What Tariffs Are Doing to North American Freight

Summary

Odd Lots Podcast Summary Episode: What Tariffs Are Doing to North American Freight
Release Date: April 8, 2025
Hosts: Joe Weisenthal and Tracy Alloway
Guest: Matt Silver, Co-founder and CEO of Car

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Introduction

In this episode of Bloomberg's Odd Lots podcast, hosts Joe Weisenthal and Tracy Alloway delve into the ramifications of recent tariff announcements on North American freight. They are joined by Matt Silver, co-founder and CEO of Car, a software company specializing in freight brokerage for U.S.-Mexico trade lanes. The discussion centers on how new tariffs are influencing businesses that handle cross-border goods, the strategic responses of logistics companies, and the broader implications for U.S.-China trade relations.

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Current Status of USMCA and Tariffs

Joe Weisenthal opens the conversation by emphasizing the pervasive impact of new tariffs on businesses globally, especially those involved in cross-border trade. Tracy Alloway humorously remarks on the breadth of their coverage, highlighting the intent to explore tariff effects across various industries.

Matt Silver provides an update on U.S.-Mexico trade, noting that "trade for Q1 is up year over year in Mexico, so it is definitely still going the right direction" ([02:33]). He clarifies that Car operates as a software firm supporting freight brokers and trucking companies dealing with cross-border shipments. Despite some reprieves for USMCA-related trade, companies importing from regions like Europe and Asia continue to face substantial tariffs, which creates uncertainty and anxiety within the logistics sector.

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Impact on the Automotive Industry

The hosts revisit a previous discussion with Matt Silver about the U.S.-Mexico trade boom. Silver explains how the revised USMCA has incentivized manufacturing within North America, reducing reliance on overseas production. He states, "Trump updated NAFTA to the USMCA and that encouraged more manufacturing to happen in North America and less overseas" ([04:31]).

However, the introduction of new tariffs poses challenges, particularly for automakers importing parts from non-USMCA countries. Silver illustrates this with the automotive sector, where parts not covered under USMCA now face a 25% tariff. For instance, a car valued at $40,000 could see an additional "$1,000 added to the cost" due to these tariffs ([07:39]). This scenario forces companies to decide between absorbing the costs or pausing shipments to avoid price increases for consumers.

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Tariff Calculation and Harmonized Tariff Codes

A significant portion of the discussion focuses on the complexity of applying tariffs, especially for products like automobiles that consist of numerous components from various origins. Tracy Alloway raises a pertinent question about the logistical challenges involved in calculating tariffs for each component, to which Matt Silver responds:

"It's the customs broker. ... there are very specific, it's called harmonized tariff codes that are assigned to each good and then there's a potential tax related to that along with requirements." ([07:50])

He mentions startups like Gaia Dynamics that utilize AI to streamline this process, highlighting the intricate nature of tariff assessments based on material composition, size, and other factors.

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Reactions from Logistics and Trucking Companies

The conversation shifts to the responses from logistics companies and truckers facing tariff-induced uncertainties. Silver observes that most trucking companies are adopting a cautious stance, choosing to "stay calm" and "wait and see" rather than making drastic operational changes ([11:49]). This approach includes maintaining current fleet sizes and focusing on supporting existing freight flows, despite reduced volumes in certain sectors.

Joe Weisenthal draws a parallel between market sentiments and industry reactions, noting a shared disbelief that current tariffs could become the long-term status quo. Silver concurs, emphasizing that the industry anticipates negotiations that may alleviate some tariff pressures, although this is uncertain.

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Future Outlook and US-China Relations

A critical aspect of the discussion centers on the broader geopolitical landscape, particularly the U.S.-China trade relationship. Matt Silver underscores the pivotal role China plays in global supply chains, stating, "China is really the big one that it's all going to depend on" ([16:39]). He suggests that if significant tariffs remain between the U.S. and China, the ripple effects would slow down overall freight movements, both international and domestic.

The hosts explore the potential for U.S.-China decoupling, which could dramatically reshape supply chains and investment patterns in North America. Tracy Alloway highlights the complexity of rerouting goods, noting that alternative destinations like Vietnam or Mexico are not straightforward solutions due to logistical and economic constraints.

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Conclusion

The episode concludes with an acknowledgment of the uncertainty surrounding tariff negotiations and their long-term implications. Both the financial markets and the logistics industry exhibit a collective hope for resolution, anticipating that the current tariff structures are not permanent. Silver remains optimistic that supply chains will stabilize and that new trade agreements could restore momentum to freight movements.

