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- [00:04]
Diana Ransom
I'm Inc. Executive Editor Diana Ransom.
- [00:06]
Christine Ligorio Chavkin
And I'm Editor at large Christine Ligorio Chavkin.
- [00:09]
Diana Ransom
This is from the ground up, today's.
- [00:11]
Christine Ligorio Chavkin
Episode, Trump's first 100 days.
- [00:19]
Diana Ransom
So, Christine, we had a roundtable discussion where we featured a bunch of ink staffers. So we had senior writer Jennifer Conrad and Melissa angel, who's our policy correspondent, and staff reporter Brian Contreras in to talk about basically the hottest topics that we could talk about that fell within the first 100 days of Trump's presidency. Because obviously that's happening right now and it's a big deal. We talked about cryptocurrency, and basically this is the one sort of industry that should be happy right now.
- [00:50]
Christine Ligorio Chavkin
Trump is not exactly a crypto regulatory president here.
- [00:54]
Diana Ransom
Right. And it's funny too, because we were like, you could tell this was going to be a crypto fan presidency. Basically there was the crypto ball during the inaugurate inauguration. And then, of course, we know a lot of crypto industry people basically supported Donald Trump. And, you know, he was on the podcast tour and all the crypto bros.
- [01:13]
Christine Ligorio Chavkin
Were out in full force, not to mention some pardons.
- [01:16]
Diana Ransom
Yes, of course. Yeah, we talked about that, too. So we, we get into a lot of good stuff. And of course we talk about tariffs. This is like the hot button issue of the moment. I mean, this is going to be significant for small businesses and consumers alike.
- [01:31]
Christine Ligorio Chavkin
Yeah, I feel like every American business owner is nail biting right now and actually hustling to try to keep up with this. Three reporters that you talked with are on top of it. I think almost most of everyone on our staff.
- [01:44]
Diana Ransom
Yeah, and it was great, too, because I felt like each one of them had written about tariffs before, so everyone kind of had their own tariff story. And everyone has done, you know, they've all individually spoken to business owners, and so we have that perspective in there. We also talked about the Small Business Administration, and it's, you know, it's like the linchpin for any business. Most businesses that are trying to raise growth capital, you know, rely, or a lot of them rely on Small Business Administration loans or loans that are backed by the Small Business Administration. So we wanted to stay up on the changes there. And finally we talked about taxes and the IRS and Elon Musk a little bit too.
- [02:22]
Christine Ligorio Chavkin
Well, I can't wait to hear that stuff. What did you start off with?
- [02:26]
Diana Ransom
So, yeah, I asked Melissa angel to give us the latest on the sba.
- [02:30]
Melissa Angel
It's difficult to know where to begin the cadence of this News cycle is certainly a whirlwind, but I think the easiest and the place that makes most sense to start is the change in administrator. We have Administrator Kelly Loeffler, who is now leading the SBA under the Trump administration. And she's very much a loyalist to the administration. She was one of President Trump's top donors, but she's also an entrepreneur.
- [02:53]
Diana Ransom
What kind of business did she start?
- [02:54]
Melissa Angel
She started a fintech firm, I believe it's pronounced Bakkt now it sells software to trade cryptocurrency. But I think what's really interesting is that a bulk of her career has been in the financial services industry. So she worked at the Intercontinental Exchange and helped them go public. And that's huge since they also own the New York Stock Exchange and she helped shepherd that acquisition as well back in 2013. Besides being an entrepreneur, she also has experience as a politician as well. She was the Senator for Georgia.
- [03:27]
Diana Ransom
She was the appointed senator.
- [03:28]
Melissa Angel
Correct. And she served about a one year term when she was in Congress. She was also one of the wealthiest members of Congress at the time. And a large bulk of that is because of the combined net worth she has with her husband, who was the co founder and CEO of Intercontinental Exchange.
- [03:43]
Diana Ransom
Which also is goes by the term ice.
- [03:46]
Melissa Angel
Yes.
- [03:46]
Diana Ransom
Which not to be confusing.
- [03:48]
Melissa Angel
Right.
- [03:49]
Diana Ransom
Okay, so they. So ICE purchased or acquired the NYSE in 2013 and they just have a ton of money. And she's putting her financial acumen helping the Small Business Administration now. Pretty cool. Yeah. Looking forward to seeing what she does with that. So the SBA for our audience has been around for 70 years. Its mandate is to basically supply lending resources and other resources to the 34 million small businesses across the United States. But its mandate recently changed. Melissa, you want to catch us up on how it's mandate changed?
- [04:23]
Melissa Angel
Right. I think one of the biggest changes that I've been paying attention to is how the SBA will now be taking charge and accounting for this $1.6 trillion student loan portfolio that it has now assumed from the Department of Education. And this is, this is monumental. This is something we haven't seen before. And I think what's really worth taking a look at is student loans are made via promissory notes. And so what that means is those are legal documents and that directs the student borrower to repay their loan to the Department of Education. This is codified in statute. This isn't only just in the US code. It's also in the Higher Education act of 1965. And what really begs the Question then is, does the SBA have the enforcement authority to collect on these loans? This is something that some activist organizations have said it kind of endangers the portfolio potentially if it's not in statute, because federal agencies, they're not fungible here. So that's certainly something to ask.
- [05:21]
Diana Ransom
Well, it sounds like they are, but the problem is that Congress actually has to be doing the tearing down or the dismantling versus Elon Musk.
