Prof G Markets: Why Trump Will Back Down on China Tariffs — Featuring Ryan Petersen

Podcast Information:

• Title: Prof G Markets
• Host/Author: Vox Media Podcast Network
• Episode: Why Trump Will Back Down on China Tariffs — ft. Ryan Petersen
• Release Date: April 24, 2025

1. Introduction and Guest Recognition

The episode opens with a brief, humorous exchange among the hosts, Scott Galloway and Ed Mylett, before welcoming Ryan Peterson, the founder and CEO of Flexport. Ryan shares the exciting news about Flexport winning the Webby’s People’s Voice Award for Best Business Podcast, emphasizing the support from the general audience over the judgments of elite panels.

Ryan Peterson [03:03]: "We won on the popular vote, where the people decide what is the best business podcast. So I think that's honestly a greater honor. The elites don't love us, but the people love us."

2. German Bonds and Shifting Investments [05:08]

The conversation shifts to the recent movements in the capital markets, particularly the rise in German bonds and the Euro. Ryan explains that investors are fleeing U.S. assets, leading to a drop in U.S. bonds and the dollar while simultaneously boosting European debt and the Euro.

Scott Galloway [05:08]: "The world is selling America, we knew that. But as of this week, the world also appears now to be buying Europe."

This trend is seen as a reflection of a broader structural shift where Europe becomes an attractive alternative for global investors disillusioned with U.S. market dynamics.

3. China's Withdrawal from US Private Equity [07:46]

Ryan discusses China's strategic move to halt investments in U.S. private equity, a significant shift affecting major funds like Blackstone, TPG, and Carlyle that have historically relied on Chinese capital.

Ryan Peterson [07:46]: "China has said there's no more investing in private equity in America, which is actually quite a big deal for the private equity industry."

Scott highlights that while China's immediate capital withdrawal may not match the scale of other nations, it signals a potential capital flight away from the U.S., further exacerbating the re-rating of American assets.

Scott Galloway [13:37]: "This just sends another signal that the US is no longer the safe haven for capital, that there's a capital flight which again creates that re-rating down."

4. Bill Ackman’s Investment in Hertz [15:43]

The discussion moves to Bill Ackman's recent strategic investment in Hertz, where he has acquired nearly a 20% stake. Ackman argues that rising tariffs will increase used car prices, thereby enhancing the value of Hertz's existing fleet.

Ryan Peterson [15:43]: "Bill Ackman has built up a nearly 20% stake in Hertz, citing the company's strong position amid tariffs."

Scott offers a critical perspective, questioning the sustainability of Ackman’s strategy given Hertz's significant debt and market challenges.

Scott Galloway [16:16]: "This is interpretive dance to decide that... Hertz is just a shitty, levered business that's in structural decline."

Ryan counters by suggesting that Ackman's play is a classic activist strategy, albeit one that may be retrofitted to align with tariff benefits.

5. Tariffs Impact on Supply Chains and Small Businesses [26:03]

Ed Mylett delves into the severe repercussions of tariffs on small businesses reliant on Chinese manufacturing. He describes the current situation as one of "paralysis," where small businesses struggle to find alternative manufacturing partners due to capacity constraints and prolonged duty rate uncertainty.

Ed Mylett [26:16]: "It's creating paralysis, especially hurting small business. Bigger companies have multiple factories, but small businesses don’t."

Ryan elaborates on the complexities, noting significant reductions in ocean freight bookings and predicting widespread business failures and unemployment as tariffs persist.

Ed Mylett [34:20]: "If they don't change anything and this 145% duty sticks on China, it'll take out like mass bankruptcies. We're talking 80% of small businesses that buy from China will just die."

6. CEOs’ Silent Response and Potential Outcry [58:38]

The hosts explore the muted response from major CEOs regarding the tariffs. Ed points out that while many small businesses are visibly distressed, larger corporations often refrain from public dissent due to reputational risks and internal constraints.

Ed Mylett [58:38]: "Big companies have a lot of failure of leadership in general... There's a lot of downside to criticizing. I'm hard to fire."

