.
Speaker 1: It's a pleasure getting your insights, and China is in
Speaker 1: the absolute forefront of a lot of investor's minds these days.
Speaker 1: Patrick Shavannick, Managing Director and chief strategist, It's silver Crust
Speaker 1: Asset Management. This has been a fascinating season for retail
Speaker 1: earnings that has definitely split the halves from the have nots,
Speaker 1: with the Walmarts and the targets of the world doing
Speaker 1: phenomenally while Gap and L brands fall further, with people
Speaker 1: questioning why are they doing badly at a time when
Speaker 1: retail sales are going so strong. Here to talk about that,
Speaker 1: as well as a slew of other issues facing the
Speaker 1: retail industry is Rick Healthenbine, President, chief executive Officer of
Speaker 1: the American Apparel and Footwear Association based in Washington, d See.
Speaker 1: Although you know you've got a foot in Washington and
Speaker 1: a foot in New York. Uh Rick, thank you so
Speaker 1: much for being here. Um, so what do you make
Speaker 1: so far off the retail earning season? The earnings have
Speaker 1: been fascinating. I mean, we're we're finally uh seeing some
Speaker 1: relief from many years of agony. You know, we we
Speaker 1: we look at two thousand and eight and we compare
Speaker 1: that to two thousand and seventeen. We actually have more
Speaker 1: bankruptcyas in seventeen than we did in no AID. So
Speaker 1: to see a really good earning season like we're having
Speaker 1: now is beyond encouraging. But it's really really interesting to
Speaker 1: dig into the earnings almost companied by company, and they
Speaker 1: I think the cardinal example of who's doing well. I
Speaker 1: look at Target, and I look at Nordstrom and nordstron
Speaker 1: is fascinating because a couple of years ago they were
Speaker 1: trying to figure out who he is Nordstrom, and they
Speaker 1: developed a very strong presence in Nordstrom rac, which has
Speaker 1: a tremendous millennial appeal. And then they picked up on
Speaker 1: their Internet sales, which remarkably good. And to give them
Speaker 1: further credit, their in store experience has been good. So
Speaker 1: they've been positive over four percent on store traffic. I think,
Speaker 1: so everything is going right for them. Before you move
Speaker 1: on to somebody else, is there a particular person who
Speaker 1: is behind this strategy that has panned out in every facet. Well,
Speaker 1: in every company there's usually a leader, but in these
Speaker 1: bigger companies, it's usually leadership by committees. So you have
Speaker 1: to give a bunch of people credit to understand. You
Speaker 1: know that the dynamics of retail have changed. The lennial
Speaker 1: customer today. You're really trying to tract would prefer to
Speaker 1: shop on their phone. How do you convert that? And
Speaker 1: they also love stores like TJ Max. TJ Max is
Speaker 1: a huge favorite among millennials. Treasure Hunt. Yeah. So it's
Speaker 1: a combination of what works and what doesn't. And and
Speaker 1: probably the biggest measure in brick and mortar retail is
Speaker 1: foot traffic. The foot traffic is up if you have
Speaker 1: a strong Internet component, and if you have a mid
Speaker 1: price line like as I said, norstern Rack, that's a win.
Speaker 1: But then again, you look at somebody like Walmart and
Speaker 1: you know there you have to be a little careful,
Speaker 1: you have to factor out the groceries, but look at
Speaker 1: their online sales phenomenal. Look at targets online sales like up.
Speaker 1: So when you take it all, you can see the
Speaker 1: picture of having those retailers um who have got it,
Speaker 1: really got it and it's starting to show, and it's
Speaker 1: great for somebody like me. This is this is like
Speaker 1: manna from heaven. I just am hopeful it's not all
Speaker 1: going to implode, and when we get we'll get to
Speaker 1: why it might implode in a second. I am so
Speaker 1: concerned when I look at places like L Brand's, Victoria's
Speaker 1: Secrets parent company, or GAP or j C. Penny and Sears,
Speaker 1: which have been having a hard time for a long
Speaker 1: time and are showing no signs of recovery. You have
Speaker 1: to wonder, if these companies are not doing well now,
Speaker 1: what will it take for them to revive well. Sears
Speaker 1: is sort of in a world of its own, and
Speaker 1: it's really hard to comment on how to figure out
Speaker 1: how to get them out of their funking, their conundrum. Uh.