- [05:31]
Melissa Angel
No, absolutely. I mean, that's something we've also seen the administration do with multiple federal agencies going and circumventing Congress, because Congress, at the end of the day, is the one that has the power to kill off a federal agency. But what the Trump administration has done is they've, they've gutted agency resources, and it's effectively the same thing.
- [05:52]
Diana Ransom
Well, so that. That's a good segue. So on the same day that they announced that they were going to move the student loan portfolio over to the sba, they had another announcement that same day. Right. What did they say?
- [06:01]
Melissa Angel
They also said that they were reducing the size of the SBA by 43%, which I believe is a reduction about 2,700 jobs. And so the SBA, under Administrator Lefler, she has said that like many entrepreneurs, their mission will stay the same, to do more with less. But the sba, as for those that have covered it well, is the agency has often long been viewed as understaffed. And so the question I've been asking is, will they be able to go out and carry out their mandates of servicing the student loan portfolio while also serving the nation's entrepreneurs with thousands of less staffers? Absolutely.
- [06:35]
Diana Ransom
No, you must question that. What is the small business community saying about this?
- [06:39]
Melissa Angel
I think for those who are as chronically online as myself, I like to go to the Reddit sub threads of small business. And a lot of people are curious about just what collections are going to look like on their SBA loans. Under Administrator Loeffler, she has said that they are going to ramp up the collections process. They're also going to clamp down on fraud is something that we've seen this administration be very stringent on. So a lot of business owners are wondering just what also the cadence will look like in terms of interacting with the agency. Sometimes the SBA's customer service hasn't always been sterling, so that's something to watch out for.
- [07:16]
Diana Ransom
And also just it bears mentioning that they had to staff up majorly during COVID and some of this reduction in force is the COVID Hires that they made. Correct, from what I understand. So they're, they're trying to get back to quote, unquote, pre pandemic levels, but the agency really only had a couple thousand employees pre pandemic. So this is definitely makes you wonder whether they're going to be able to handle the mandate going forward in the new expanded mandate.
- [07:40]
Melissa Angel
Right. They're also hiring a new fraud czar, so very curious to see what that's going to look like as well. The fraud czar was the inspector general, which they've effectively neutralized alongside other agencies as well.
- [07:51]
Diana Ransom
Right, right. No, and speaking of other agencies, the IRS has been getting brutalized. So heading into this year's tax season, they had 102,000 employees roughly. And the announcement recently was that they're about to get rid of around 40% of their staff. So, Brian, you've been doing some tax coverage for us and you've been writing about the IRS reduction in force. Yep. Can you talk a little bit about what would happen if they got rid of 40% of their staff?
- [08:19]
Brian Contreras
Yeah. I mean, so they started off with laying off around 6 or 7,000 recently hired provisionary employees who are a little easier to let go than sort of longer term employees. And then More recently on April 15, they said that 22,000 employees had taken essentially a buyout offer to stick around until September on payroll, but not really do work. They are resigning in the short term if they take this offer. Now, these are sort of like the fork in the road offers that Elon Musk has been offering a lot of agencies and a lot of those are facing sort of court scrutiny. So it's not super clear yet like what the final body count of these cuts will be. But there's been reporting from IRS insiders that they are aiming for 50% reduction in the agency overall. So it could be even further beyond what we're seeing right now. And that number, I believe, is including like normal attrition rates. But still, that's a massive cut to basically the chief way our federal government gets the revenue that funds all sorts of social services and government programs. So to your, to your point, what does this mean? You know, we're sort of past the 2025 tax season at this point. It could impact auditing still as we sort of, you know, the government starts looking at what people have filed. That's, you know, talking with tax experts and tax agencies recently, that's been something they've talked a lot about is a decrease in auditing, which obviously that impacts the government's ability to fund various programs because it has less revenue. There's also similar to the sba, concerns that this is going to impact customer service wait times if you're trying to call them for help. It is pretty significant cuts that have already happened and massive cuts that are on the way, especially if these buyout offers go through.
- [10:03]
Diana Ransom
I don't think I'm any stranger to feeling like a little bit ambivalent about these cuts. You know, frankly, nobody's. Most people are not big fans of the irs, so it is kind of funny to be like, oh, woe for them. But at the same time it is a problem because that's how this nation generates revenue at this point. And without that, you know, other programs start to fall on the wayside.
- [10:25]
Brian Contreras
And the people who get away with tax fraud are the ones who stand to benefit. If you are cutting the IRS's ability to enforce the on the books laws about taxes, the people who stand to benefit most from that are fraudulent individuals and companies.
- [10:42]
Diana Ransom
It's been long said that smaller businesses basically, they can't necessarily afford to hire the fancy high priced tax accountants like bigger companies. So they're already basically shouldering a lot more of the tax load than the nation's biggest companies. So theoretically, without those auditors in place, they'll have even less ammunition to go after the bigger companies that might be the tax cheats.
- [11:05]
Brian Contreras
Yeah, I mean, I've seen these cuts compared to sort of at a company getting rid of your accounts receivable department, where that is what this is for the federal government, like this is how they get money that funds again, every manner of program, including I would imagine, a lot of stuff that directly impacts small businesses.
- [11:24]
Diana Ransom
Yeah, I mean, there's also talk about in phase two of these cuts, they're talking about getting rid of a high number of cuts in their compliance department. And I mean, this is the IRS compliance department for the IRS is probably really significant and important. I mean, there's potential for cybersecurity incursions when we're talking about our own private information being sort of at risk here. That's a concern I think I have as a private citizen, much less as a business owner.