Tracy Alloway emphasizes the centrality of the U.S.-China trade relationship, suggesting that its evolution will significantly influence North American freight dynamics. The discussion wraps up with the hosts expressing appreciation for Matt Silver's insights, underscoring the interconnectedness of global trade policies and their tangible effects on industries.

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Notable Quotes

• Matt Silver [02:33]: "Trade for Q1 is up year over year in Mexico, so it is definitely still going the right direction."
• Matt Silver [04:31]: "Trump updated NAFTA to the USMCA and that encouraged more manufacturing to happen in North America and less overseas."
• Matt Silver [07:50]: "It's the customs broker. ... there are very specific, it's called harmonized tariff codes that are assigned to each good and then there's a potential tax related to that along with requirements."
• Matt Silver [11:49]: "Most of those trucking companies are saying, like, hey, we're going to stay calm. We're going to focus on supporting what we can support."
• Matt Silver [16:39]: "China is really the big one that it's all going to depend on."

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This comprehensive summary captures the essence of the Odd Lots episode, providing insights into how tariffs are reshaping North American freight, the strategic responses of businesses, and the overarching influence of U.S.-China trade relations on the global economy.

Transcript

[KPMG]

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[Matt Silver]

Bloomberg Audio.

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Studios Podcasts Radio News.

[Joe Weisenthal]

Hello and welcome to another episode of the Odd Lots Podcast.

[Tracy Alloway]

I'm Joe Weisenthal and and I'm Tracy Alloway.

[Joe Weisenthal]

Tracy, we can't get enough of trying to understand the immediate impact that the new tariff announcements are having basically to like every business in the world. But certainly any business that touches goods, and certainly any business that touches goods that at some point cross a border, which at some point is all of them.

[Tracy Alloway]

I like the implication that we're just gonna do episodes on every single business in the world. That's what you're saying, right?

[Joe Weisenthal]

Aren't we?

[Tracy Alloway]

Yeah, I think we are. I mean we're deep in the process of doing that already. So here's an episode with another business.

[Joe Weisenthal]

Well, so yester in our episode, our first of the multiple emergency tariff episodes were like we just got to go down the list and talk to all the supply chain specialists that we talked to a few years ago over the last several years. And so we're just going to do that. And we have another guest today who I think we talked to about a year ago, maybe a little less. We're going to be speaking with Matt Silver. He is the co founder and CEO of car, which is a freight brokerage that really specializes in US Mexico lanes. North America knows a lot about North America trucking, cross border trucking, etc. And given the world of tariffs, you know, suddenly things like knowing about the world of cross border trucking.

[Tracy Alloway]

You know, the last time we spoke to him, I think the episode was titled like How Shippers are responding to a U.S. mexico trade boom.

[Joe Weisenthal]

Oh yeah. So I guess, I guess we're going to check in on whether that's check.

[Tracy Alloway]

In on the U.S. mexico trade boom.

[Joe Weisenthal]

Matt, is there a U.S. mexico trade boom happening right now on April 7, 2020, 25?

[Matt Silver]

Well, first of all, trade for Q1 is up year over year in Mexico, so it is definitely still going the right direction. One thing to clarify, we're not a brokerage, we're a software business. But yeah, so we, we work with freight brokers and trucking companies that are moving cross border freight. So we hear it from everybody involved in the process. And there's definitely anxiety and concern over how these tariffs are going to impact trade with Mexico and Canada. The thing is like the news that we heard this week revolved around basically every country besides Mexico and Canada. And the USMCA got some sort of a reprieve, if you will, but they were still hit by tariffs over the last couple months. And so the companies, like the automakers that are producing cars throughout North America, they're not getting hit the same way. The companies that are bringing their cars in from overseas, from Europe or Asia. And so, you know, the trucking companies that are moving this freight, they're going to continue to move the freight that they can still move that's consistently shipping. But they understand that things might get a little bit rocky as all these discussions get worked through. And so they're going to stand strong, I guess, ultimately, and wait and see what happens with the market.

[Tracy Alloway]

Right. I mean, I think even if Mexico was exempted from the reciprocal tariffs that were announced last week, and I should just mention we're recording this on April 7, lots of things could still change. But even if they were, I mean, the direction of travel seems fairly clear at this point. Give us a reminder of why US Mexico trade had been on a sort of upwards trend line. Because a lot of people were saying, well, this is actual genuine trade between the US And Mexico. And then other people would say, well, this is China rerouting some stuff through Mexico in order to get further away from the Trump administration's first round of tariffs back in circa 2018.