Speaker 1: J C. Penny, on the other hand, there's hope for
Speaker 1: j C. Penny. The question is can they figure out
Speaker 1: what works and what doesn't work. You know, we had
Speaker 1: Toys r US Kids ar US go out of business
Speaker 1: where people are going to buy their kids clothes. That
Speaker 1: used to be a strong point of J C. Penny.
Speaker 1: So maybe you know they can advance on that. They
Speaker 1: have to figure it out. But you know, then you
Speaker 1: look at someone like app who reported today um Old
Speaker 1: Navy was very strong. Don't look at CAP look at
Speaker 1: Old Navy and see what works and then figure out
Speaker 1: how to change the dynamic. All these companies are fighting
Speaker 1: for market share, but people are buying. You know, It's funny.
Speaker 1: In retail, you look at three things. You look at
Speaker 1: the unemployment level, you look at the consumer confidence level,
Speaker 1: and they're all good, all right. So one thing that's
Speaker 1: not perhaps good for your industry are some of the
Speaker 1: terps that have been proposed, and you've been lobbying against
Speaker 1: some of them. Um, a lot of them will hit
Speaker 1: your industry directly. Where are we with that? Well? I
Speaker 1: was at the hearings on Monday, our team testified, and uh, frankly,
Speaker 1: I was sitting in there what I would call the
Speaker 1: peanut gallery, and it sounded a little bit like Clara
Speaker 1: belhunking at Buffalo Bob. It was so sad, all these
Speaker 1: really strong businesses and trade associations explaining to a panel
Speaker 1: of government representatives how raising tariffs would severely impact their business.
Speaker 1: I'm curious, were there any representatives from companies arguing for
Speaker 1: the tariffs? Yes, there were a few, and I um
Speaker 1: put few in capital letters, um and and a lot
Speaker 1: of that place to self interest for them. You know,
Speaker 1: some protectionism would help. Uh, Well, there's one gentleman tests
Speaker 1: testifying actually about right now as we speak, from a
Speaker 1: leather company, and uh, he's interest is to protect his business.
Speaker 1: Um NICTO the trade organization also testified and they, you know,
Speaker 1: they represent textile interests in America. So you know, I
Speaker 1: have to give these people credit to the extent they're
Speaker 1: fighting for what they believe in. But I have to
Speaker 1: say they're in the minority, but they believe what they believe.
Speaker 1: Most people who testified hit tears in their eyes. You're
Speaker 1: really gonna hurt me. This is gonna hurt my business.
Speaker 1: And in this third ranch, we call it of two
Speaker 1: hundred billion, they've got hand bags, they've got hats, they've
Speaker 1: got baseball gloves, they've got backpacks. You know, I tell
Speaker 1: everybody who listen that, you know, it's back to school season,
Speaker 1: you better buy two backpacks because you're twenty dollar backpacks
Speaker 1: gonna be thirty next time. Do you think that there
Speaker 1: will be bankruptcies as a result of some of the
Speaker 1: proposed tariffs or do you think it will just be
Speaker 1: uh a slower profit margins? Now, you know, the tariffs
Speaker 1: aren't gonna push people into bankruptcy. You know, be other
Speaker 1: economic factors that do it, that are already in play
Speaker 1: the bank. The tarifs will just exacerbate the situation because
Speaker 1: you know, remember this isn't percent tariff they're talking about.