- [11:49]
Brian Contreras
Sure. And there's already been talk about DOGE going in and accessing taxpayer data. There's sort of a parallel question about the Department of Homeland Security and ICE accessing taxpayer data specifically related to undocumented immigrants, which is sort of a parallel thing. But beyond that, there's also this new DOGE agency going in and looking at taxpayer data and in other agencies at least, we've seen cybersecurity concerns around that sort of access from people who are not relative newcomers to a particular government agency.
- [12:23]
Diana Ransom
And Jennifer, you've been writing about cybersecurity for us for a few years. Are you hearing any rumblings or anything about this?
- [12:31]
Jennifer Conrad
I think what you're seeing is that because you have a lot of people using unauthorized systems, most famously when war plans were discussed over Signal, which is an encrypted messaging app, there are concerns that information may be leaking out of government agencies that would normally be held in secure systems where you have to physically be on site in a room with no unauthorized devices. So there's that. The other thing that is potentially happening is that cisa, which is the Cybersecurity and Infrastructure Security Agency, they are seeing a reduction in force which could potentially affect things like critical infrastructure and government cybersecurity. And there could be trickle down effects for smaller businesses, even though they are not necessarily directly working with cisa.
- [13:18]
Diana Ransom
We've been reporting on this over the few months is basically AI is helping enable cyber hackers to be even more efficient. So even if you, even if your business was maybe not a target before, if AI can help these fraudsters or hackers basically get you faster or more efficiently, then you might need to worry. So it is good to have a nation that is well prepared for this situation. So let's also talk about the tax situation. I know under Trump's first presidency, his crowning achievement was the Tax Cuts and Jobs act. And that was 2017 was when it passed. This was a big deal for our audience. So let's talk about the tax bill that is up for proposal. So basically you have all these provisions that were in the 2017 bill that are coming up or that are coming due that are about to expire by the end of this year. And so there's a big, big fat deadline on this situation. What are you hearing? What are the rumblings in Washington?
- [14:15]
Brian Contreras
It seems like Republicans are generally unified in wanting to renew a lot of those sunsetting provisions that are set to expire at the end of 2025. So in early April, the House approved a preliminary budget plan for this is what Trump's been calling his big beautiful bill, sort of this big tax bill that's going to renew some of the TCJA 2017 tax cuts, also add new ones potentially. So the House and Senate are now sort of on the same page at.
- [14:44]
Diana Ransom
Wait, did they actually approve this already? The $5.3 trillion budget?
- [14:48]
Brian Contreras
Yeah. So the, the House and Senate are now on the same page about how much money they're willing to spend or how many taxes they're willing to cut. Now, they sort of have to get into the weeds and figure out what that looks like. But they have basically set aside 5.3 trillion in tax cuts. 3.8 trillion of that is the renewals of the TCJA extensions. And then there's some another 1.5 trillion of wiggle room, which is, you know, there's been a number of different proposals from Trump on the campaign trail and at his recent sort of pseudo State of the Union before Congress. This is like no tax on tips, no tax on overtime pay, no tax on Social Security benefits. Some of these sort of new ideas he's put forward, those could potentially be part of that sort of 1.5 trillion in additional cuts they've left for themselves, sort of on top of the TCJA renewal stuff.
- [15:37]
Diana Ransom
Well, that's nice amount of wiggle room there. So the no tax on tips, that's always interesting because whenever you talk to a tax expert, they're like, people are going to game the system. They're just going to. They're going to get paid in tips now just to avoid paying taxes. So you have that concern is like, okay, if this actually does happen, people will game the system anyway. $1.5 trillion worth of wiggle room is pretty fascinating. So how is he going to pay for all this?
- [16:04]
Brian Contreras
Well, they, they've talked about cutting government programs. I mean, that's obviously always tough to do, especially for Republicans that are going to be in vulnerable seats come election season. But, like, there's already talk about Medicaid cuts and other government services cuts.
- [16:20]
Diana Ransom
Yeah, I've been hearing about the Social Security situation. Yeah, they're shutting down Social Security offices. So some people who currently are on Social Security have to drive upwards of 200 miles just to go to a Social Security office to collect their check, which now has to be given to them in person. Yeah, they can't do it online anymore because there's concern about fraud.
- [16:40]
Brian Contreras
Yeah. I mean, you're already seeing some schisms within the Republican Party about sort of. Now that they have set these numbers, they're trying to hit in terms of tax cuts and savings, where is that money going to come from? Every time you cut a tax, you either have to make up that money elsewhere. We'll obviously be talking about tariffs a little later. That's one thing. One way they've talked about sort of making up that deficit, but you know, the other way, you the government accounts for tax cuts is by cutting services, and that always impacts voters who then get to make their voice heard at the ballot box. So we'll see how that plays out both in these negotiations and then come election season.
- [17:15]
Diana Ransom
Totally. And that's a perfect segue for Jennifer, our conversation. So let's move on to tariffs. I mean, this is the big thing. This is the bombshell for us. I mean, it hasn't even been 100 days yet, or it's been nearly 100 days. And we've basically seen federal agencies gutted, different programming just change hands like that. And then this announcement about tariffs early April, Take us back. What happened?