[Matt Silver]

Yeah. So going back to 2018, that's when Trump updated NAFTA to the USMCA and that encouraged more manufacturing to happen in North America and less overseas. And so you've got the pandemic that scared everybody and thinking that it's not such a great idea to rely on China for manufacturing. Couple that with the general relations that the US And China have had for the last decade or so, which has been contentious and it's not super friendly, then you've got the latest round and everything. Even up to the last few hours, when Trump said that if China goes through with the increased tariffs that they announced, I think he said 90% would be placed on all goods coming from China. And so things are only escalating. And between the fact that Mexico is primarily on the same or similar time zones as the United States, it's only a few hours to get there, whereas It's I think 14 or 15 hours to get to China. And then the culture and language barriers are a lot simpler and easier to get through with Mexico than it is with overseas. And so there are a lot of reasons why companies already do manufacture in Mexico and why they're going to continue to do that. Yes, there's Chinese investment in Mexico, but it's not as heavy as people make it out. To me, it's just you start to hear it more because everyone's going, well, here's how China's reacting to this trade war. They're investing in countries nearby like Mexico. But I still think we'll see more American companies investing in Mexico than we.

[Joe Weisenthal]

Will Chinese time zones and language, two of the great non tariff trade barriers that affect our world. All right, why don't we pause here, give us the status of the tariffs. Because it seemed like Trump was like really, you know, for a while, like, talk about blowing up the USMCA right now on April 7th. What is the status of what's newly being tariffed, what isn't in the cross border US Mexico trade?

[Matt Silver]

So you hear about the big separator being what qualifies under the usmca. I think most agricultural products still qualify under that. And so we're not seeing an impact on, on most of those goods. Although the US For a long time has had tariffs on sugar.

[Joe Weisenthal]

Right.

[Matt Silver]

Mexico has had it on some dairy products. And the irony right now is the RFK movement talks about trying to reduce the reliance on high fructose corn syrup. And the biggest counter to that would be sugar, which we could buy from Mexico. And so on one side, you've got goods that fall under the USMCA that have those requirements. So take a car, for example. If 75% of the value of the car came from Mexico, the US Or Canada, it falls under the USMCA and it's qualified. The difference now though is that the parts that are not falling under the USMCA will get taxed right now at that 25% rate. Oh, and so if, let's say on a $40,000 car, 10% of that car, so about $4,000 worth of value is coming from overseas that could still have tariffs applied to it. And if it's 25% tariff, then it's, it'd be 25% on that $4,000. So about $1,000 would get added to the $40,000 cost. And so they're only taxing that piece.

[Tracy Alloway]

Who actually does those calculations though? Because that seems Seems like a lot of paperwork to break cars down by like components and where those components are made.

[Matt Silver]

It's the customs broker.

[Tracy Alloway]

Oh wow.

[Matt Silver]

And there's. Yeah, I mean there's, there's a startup called Gaia Dynamics that's also doing that using AI and so companies are able to use them for that stuff now too. But like it's very specific. Like if you're using something made of steel versus aluminum versus another raw material, even if it's a screw, it still it depends on what it's made out of and it depends on the size of it and all that other stuff. So like there are very specific, it's called harmonized tariff codes that are assigned to each good and then there's a potential tax related to that along with requirements. Very specific.

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[Joe Weisenthal]

I'm some company and I don't know what the future is of US Mexico trade. Some things are getting tariffed now that weren't so much what am I passing along and what am I eating.

[Matt Silver]

So it depends on if so the who is it Land Rover, Jaguar, whatever the name of their brand is. Now they announced that all their cars coming in from overseas are pausing for a moment until they figure out exactly how to manage this. And historically even cars like that that were coming from Europe were still or Asia were still getting grandfathered in under kind of almost like a side letter to the usmca. And so some of those companies were able to get by and now all of a sudden they're getting hit with these tariffs and so they don't want to go turn around to their customers and raise prices. They know it's not a good look. And so rather than raising prices, they're saying, hey, hang on a second, we're not going to put more cards on the lot. We're going to stop shipping for a moment until we figure this out. And they're, you know, over the next, call it five to 10 days as like the US and the EU navigate and negotiate. And I think I just saw recently that, that, that conversation starting. And you'll see similar with a lot of other countries or trade organizations that ideally that'll get back to some level of a more balanced trade agreement where there's ideally no tariffs in either direction. And so those companies that are getting affected by it, they just have to wait. And I think a lot of them are just waiting and they're okay with less inventory for the time being and keeping the prices the same because those cars already landed, rather than trying to charge more to the consumer or eat that cost.