Speaker 1: It's twenty on top of what you're already paying. So
Speaker 1: if you're paying and you had twenty five, now we
Speaker 1: got a forty five percent tariff, what's gonna happen. People
Speaker 1: are gonna stop buying, They stop buying, sales go down. Um,
Speaker 1: it's a bad cycle. Is there any positive consequence from
Speaker 1: some of the post tariffs on retail? Wow? What a
Speaker 1: what a great question? Um, two word answer. Absolutely, no
Speaker 1: positive consequence except maybe at the end of the day,
Speaker 1: perhaps tariffs will just go away and then people could
Speaker 1: spend what they really should be spending for product. You know,
Speaker 1: you look at the economy and there was an article
Speaker 1: this this week about the millennials responding to the next crash,
Speaker 1: and you know, how will they respond? It's been ten years.
Speaker 1: We'll keep in mind that low quost product in last
Speaker 1: recession really helped us out, helped us come back quickly,
Speaker 1: and you're not going to have that anymore. So if
Speaker 1: you're short on cash, it's going to be harder. Rick
Speaker 1: Calforn Byn, thank you so much for joining me today.
Speaker 1: Rick Calvin Byn is President and chief executive officer of
Speaker 1: the American Apparel and Footwear Association in Washington, d C.
Speaker 1: The business of car racing is massive and growing. Joining
Speaker 1: us now is Mark Miles, President, chief executive officer of
Speaker 1: Indy Car, also the President CEO of Holman and Company,
Speaker 1: which owns the Indianapolis Motor Speedway. Mark, thank you so
Speaker 1: much for being with us. I just want to start
Speaker 1: with an overview. Can you give us a sense of
Speaker 1: sort of the state of play of the car racing business,
Speaker 1: given the fact that we've seen declines in some list ownership,
Speaker 1: viewership at tendership of other other sports. Yeah, there's definitely
Speaker 1: headwinds in sport to some extent, in the motor sport
Speaker 1: to great extent. But frankly, we're delighted that over the
Speaker 1: last few years since probably Indie Car has been growing
Speaker 1: in with respect, almost all the sort of fan metrics are.
Speaker 1: Television ratings are up in four years, um our attendance
Speaker 1: is growing, our social following is up by a million
Speaker 1: followers in the last year, and so we feel like
Speaker 1: we're kind of bucking the headwinds and and very bullish
Speaker 1: about our future. Can you give a sense of why.
Speaker 1: I mean you noted also that IndyCar is the highest
Speaker 1: percentage of millennials of any of the major sports leagues.
Speaker 1: What is it about the sport that is attractive to
Speaker 1: younger people? Part of our growth is because I think
Speaker 1: we kind of squandered the recent years in our past,
Speaker 1: and so we're getting our act together and getting things
Speaker 1: together and forward. But inherently we think IndyCar Racing has
Speaker 1: a lot to offer. It is the fastest series out there.
Speaker 1: It's very technical, and by that I mean on the track,
Speaker 1: but also in the way we go to market. For example,
Speaker 1: in a two hour race, we collect fifty million data
Speaker 1: records and when we talked to UH companies, you're well
Speaker 1: aware of that, think about how they can help us
Speaker 1: UH convert that data into really interesting content for fans.
Speaker 1: We think there's a there's a lot to offer there
Speaker 1: and to continue to grow our younger audience in particular,
Speaker 1: So UM the sport is compelling. You can start at
Speaker 1: the back of the grid and and win a race
Speaker 1: with lots of different winners, and yet we've got some
Speaker 1: you know, some stalwart competitors like Team Penskey and and
Speaker 1: Ganassi and Andretti, and drivers that are veteran champions. So
Speaker 1: we've got challengers, and we got UH, and we've got
Speaker 1: established champions, and I just think there's lots and lots
Speaker 1: of narrative for fans to follow. So Mark, when I
Speaker 1: think about what I think about car racing in the
Speaker 1: United States, I think about UH, the zooming noise that
Speaker 1: I think about, how fast they go, and the sort
Speaker 1: of sponsorship labels all over the cars. I also think
Speaker 1: of the highly publicized crash that crashes that occasionally happen
Speaker 1: from time to time, and there was a terrible crash
Speaker 1: just on Sunday, Indy car driver Robert Wickens being hospitalized
Speaker 1: for some serious injuries after a crash at the Pocono Raceway.