- [17:41]
Jennifer Conrad
So tariffs, as the president would say, the most beautiful word in the English language. And Trump has often used economic policy as a way of trying to coerce various countries to do things that we want to, or to, in some cases, make up for legitimate trade concerns with other countries, say, heavily subsidizing an industry so that American products can't compete with what they're making. So on the campaign trail, he said he was going to unleash a whole lot of tariffs, and he did.
- [18:16]
Diana Ransom
And nobody thought he would, apparently, or a lot of people thought he wouldn't do it.
- [18:20]
Jennifer Conrad
I think a lot of people thought they would be more targeted and that the rates would be lower. And so he issued a few tariffs on Canada, Mexico, auto parts, China. And then we got to April 2.
- [18:36]
Diana Ransom
And these are Canada, Mexico. We already had NAFTA and the MC, USMCA.
- [18:42]
Jennifer Conrad
U.S. mexico, Canada.
- [18:46]
Diana Ransom
Agreement.
- [18:47]
Jennifer Conrad
Yes, agreement.
- [18:49]
Diana Ransom
So these are effectively allies who basically turn around and get a 25% tariff.
- [18:54]
Jennifer Conrad
Right. So essentially, we have this agreement with Mexico and Canada. So we have these integrated supply chains where, say, if you're making a car, maybe you'll make a part in Canada and then bring it to the US and do some work on it, take it to Mexico. And so companies will have their supply chains in all three countries and factories in all three countries. And normally those products could cross the borders duty free.
- [19:20]
Diana Ransom
So we have this integrated supply chain that's just been there for decades that is basically going to have to change or is already shifting, theoretically.
- [19:29]
Jennifer Conrad
Theoretically. And the idea behind the tariffs, which we should say are taxes on imported goods and they're paid by the person who imports it or the company that imports the goods. So theoretically, these tariffs will make goods that were produced overseas more expensive and therefore make American products more competitive and will bring more manufacturing jobs back to.
- [19:52]
Diana Ransom
The US how much does Donald Trump's administration expect to raise through tariffs? But here's where that is. I feel like, flawed, because if his plan is correct and people bring production back to the United States, then he doesn't have the tariff revenue. So then what happens?
- [20:10]
Brian Contreras
Sure. Yeah. Yeah. Because the whole idea is to create an incentive structure where people are shifting their buying to domestic companies that don't have the tariffs and more.
- [20:19]
Diana Ransom
And then if we don't have taxes.
- [20:21]
Brian Contreras
Right.
- [20:22]
Diana Ransom
Well, I guess we wouldn't have income taxes, but theoretically, businesses would still have to pay corporate taxes.
- [20:26]
Brian Contreras
Sure.
- [20:26]
Jennifer Conrad
Yes.
- [20:27]
Brian Contreras
I don't know.
- [20:27]
Diana Ransom
I think, fascinating. It's like an intellectually fascinating question to come across. But when you're actually a business owner and you're actually dealing with these issues right now, I mean, it's like you can be. You can have as much fun as you want, kind of like thinking about this. But when you're actually having to deal with it, it's a real crisis.
- [20:45]
Brian Contreras
Well, and it gets to something. Jennifer, you've covered a lot, which is that it's not even clear what exactly the administration is trying to get out of these. Sometimes they say we are trying to keep fentanyl out of our country and this is sort of just a bargaining chip. Other times they're talking about we want to reshore and re industrialize, you know, the Rust Belt. Yeah. And even like, you know, negotiations with Japan over these tariffs are happening right now. And I saw yesterday the Japanese negotiators were, I guess, leaking to the press that it has been very hard to negotiate with the White House, because what the White House is saying, they want changes day by day or person by person, which I think is sort of indicative of a larger lack of clarity around what Trump is using these tariffs for. Is this a revenue stream? Is it a negotiating tactic? Is it a plan to bring iPhone production back into the Midwest? Like, what is the end goal here?
- [21:38]
Diana Ransom
Yeah, well, I think that's part of it too, is like to keep people guessing. This is like the whole art of negotiation that he's known for of like, you know, you keep people on their toes so they don't know what to expect.
- [21:49]
Brian Contreras
And that makes sense. If you're trying to use that as a negotiating tactic with other countries. I can see the logic there. That is also very tough. I've spoken with a lot of venture capitalists and private equity people who are really having a tough time allocating money in funds right now to private companies because it's not clear what the landscape is going to look like. You know, if you invest in a retail or a manufacturing Interest now, who knows what that looks like in six months if they rely on, you know, Chinese products or precursors or whatever.
- [22:20]
Diana Ransom
Totally. I mean, that's what we've heard from survey after survey. It says business owners, like, what do they not want? Uncertainty. How do you plan for that? You can't, you don't know what your supply chain is going to be. You don't know how do you need to change it because you don't know what the problem is. And if it's going to go from 145% tariffs one day and then goes back down to 10% the next day. I mean, you really honestly have no idea what you're doing.
- [22:44]
Melissa Angel
What's so funny is if you had an, the modeling is just so off and if you had an investment banker working in a firm, have models this off, they'd be fired in an instant. The Trump administration has claimed that tariffs could bring in as much as $7 trillion in funding over the next decade. Okay, that's their claim.
- [23:00]
Diana Ransom
Yes.
- [23:00]
Melissa Angel
The Tax Policy center estimates that tariffs will likely bring in about half of that, so around 3.3 trillion from 2026 until 2035. And then for this year alone, it's only expected to generate about $190 billion worth of revenue. And so it barely makes a dent in our deficit. Right. And there's also all this talk about even the administration propping up a so called External Revenue Service.