[Tracy Alloway]

So if we were to assume that maybe things don't change from what's been declared, like let's just assume that we don't see a bunch of deals like Trump is advocating for and these tariffs we're stuck with with them for a while, how would you expect some of your clients to actually react and maybe reorient their businesses for this new reality? What would they do?

[Matt Silver]

Our customers are logistics companies. And I think what you're thinking about is more on the manufacturer side, which is their customers. And so I'll put myself in the shoes of a logistics company that's working with manufacturer. My first thought is like, let's build some consistency around the freight that you're moving. Because if you have to move that freight, one of the levers that you have is how much you're spending on moving it. So if you're getting an increase in the taxes and duties that you're paying on your goods, then I would be looking at ways to reduce my cost, which would be relying more on a logistics company or a third party logistics provider that can help kind of spread that price risk and the operational risk and they can take that on with more volume. So you think about how more density builds over time with more freight moving in an individual lane. Well, all of that, that's going to drive ideally better price control. And so for a shipper thinking about their freight moving across the border, I might rely more on a logistics company to try to navigate that and reduce my cost of actually procuring different trucking companies and potentially be able to scale that business up by outsourcing more of that. And so if I'm a shipper, that's how I'm thinking about it. If I'm a trucking company, my. From what I understand is right now trucking companies are not running out and buying more trucks. They want to see what's going to happen. Right now they're waiting, they're not panicking, they're not picking up and switching how their business operates. So like I was in Canada recently and I met with a handful of trucking companies that move freight from Mexico to Canada and vice versa. And they told me, you know, look, like there's definitely anxiety here. Like there's as much outrage that I heard from every trucking company and broker that I met with in Canada a few weeks ago that I've seen on social media about everything going on right now in politics. And so most of those trucking companies are saying, like, hey, we're going to stay calm. We're going to focus on supporting what we can support. We know some customers might not be shipping right now if their freight is getting taxed heavily. And so we have to find freight elsewhere. But for the time being, we're going to stand strong, we're going to wait and see because we don't think this is how it's going to stay long term. And so they're of a more long term mindset of waiting and seeing what happens rather than panicking and trying to switch what they're doing or shutting something down or slowing down their fleet. They might just not grow as much right now, but they're not going to stop their trucks.

[Joe Weisenthal]

But it sounds like no matter who you're talking about, and it's funny because, look, in the financial markets one gets the sense that there is a widespread belief that the current rules can't stay in place. Like this can't be the ultimate status quo. And no one really wants to accept that the new tariff schedules are really the whole thing. And I think there's a widespread belief that if somehow you had a crystal ball and these were the permanent tariffs for years to come, the markets would go a lot lower. It sounds like actually from you that that's kind of the same in industry, that whether we're talking about manufacturers or whether we're talking about truckers. Yeah, okay, some pausing. We're not going to move new inventory in right now. We're not going to change our business model. But at the moment, still the sort of widespread belief that this can't be the final set of rules.

[Matt Silver]

Correct. And like, keep in mind that, you know, the big market that everybody talks about is the US market when it comes to freight. And obviously ocean freight is going to slow down. We're already hearing about that on both social and from customers directly, that they're seeing volume coming in through the port slowdown and then to that freight comes into the port, it goes to a warehouse at some point, it gets repackaged or labeled and unpackaged and palletized. It goes on a truck after that. And so what people in, you know, that the US market would say is considered domestic freight moving from like Los Angeles to Dallas, that freight very well is going on a truck and it is considered a domestic shipment at that point. But it's really part of an international move. And so if international freight slows down coming in over the ocean, that is ultimately going to impact over the road throughout the US and so I don't think we're going to see a spike in rates by any means. I think we might see some weird fluctuation over the next couple of months as these things settle. But I think overall the market's going to be a little bit slower for freight in general, not just for cross border or international.