Speaker 1: What does a crash like this do for the sport?
Speaker 1: Is it something that sets you back? How do you
Speaker 1: address it? I think the sport, first of all, everybody
Speaker 1: recognizes that it's it is extreme sport and it's dangerous.
Speaker 1: So our our obligation is to do everything we can
Speaker 1: to to manage the technology and to continually improve safety
Speaker 1: and to be a better able to minimize the effects
Speaker 1: of accidents. Um. You know, psychologically, we're all human beings
Speaker 1: and when a guy like Robbie Wickens has a serious injury,
Speaker 1: you know, it sort of takes your breath away. But
Speaker 1: he's getting great medical care. He gets great medical care
Speaker 1: at the track we have. We're the one sport that
Speaker 1: for some years has had the same safety crews on
Speaker 1: the tracks, the same doctors, the same nurses that travel
Speaker 1: um and so there's great continuity, a very high level
Speaker 1: of care. We work with our car manufacturer, that d
Speaker 1: Lara in italyite to improve the physical aspects of the
Speaker 1: car that make it safer all the time. So it's
Speaker 1: a never ending process. We hope next year we'll be
Speaker 1: introducing a cockpit for the first time in years and
Speaker 1: will help protect the drivers from debris and around the track.
Speaker 1: We just got to keep doing the best we can.
Speaker 1: Racers sign up for it and there they insist that
Speaker 1: we do all that we can. But they're very resilient
Speaker 1: group and it's kind of what they what they love
Speaker 1: to do. Yeah, indeed, I'm wondering. You know. One of
Speaker 1: the big headlines in the sports industry this year has
Speaker 1: been the lead ization of sports gambling and I'm wondering
Speaker 1: does that affect you at all? Well, it will, for sure,
Speaker 1: but to be frank at this point, it's a little
Speaker 1: hard to know, you know, sort of how high is up.
Speaker 1: I think that, first of all, like all sports, will
Speaker 1: do everything possible to amp up kind of the integrity
Speaker 1: aspects of the governance of the sport. But I do
Speaker 1: think there's a commercial side to it, and whether that's
Speaker 1: making our data available, uh basically licensing it for for
Speaker 1: scoring and timing um and other things that that we
Speaker 1: think we can be engaged in yet to be determined.
Speaker 1: It's obviously complicated because you're gonna have this patchwork of
Speaker 1: legislation by state and we race seventeen times a year
Speaker 1: in a number of different states. But it certainly, you know,
Speaker 1: drives fan attention to the sport, and at one level
Speaker 1: that that can only be a good thing. Yeah, thank
Speaker 1: you so much. Really interesting, especially really interesting what you
Speaker 1: say about UH fans data and how that sort of
Speaker 1: allowed you to be more targeted in your approach with
Speaker 1: both advertisers as well as attracting new fans. Mark Miles, President,
Speaker 1: chief executive Officer of IndyCar. We really appreciate you joining
Speaker 1: us He's also the president CEO of Home and Company,
Speaker 1: which owns the Indianapolis Motor Speedway, i MS Productions and
Speaker 1: the Indiana based baking goods brand Clapper Girl. We really
Speaker 1: appreciate you being with us. Really interesting. Also, the Indie
Speaker 1: car is the highest percentage of millennials of any of
Speaker 1: the major sports leagues. So even though you are seeing,
Speaker 1: for example, UH, the viewership of baseball, for example, decline,
Speaker 1: there does seem to be some growth among the younger
Speaker 1: generations in the United States. One interesting thing about the
Speaker 1: tip for TAT or if war tariff tension that is
Speaker 1: brewing between the US and China is just how much
Speaker 1: of the infrastructure of trade is actually getting unleashed uh
Speaker 1: and sort of exposed and highlighted every day. The latest
Speaker 1: is fascinating looking at the universal Postal service and postal
Speaker 1: rates and how they're set. Garrett Devenk joining us now
Speaker 1: currently technology of Bloomberg News here in our eleven three
Speaker 1: oh studios. Garrett, just walk us through what this is
Speaker 1: that President Trump is proposing to do in order to
Speaker 1: give a competitive edge to US companies. So I think
Speaker 1: from his perspective, it's not so much necessarily about giving
Speaker 1: it a new competitive edge to US companies, but to
Speaker 1: sort of getting rid of what he sees as an
Speaker 1: uncompetitive edge for the U. S. Postal Service and US companies.