- [23:24]
Diana Ransom
Oh yes.
- [23:24]
Melissa Angel
Where it would re this so called profit. But it just, the math isn't adding up. Right. And at the end of the day, it's not going to be enough to make up for how much the country's spending.
- [23:36]
Diana Ransom
And then is this going to be in the big beautiful bill? Like are they accounting for all this?
- [23:40]
Melissa Angel
I don't think so. I wouldn't masquerade as an accountant, but I. And at the end of the day, it's kind of always comes down to the 11th hour with these things.
- [23:50]
Diana Ransom
When we come back, we explain exactly what stacked tariffs are and their impact on the global economy. But first, a quick break. Please, somebody explain what a stacked tariff is.
- [24:11]
Melissa Angel
To me, when I speak with business owners, I can't shake this line that someone recently told me and that she said, I just woke up, so I don't even know what the tariff is today.
- [24:21]
Diana Ransom
Oh, funny. I mean, sad.
- [24:23]
Melissa Angel
There's so much volatility in this landscape. And so we also can't forget that there are prior tariffs from the past administration, the past Trump administration, where they never were phased out. And so this is what's known as a stackable tariff. So say you have a 10% tariff that was implemented. Companies pay that like a directed tariff.
- [24:44]
Diana Ransom
Like on steel for instance.
- [24:46]
Melissa Angel
Yes, exactly. And so that never goes away. So you're still paying that as a business. And then when you have this new announcement that there's another 25% tariff, well, that gets stacked on top of that last 10%. So now you're looking at a 35% surplus there. Right. And so then when we're talking about triple digit tariffs, as the president has floated on China, it just becomes insane.
- [25:10]
Diana Ransom
Yeah, this is why people end up paying upwards of 245%. And by the way, from what you all have been reporting, people are leaving their goods in crates abroad basically because it's cheaper, because they can't even afford to get their products out. Right. Because they can't afford the tariffs. Okay, so that's ridiculous. Another change that's been happening is this whole de minimis thing. What is that?
- [25:32]
Jennifer Conrad
What's known as the de minimis exemption, sometimes called the de minimis loophole, is a century old law that essentially allows packages that are worth less than $800 to enter the United States duty free. It's been used widely by e commerce sites such as Temu and Shein, but it's also used by many, many, many drop shippers, just used by regular people receiving packages from abroad that are worth $800. And the idea behind it is that it frees up customs resources so they're not having to screen every little package and also just makes it easier for e commerce to happen and for goods to travel overseas. It's been in the crosshairs of both the left and the right, particularly as Shein and Temu have taken off.
- [26:21]
Diana Ransom
But it's not just Chinese companies that are benefiting from this, right?
- [26:25]
Jennifer Conrad
Oh, everyone does. So many direct to consumer brands hold their packages in warehouses and then ship them directly to consumers from say Canada or Mexico or sometimes Vietnam. There are a lot of e commerce businesses that are going to have to rethink their model now.
- [26:42]
Diana Ransom
And when does this exemption go away?
- [26:44]
Jennifer Conrad
So starting May 2nd for both China and Hong Kong, the exemption will expire. And there has been talk about it expiring for other countries as well.
- [26:54]
Diana Ransom
Okay, so with, you know, the discussion about de minimis, it's all relative and related to this conversation about tariffs. What are you all actually seeing business owners doing on the ground? Are they wringing their hands? Is it like untenable?
- [27:07]
Melissa Angel
A lot of people were stockpiling before the announcement. Right. Those that had the foresight were going to their suppliers, they were looking at their supply chains and they were saying, how much can I buy and how much can I store as well? Because if you're buying thousands of units, you also have to put that somewhere. Right. And not everyone has the luxury of doing that, especially if you're based in New York City, where real estate is, you know, top tier. So that's one thing. I spoke with one business owner. She purchased thousands of cartons because she was producing microgreen kits. So. And she stockpiled these. And what I love is her husband actually built her a shed to put them in.
- [27:42]
Diana Ransom
Wow.
- [27:42]
Melissa Angel
Right. If he wanted to, he would. So I think that she got a.
- [27:47]
Diana Ransom
She shed out of it.
- [27:47]
Melissa Angel
Right, right, she did. So I think that's one really interesting thing. Jennifer and I recently did a piece on bonded warehouses, which I think is an excellent hedge for how we're seeing tariffs fluctuate so much.
- [27:58]
Jennifer Conrad
Yeah.
- [27:59]
Diana Ransom
What's a bonded warehouse?
- [28:00]
Melissa Angel
So that it doesn't allow anyone to evade tariffs. That is first and foremost, we have to make that clear. But what it allows people to do is you store your inventory in part of the warehouse where it's also sectioned off. Usually if you see photos of it, it looks like there's a chain linked fence. It's really. It's hardcore. And it allows someone to not pay a tariff until that item exits the warehouse, until it's sold, basically. So that's one way if you're.
- [28:29]
Diana Ransom
So basically, if you think that Donald Trump is going to reverse course on tariffs, you leave it in the bonded warehouse for a period of time to let him come to his senses. Right. Or whatever it ends up being.
- [28:43]
Melissa Angel
That's the hope.
- [28:43]
Diana Ransom
Yeah. Okay.
- [28:45]
Melissa Angel
It's a gamble. Right. Because at the end of the day, the inverse could also help.
- [28:48]
Diana Ransom
But demand for these warehouses is surging, skyrocketing.