[Tracy Alloway]

I mean, on this note, one of the things we Learned from the 2020 pandemic and the supply chain disruptions after that, one of the things we really internalized is just how cyclical the trucking business actually is and how you do tend to get these boom bust cycles. And it feels like the more sort of one off shocks we have to the system, the worse that cyclicality kind of gets. How should we assume things are going to get if this tariff uncertainty sticks around for a while?

[Matt Silver]

I think it really depends on what happens with China, all the other countries. It all has an effect. If you think about what happened during the pandemic when all of a sudden there was a shortage with semiconductor chips and what that did to everything. All of a sudden cars were not rolling off of lines because of how many chips are going to a car. And so the whole ecosystem is really tied in more than you'd think. But China is really the big one that it's all going to depend on. Right? Like if we come out of this with significant tariffs from both sides on China and from China to the US then like, yeah, it's going to slow things down if things go to a new normal. But to me, normal still means that supply chains don't have to be completely redone. In a really quick fashion, then I think the market should pick back up and there should be excitement from the new agreements in place where people might start buying again. People are not obviously happy about their bank accounts right now.

[Joe Weisenthal]

Yeah, obviously not. No. I mean, like, this is sort of the big one because if some of these levels that are being discussed and again, we're talking about this April 7 to 35pm Eastern time, if some of these levels for China tariffs remain in place, I mean, people are talking about the end of US China trading, which is the sort of the defining economic relationship of the entire world. Matt Silver, thank you so much for coming back on on Oddlock.

[Matt Silver]

Absolutely. Thanks for having me.

[Joe Weisenthal]

It really feels, Tracy, even with all of the market volatile, I love catching up with Matt, by the way. It really feels that with all the market volatility that we've seen with all the selling, like, no one just believes that this could be the new normal. Right. Everyone's like waiting, oh, it's like, oh, we're going to see what happens with negotiations. I'm like, what negotiations? But you know, there's got to be something. Right. Everyone assumes there must be some deal to be cut.

[Tracy Alloway]

Yeah, Well, I mean, ostensibly that's the whole point of this process. Right. It's to use leverage to strike deals. But in the meantime, we're all sort of grappling with all this uncertainty of what's going to happen. But I thought that was really interesting.

[Matt Silver]

Yeah.

[Tracy Alloway]

Good to catch up with Matt. I did think his emphasis on the importance of China.

[Matt Silver]

Yeah.

[Tracy Alloway]

Is a really big deal. And you said it very well at the end as well. Like, the world's two largest economies, there's a real chance that they're basically decoupling from each other, which seems like it could reverberate around supply chains and industries around the world. So again, no matter what happens, you know, if the US Strikes a deal with, I don't know, like some small Pacific island or something, maybe it doesn't really matter because the US China relationship is much, much bigger and weighs much, much, much more heavily on the global economy.

[Joe Weisenthal]

Yeah, it seems like the big one. And so it's like, even if you're talking about US versus Mexico trade, the future of US Mexico trade is contingent to some degree on the China of US China trade. Because A, there is a question of what can Chinese goods get through Mexico and then to the US which happens to some extent. And then B, if you're really shut off from China, how much actual capital I investment do you then make in North America and how much do you make in Mexico versus the United States? Many big questions. But like investors, it sounds like the world of shippers and carriers are also in a certain kind of wait and see mode.

[Tracy Alloway]

Yeah, and I mean the other big thing happening here is the difference between now versus 2018 is you don't have those outlet countries necessarily, right? So you can't just reroute stuff into Vietnam or into Mexico away from China. Like that is no longer an option. So that seems to make it much, much more complicated as well. Shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracee Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me @thestalwart. Follow Matt Silver, he's ATT Silver. Follow our producers Carmen Rodriguez Ermenarman, Dashiell Bennett at dashbot and Kell Brooks at Kel Brooks. For more Odd Lots content, go to bloomberg.comoddlods where we have all of our episodes in a daily newsletter. You can chat about all of these topics 24. 7 in our Discord, Discord, GG, Oddlauds.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we go back and talk to some of our supply chain and logistics contacts, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.

[Matt Silver]

Something unexpected happened after Jeremy Scott confessed to killing Michelle Schofield in Bone Valley Season one. Every time I hear about my dad is, oh, he's a killer. He's just straight evil. I was becoming the bridge between Jeremy Scott and the son he'd never known.

[Tracy Alloway]

At the end of the day, I'm.

[American Express]

Literally a son of a killer.

[Matt Silver]

Listen to new episodes of bone Valley Season 2 starting April 9 on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.