Speaker 1: So there's um international treaties judge, you know, sort of
Speaker 1: saying that, you know, one country's postal service has an
Speaker 1: agreement with another one, they agree to help each other out.
Speaker 1: These things go back, you know, for as long as
Speaker 1: we've had postal services, decades and hundreds of years. And
Speaker 1: so we are sort of in the situation right now
Speaker 1: where it's actually cheaper to send small packages, big things,
Speaker 1: not but small things, letters and things up to about
Speaker 1: four pounds from China to a US city that has
Speaker 1: to send it domestically. And that's because of the international
Speaker 1: agreements between the Chinese Postal Service and the U. S.
Speaker 1: Postal Service. And so what Trump has said is next
Speaker 1: month at the meeting of the International Postal Union, he
Speaker 1: wants the US representatives to go and sort of changes
Speaker 1: or pull themselves out of that agreement somehow. How big
Speaker 1: of a deal is this for the Amazons of the
Speaker 1: world and the Ali baba Is of the world. So
Speaker 1: the companies that could be hurt by this any change
Speaker 1: are anyone who's shipping a lot of small things from
Speaker 1: China to the US. So Ali Baba, although you know,
Speaker 1: obviously the bulk of its business is in China, is
Speaker 1: trying to grow that service in the US, so this
Speaker 1: could put it definitely put a damper on their US growth.
Speaker 1: Another company to look at is Shopify, which a lot
Speaker 1: of people see us as sort of shopifies this kind
Speaker 1: of back end provider. If you want to sell something online,
Speaker 1: anyone can set up It's like YouTube for selling online.
Speaker 1: And there's this perception that a lot of Shopify sellers
Speaker 1: are just sort of packaging small cheap goods from China
Speaker 1: and selling them and sending them internationally. Shopify kind of says, well,
Speaker 1: you know, we're diversifies business, but that's a stock that
Speaker 1: you should be watching as well. On this, how big
Speaker 1: of a deal is this? I mean, are we talking
Speaker 1: about a couple of cents here and there that add
Speaker 1: up to uh some money but not a tremendous amount,
Speaker 1: or are we talking make it a break? Well, the
Speaker 1: USPS has lost billions of dollars of the last years,
Speaker 1: I mean the last several years they run and operating,
Speaker 1: you know, shortfall every year to do their difficult job
Speaker 1: of you know, sending packages to every single address in
Speaker 1: the United States. You know, they are sort of operating
Speaker 1: at loss when it comes to this kind of international shipping.
Speaker 1: But they also agree to step deeper into these agreements
Speaker 1: with the Chinese Postal Service because they want a piece
Speaker 1: of that e commerce international trade pie, much of it
Speaker 1: flowing from Chinese manufacturers to countries in the West, such
Speaker 1: as the United States and Canada, and so they actually,
Speaker 1: you know, there's a few different things going on here,
Speaker 1: but you know, from Trump's perspective, it's about you know,
Speaker 1: trying to kind of control those costs. And um, you know,
Speaker 1: we'll see, we'll see how those discussions go in September.