- [28:52]
Melissa Angel
Yeah.
- [28:52]
Diana Ransom
And how much do they cost and where are they?
- [28:55]
Melissa Angel
The cost of bonded warehouses usually are higher compared to non bonded space, I believe at a dollar per square foot. In addition.
- [29:05]
Jennifer Conrad
Yeah, I would say, let's see, generally $0.75 to $1.50 a month per square foot versus a regular one, which might be.
- [29:14]
Melissa Angel
It's generally more expensive, generally like maybe.
- [29:17]
Jennifer Conrad
20% more or so.
- [29:18]
Melissa Angel
But it's not unattainable. And that's what's important to remember. But it also doesn't make sense for every business owner to look into one. If you don't have Runway concerns, that's something where this helps you extend your Runway.
- [29:32]
Diana Ransom
Doesn't have Runway concerns.
- [29:34]
Melissa Angel
Right.
- [29:34]
Jennifer Conrad
I mean, I want to be in that.
- [29:36]
Diana Ransom
This is a good question, too. It's like, so are businesses doing anything interesting with their capital right now? Are they drawing on their credit lines or they, you know, you said you're, they're buying inventory. They were, they were buying inventory significantly prior to the announcement. Are they drawing down their credit lines? You know, do they need this reservoir of cash just in case?
- [29:55]
Jennifer Conrad
One thing I've heard from a lot of business owners is that they're just halting unnecessary spending. I spoke to a coffee shop owner in Arizona and he is building a new cafe and he cut back, I think, $50,000 worth of expenses, construction expenses, just to save his capital. But that also means that's $50,000 less that he's not putting into the economy. And he's cut back on hiring new people because he doesn't want to have to lay them off. There's a lot of paralysis right now and a lot of just not spending.
- [30:27]
Diana Ransom
Well, I saw also it was an ex post from Ryan Peterson, who's the CEO and founder of Flexport. He was saying that at least two of his clients that he was aware of, that basically manufactured in China have effectively sold their companies to the Chinese counterpart. They're like backing out. They're out of the game entirely. And if he's seeing it a couple of times, it's probably happening more and more across the country.
- [30:52]
Brian Contreras
I saw a related story with the founder of Busy Baby, which is sort of a baby products company, who is saying that her products are stuck in China. She has $160,000 worth of merch in two crates. Two containers in China isn't going to bring it into the US under the current tariff regime just because she's willing to swallow the cost of the merch but not additional cost of tariffs. And she's thinking about just selling it on Chinese markets to Chinese customers. American customers right now are inaccessible.
- [31:26]
Diana Ransom
Right. No, that's, that's fascinating. And Jennifer, in some of your reporting you've learned this too, is that there's some things that just like, literally cannot be made here. The, the Busy Baby example, that's this food grade silicone is the issue. And Jennifer, you've done reporting on the actual glass bottles being some manufacturers normally got them from Canada. And then if you actually have a US Supplier of the glass bottle, they don't fit in the machine like the Canadian ones for whatever reason. So something's just like it probably could be done here. But we don't have the resources or the capacity now to do it. So when we're talking about these tariffs and just flipping a switch, these things just aren't built. They're not like we're not ready for it yet.
- [32:07]
Jennifer Conrad
This is a big issue. A lot of business owners have said they would like to reshore most of their manufacturing if they could, but we don't have the industrial equipment and expertise. Even something like an iPhone, that injection molding, that has to be precise for the very, the most advanced iPhones. The equipment, the expertise is only in China. And we're talking about millions if not billions of dollars that would have to go into building these factories in the.
- [32:36]
Diana Ransom
U.S. yeah, I just saw a post from Lauren Lockwood. She's the CEO of a company called Lion Latch. This has been a shark tank company. She's been on the Inc. 5000. So she talks about how her companies, first of all, her products are made in the United States. But it took nine years for her to find like the right manufacturer to help her produce these things. Because initially there's a lot of trial and error, you know, with working with a manufacturer to begin with. But this was like she had a lot of drama along the way. And so basically my point is, even if you have a product made here and you finally get it done, it might take nine years for you to resolve whatever issues you have.
- [33:13]
Jennifer Conrad
Yeah, this is a good point that I hear from a lot of business owners too is these tariffs are coming and going by the day, by the week. But changing your supply chain takes six months minimum. And you have to do new samples, drop new contracts. So it takes time, it takes money. And if you don't know what sort of situation you're going to be in a week from now, how do you invest in that change?
- [33:39]
Diana Ransom
Yeah. So what's the current state of the tariff situation? So we have obviously up to 145% on Chinese products or Chinese made goods. And then it's 25% on Canada and Mexico.
- [33:53]
Jennifer Conrad
Right now there's a 10% blanket tariff on the rest of the world. And then products that fall under the USMCA United States, Mexico, Canada agreement, those should be duty free. Oh, and so companies can go on the customs website and get a certificate that certifies that their products fall under that agreement. And that's one thing that, you know, everyone should be looking into now if they qualify.
- [34:23]
Diana Ransom
Oh, wow. But, but is it temporary? Is all this temporary? Like isn't it 10% only for three months or something? We Hit pause.
- [34:30]
Jennifer Conrad
Yeah. So he hit pause on the larger Liberation Day tariffs, which were anywhere from like 30 to 50%, and they were based on the US trade deficit with each country.