Ryan anticipates that more voices from influential entities like JP Morgan might eventually speak out, but remains skeptical about immediate broad-based CEO opposition.

Ed Mylett [58:38]: "I think you'll see more, but I don't know that it matters. I feel like the Trump administration knows that this is bad for businesses importing from China."

7. Flexport's Strategy Amid Tariffs [37:03]

Ryan Peterson discusses Flexport's proactive measures to navigate the tariff-induced disruptions. This includes relocating talent to emerging markets like Vietnam, enhancing intra-Asia logistics, and reconfiguring their supply chain networks to mitigate risks associated with tariffs.

Ryan Peterson [37:14]: "We're shifting, trying to move talent, create incentives for people to leadership program to go down there and help us grow in those regions."

Ed adds that despite challenges, the U.S. consumer remains central, and Flexport is leveraging data-driven strategies to optimize supply chains amidst the evolving landscape.

Ed Mylett [38:00]: "US consumer is still king. But that also revolves around the US dollar being strong."

8. The Role of AI in Logistics [52:32]

AI emerges as a transformative tool in logistics, with Ed Mylett explaining Flexport’s investment in artificial intelligence to automate labor-intensive tasks, reduce costs, and enhance data utilization for better decision-making.

Ed Mylett [52:32]: "We believe we can take about 80% of that cost out in the next two, three years largely because of AI."

Scott inquires about the practical implementation, and Ed responds by outlining specific areas where AI is driving efficiency, such as automating freight forwarding processes and generating real-time reports.

Ed Mylett [55:05]: "We're finding about 1% weekly the ability to automate about 1% of that work every week."

9. Impact on E-commerce Giants: Temu and Shein [55:05]

The hosts analyze the implications of tariffs on e-commerce powerhouses like Temu and Shein. Ed believes that while tariffs will pose challenges, these companies maintain significant cost advantages that may allow them to retain or even grow their market share despite increased duties.

Ed Mylett [55:18]: "They have some big advantages there. Probably their sales go down but their market share might go up."

Scott adds a sardonic take, likening Ackman’s investment strategy to "interpretive dance," underscoring the unpredictable nature of such activist plays.

10. Advice for Small Businesses and Optimism [61:02 onward]

As the episode nears its end, Scott offers solace and practical advice to small and medium-sized business owners grappling with the tariff-induced turmoil. He emphasizes controlling what is within their power—such as securing credit lines, cutting costs, and preparing for potential recovery even amidst current challenges.

Scott Galloway [61:02]: "One, you can only control what you can control... Two, recognize that whatever you're feeling right now, if it's bad, it's probably not as bad as what you're feeling."

Scott shares a personal anecdote about overcoming adversity, reinforcing the message that situations often improve in unexpected ways and that opportunities can arise even from dire circumstances.

Scott Galloway [61:14]: "Nothing's ever as good or as bad as it seems."

Conclusion

The episode concludes with final thoughts from both hosts, encouraging resilience and strategic adaptation among businesses facing the complex challenges posed by tariffs and global trade tensions. Ryan Peterson's candid insights underscore the precarious balance between policy decisions and their tangible impacts on the global supply chain and small businesses.

Notable Quotes:

• Ryan Peterson [03:03]: "The elites don't love us, but the people love us."
• Ed Mylett [26:16]: "It's creating paralysis, especially hurting small business."
• Scott Galloway [05:08]: "The world is selling America, we knew that."
• Ed Mylett [52:32]: "We believe we can take about 80% of that cost out in the next two, three years largely because of AI."
• Scott Galloway [61:02]: "Nothing's ever as good or as bad as it seems."

This episode of Prof G Markets provides an in-depth analysis of the current geopolitical and economic tensions between the U.S. and China, exploring the cascading effects of tariffs on global investment patterns, private equity, and small businesses. Ryan Petersen’s expertise offers listeners a nuanced understanding of the supply chain disruptions and strategic shifts necessary to navigate these turbulent times.