Speaker 1: So is the logic here from the US societe as
Speaker 1: to why they agreed to this arrangement where it's cheaper
Speaker 1: to send small packages from China to the US and
Speaker 1: vice versa. Is a logic here that China said to
Speaker 1: the US Postal Service or you know, we just won't
Speaker 1: do business with you otherwise if you don't accept these
Speaker 1: fees were out, well someone is going to be shipping
Speaker 1: those things, you know, either way. And the USPS, I
Speaker 1: think that they wanted to sort of they didn't want
Speaker 1: someone else. They don't want a private ship or to
Speaker 1: be you know, getting the bulk of that e commerce revenue.
Speaker 1: So they said, well, let's step into these agreements. You know,
Speaker 1: we'll take a loss in the actual um shipping them,
Speaker 1: you know, from once they arrived to the US to
Speaker 1: their end destination. But then what we can do is
Speaker 1: we can layer on other costs. We can layer on
Speaker 1: tracking costs, we can layer on premium services, we can
Speaker 1: lay on rush shipping. And so they said, if we
Speaker 1: can grab some of this market share, all of these
Speaker 1: packages coming from China, you know, we'll we'll we'll deliver
Speaker 1: them at a loss to us. But then if we
Speaker 1: can sort of try to add some premium services, that's
Speaker 1: where we're going to make the money. And that's kind
Speaker 1: of has not been working out for them yet. What
Speaker 1: do people in the markets say, I mean, do people
Speaker 1: think that that President Trump is right on this? I mean,
Speaker 1: it's definitely one of those things that seems to be
Speaker 1: sort of a holdover or a quirk from international treaties.
Speaker 1: I mean, you know, very few of us spend a
Speaker 1: lot of time thinking about international postal service treaties and
Speaker 1: the agreements between countries when it comes to the mail,
Speaker 1: and so it does seem to be one of those
Speaker 1: issues that has sort of, you know, continue to go
Speaker 1: on and sort of been kind of subtly controversial to
Speaker 1: a very few group of people. But now that President
Speaker 1: Trump obviously is very focused on trades, focused especially on
Speaker 1: China and his perception that China is beating United States
Speaker 1: at the international game, this has suddenly become you know,
Speaker 1: at the forefront. Is this encouraging to technology companies that
Speaker 1: this is the tack that President Trump is taking, which
Speaker 1: is nuanced. It's actually very nuanced, and it's a perhaps
Speaker 1: highlighting issues that have been long simmering. It's not necessarily
Speaker 1: hit you over the head at least when it comes
Speaker 1: to tech in the same way that it has been
Speaker 1: with say other areas. Perhaps, I mean, it's it's it's
Speaker 1: definitely you know, someone definitely sort of proposed this idea
Speaker 1: to him and something that he's gotten interested in and
Speaker 1: has sort of, you know, decided that it's something he
Speaker 1: wants to talk about. Companies like Amazon they are happy
Speaker 1: about this because you know, they would imagine anyone whose
Speaker 1: business is not primarily sending things from China to other countries.
Speaker 1: Is well, okay, this level as the playing field, you know,
Speaker 1: and even Shopify, which is perceived as a company that
Speaker 1: handles a lot of volume from China to the US,
Speaker 1: said well, you know, this will lay level the playing
Speaker 1: field for our users who are in the United States
Speaker 1: and sending to other Americans. Really really interesting. I did
Speaker 1: not know about these treaties, the international treaties that governed
Speaker 1: the price at which you sent packages internationally. Garrett de Bank,
Speaker 1: thank you so much for being here. Garrett de Bank
Speaker 1: is technology reporter for Bloomberg News, joining me here in
Speaker 1: the eleven three oh studios in New York. Just really
Speaker 1: interesting that there is going to be this potential renegotiation
Speaker 1: of rates. A lot of renegotiations going on right now.
Speaker 1: Thanks for listening to the Bloomberg p m L podcast.
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Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
Speaker 1: Abramo wits one. Before the podcast, you can always catch
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