- [34:43]
Diana Ransom
Yeah. Okay. Well, I can tell you one industry that's not complaining right now, and that's crypto. We should have known based on the. So in on inauguration night, there was the crypto ball, and apparently it was like, the hottest ticket in town. We should have seen the writing on the wall. Obviously, crypto people would be happy. Brian, you've done some reporting on this world. Can you tell us why they might be happy right now?
- [35:06]
Brian Contreras
Yeah. Crypto sort of as a sector broadly went really hard for Republicans and Trump during the election, just in terms of sort of campaign donations, and it is paying off for them. We are already seeing secretary appointments that are in line with sort of the regulatory goals that the crypto industry has. You have Howard Lutnick in Commerce, and you have Paul Atkins at the sec. These are both, both known sort of crypto fans who are sort of looking to roll back the Biden administration's fairly aggressive crypto regulatory approach and be a little more laissez faire about everything from cryptocurrencies to crypto exchanges. So at least in that regard, they are getting the regulatory landscape or starting to get the regulatory landscape they want. There's already been lawsuits that the SEC was pursuing against major crypto companies that have been dropped.
- [36:03]
Diana Ransom
Like the ripple one ripples. I guess the SEC lawsuit was dropped there.
- [36:08]
Jennifer Conrad
Right.
- [36:09]
Diana Ransom
So there have been others.
- [36:10]
Brian Contreras
Yeah. Coinbase is another one. That's one of the best known cryptocurrency exchanges. And the SEC dropped a case against them. Coinbase's chief legal officer called it nothing short of a complete win. So crypto was in a bit of a winter.
- [36:25]
Melissa Angel
I think.
- [36:26]
Brian Contreras
A lot of people remember, like, 2021ish. There was all the hype around, like, the monkey NFTs and cryptocurrencies and stuff. And then, especially as AI started to become sort of the hot new thing in tech, a lot of that interest fell away. It started becoming less of a focus of, like, Silicon Valley funding. But with this election, there's a lot more energy behind it. People in that space are really optimistic about sort of regulatory changes. There's been a number of IPO filings or rumors from various, like, major crypto companies. So it's a. It's a hot time to be in crypto.
- [37:02]
Diana Ransom
Yeah. But there was a period, though, when the markets were kind of crashing, when the crypto markets were Also crashing.
- [37:07]
Brian Contreras
Yeah. And I think that's been dialed back a little recently. But crypto people often talk about crypto, especially like Bitcoin and Ethereum, which are the two biggest cryptocurrencies by market cap and sort of the two most mainstream crypto assets. Generally, people often talk about them as a hedge against US Dollar macroeconomic dynamics like inflation. And I think the fact that Bitcoin and Ethereum were tracking the general decline in the stock market more broadly, especially after Liberation Day, made some people a little bit skeptical of the extent to which cryptocurrency is sort of its own ecosystem. It's becoming increasingly tied up with institutional investors. You see, like Fidelity is talking about launching a stablecoin.
- [37:50]
Diana Ransom
I saw in my PayPal account, like, I can. I can invest. I can Invest in crypto 100%.
- [37:55]
Brian Contreras
Same with Venmo. The once very stark boundaries between traditional economics and finance and crypto are becoming a lot blurrier. And that means that it's easier to be in crypto in terms of regulations and customer acquisition, but also that trends in that space are starting to track broader sort of US dollar and public market stocks a little more closely.
- [38:19]
Diana Ransom
Yeah, this is. And I want to dig into the regulatory issue a little bit here. So there was a question about whether crypto would be regulated under the sec, the Commodity Futures Trading Commission, so the cftc. So I think that that was decided correct, Jennifer.
- [38:36]
Jennifer Conrad
I would say what happened was the securities and Exchange Commission has said that for the most part, they're not.
- [38:43]
Diana Ransom
They don't want to.
- [38:45]
Jennifer Conrad
They don't want to. Which was a switch from under Gary Gensler, who said that most cryptocurrencies other than Bitcoin should be regulated by the sec. And that's why we had all these enforcement actions. And one thing that comes up a lot when I talk to heads of crypto companies is that they want regulatory clarity. They want to know who's regulating what.
- [39:08]
Melissa Angel
But then when you ask them, well.
- [39:09]
Jennifer Conrad
What would that look like? No one can ever give you a clear answer. It seems like there needs to be some clarity from Congress as to who should be in charge of what. And some of these agencies need to clarify what their positions are. So far, all we have is the SEC saying this is not us.
- [39:27]
Diana Ransom
Any sense for how the industry would be regulated differently if it was under CFTC versus sec.
- [39:32]
Jennifer Conrad
The idea is that there's this ongoing debate about whether. And you guys feel free to jump in the weeds, whether cryptocurrencies are a commodity or a security. So are they More like gold or coin or something like that. You know, just like a product. Or are they like a security, like a stock? And that would determine which agency has regulatory oversight. So Gary Gensler's argument, former SEC chair, was that because these cryptocurrencies, they have people pulling the strings behind them, they're more like stocks. And so the SEC should be involved. Bitcoin is different because it's totally deregulated and there's no. There's no one making decisions.
- [40:18]
Diana Ransom
It's all based on the initial mining for these things. Right. It's not like. And people can do that.
- [40:23]
Jennifer Conrad
People can do that. But as far as people can also grow corn. Yeah, I mean, I guess the thing with bitcoin is there's no one who's making decisions about how the cryptocurrency is going to be made and run. Whereas some of these others, they might be to, like, fund a certain project or they're somehow tied to a person. I mean, president has a cryptocurrency.
- [40:45]
Diana Ransom
Right. Okay, so that's still a question of, like, what. What's actually going to happen there. Any other headwinds that the industry faces?
- [40:52]
Brian Contreras
I would point again to the increasing interest around IPOs. We're seeing Circle, which is a major sort of stablecoin company. Stablecoins are basically cryptocurrencies that are trying to track the value of like, a US Dollar or a Treasury bond or something. So they're a little more stable. As the name implies, Circle Mint's basically one of the biggest stablecoins. They recently filed to go public. There's a few other major crypto companies, Kraken and Gemini, which are reportedly going public either this year or next. And I think, you know, to the question about how much regulation does the industry itself actually want? I do think that the fact that these companies are increasingly interested in access to public markets in exchange for a little more transparency and going through the whole filing process to go public is indicative of at least how some of the bigger players in the space are thinking about regulation. You don't file to go public unless you're comfortable with at least some regulation.
- [41:51]
Diana Ransom
One would hope.
- [41:52]
Brian Contreras
One would hope.
- [41:53]
Diana Ransom
Yeah. How about this? I'd love to kind of have us each talk about prediction for the year ahead.
- [42:01]
Jennifer Conrad
Who knows?
- [42:03]
Diana Ransom
Who knows? It's been so much change in the first 100 days of Donald Trump's second term in office, so we really don't know. Know what to expect. I mean, we know that Elon Musk's tenure will end at the End of May. So what happens to Doge? I have questions about this. Maybe things will calm down without Musk on Capitol Hill. He's got the Tesla takedown he needs to worry about, so hopefully maybe he'll refocus his efforts elsewhere. So that's one thing I think I'm looking forward to, is maybe a little more CALMER Situation in D.C. there's predictions.
- [42:38]
Melissa Angel
And then there's things that I actually hope will happen. Right. I mean, I think, and I certainly hope with trade, that we see a realignment and a lowering of these tariffs, because if we don't, it is obvious that things will get very expensive. But when you're looking at what's happening in the bond markets, when you're looking at the weakening of the dollar, it really just makes you take pause. Right. Especially if you travel, for example. I mean, we saw just last week that the dollar had a terrible day. I've read reports, and it's not something that is going to make a lot of people happy, but some, and this might be a fringe belief, but some have likened America to an emerging market. And that makes you think, well, certainly.
- [43:24]
Diana Ransom
True for women's healthcare.
- [43:26]
Melissa Angel
Right. All said.
- [43:28]
Diana Ransom
All right, Brian, what you got?
- [43:31]
Brian Contreras
I think, I think we'll see a major crypto company go public and that will bring a lot more money into that space from sort of just general retail investors, but also more scrutiny, especially around Jennifer. You mentioned that President Trump has a cryptocurrency right now. We've also seen, like Javier Milei in Argentina, the Argentinian president, launch a cryptocurrency and face a lot of skepticism about sort of what it means for corruption and public accountability for a head of state to have essentially their own name brand currency. So I think we're sort of in this very pro crypto area right now post election, where there's a lot of positive energy and vibes. And I think a, a major IPO will on one hand, open those markets up to a lot more sort of lay retail investors, but also sort of get us back into like the FTX collapse era of a lot more scrutiny and skepticism and maybe pressure for regulation in that space.
- [44:31]
Diana Ransom
Also, SBF could get released.
- [44:33]
Jennifer Conrad
He could. There is talk that his parents are lobbying behind the scenes to have him released. And we have certainly seen Trump pardoning certain people. I mean, I agree with Brian that I think that we're gonna see more bleeding of traditional finance and crypto just at cryptocurrency conferences and events now you see people from major banks attending speaking on panels. So I think that the cat is out of the bag on that. As far as tariffs, I think Slash hope we're going to settle on more tariffs than we had on January 20, but we're not going to. These crazy high levels are unsustainable. And I think as the economic impacts become more obvious, I think that there will be a drawback or maybe we'll just stay where we are. Now, the thing is, because with all of this, there could be some big external shock, whether it's a pandemic or a terrorist attack or Russia invading Ukraine. And a lot of what we think is going to happen could get totally tossed up in the air and changed.
- [45:38]
Diana Ransom
That's fair. Everything we said here today could be totally meaningless. But we endeavor to go on and try to. I mean, at the end of the day, hopefully we have more certainty. So for the business owners listening, yeah, we can hope for that. Okay, thank you all so much for coming. Melissa, Brian, Jennifer, thanks for having us.
- [45:55]
Melissa Angel
Thank you.
- [45:55]
Jennifer Conrad
Thanks very much.
- [46:00]
Christine Ligorio Chavkin
That's all for this episode of from the Ground Up.
- [46:03]
Diana Ransom
Be sure to subscribe on Apple Podcasts, Spotify, or your podcast platform of choice. Also, if you like this episode or have suggestions of what topics you'd like to hear about, leave us a review on Apple Podcasts or reach out to us on INK's social channels.
- [46:16]
Christine Ligorio Chavkin
From the Ground up is produced by Blake Odom and Avery Miles with Diana Ransom and myself, with help from Sam Gabauer and Hawa Ohtori. Editing by Matt Todder, mix and sound design by Nicholas Torres. Our executive producer is Josh Christensen. Be sure to read our coverage of the first 100 days of the Trump administration on inc.com thank you for listening and we will see you next week.
- [46:44]
Melissa Angel
Panoply.