588: Tariffs, Trade Wars, and Billion-Dollar Consequences

Summary

Episode 588: Tariffs, Trade Wars, and Billion-Dollar Consequences

Podcast: The My Wife Quit Her Job Podcast With Steve Chou
Host: Steve Chou
Release Date: April 23, 2025

In Episode 588, Steve Chou engages in a deep dive with his co-host Tony to unravel the intricate dynamics of tariffs and trade wars and their profound impacts on global commerce, particularly within the e-commerce sector. The discussion navigates through the fluctuating nature of tariffs, supply chain disruptions, strategic business responses, and the emerging challenges posed by Chinese vendors on platforms like TikTok. The conversation also touches upon the broader implications of AI on the job market, culminating in insights that are invaluable for both budding and established e-commerce entrepreneurs.

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1. The Ever-Changing Landscape of Tariffs and Trade Wars

Steve Chou opens the discussion by highlighting the unpredictable nature of tariffs and their constant evolution, making it challenging for businesses to stay informed and adapt accordingly.

Steve Chou [02:31]: "You're right, it changes like every week... by the time I publish it, it might be obsolete."

Tony concurs, emphasizing the difficulty in keeping up with the rapid changes and the lack of consistent information regarding tariff applications.

Tony [02:58]: "There's not even like a true, like what's actually happening."

This section underscores the necessity for businesses to continuously monitor trade policies and remain agile to mitigate unforeseen impacts.

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2. Impact on E-commerce Suppliers and Supply Chains

The conversation delves into how tariffs are directly affecting suppliers and the broader supply chain within the e-commerce ecosystem.

Tony raises concerns about the immediate financial implications for businesses awaiting shipments:

Tony [03:53]: "Are you paying the new tariffs or are you under the old? Is there a grandfathering period?"

Steve Chou responds by explaining previous clauses that exempted goods already in transit before new tariffs:

Steve Chou [04:01]: "There was a clause where if your goods were already on the water before the reciprocal tariffs, they didn't apply."

However, he admits uncertainty about the application of newer reciprocal tariffs, highlighting the complexity and ambiguity surrounding current trade policies.

Steve Chou [04:13]: "I'm not 100% sure about the latter ones because I couldn't find any written documents on that one."

The discussion reveals the precarious situation suppliers face, with many delaying orders and experiencing urgent communications about placing orders quickly before further uncertainties ensue.

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3. Strategies for Managing Increased Costs Due to Tariffs

Addressing the financial strain caused by tariffs, Tony and Steve explore strategies for e-commerce businesses to adjust their pricing without alienating customers.

Steve Chou introduces the concept of gradual price increases, likening it to the "boil the frog" technique:

Steve Chou [15:06]: "We're gonna be increasing the prices just kind of gradually... just a couple of years. That's how we're gonna do it."

This method aims to mitigate customer backlash by implementing small, incremental price hikes across various product categories, making the changes less noticeable.

Tony acknowledges alternative approaches but agrees that a gradual increase can be more palatable for customers.

Tony [15:36]: "So you're doing a slow, slow roll across different categories."

This section emphasizes the importance of strategic pricing adjustments to maintain profitability without compromising customer loyalty.

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4. The Rise of Chinese Vendors on TikTok Shop

A significant portion of the episode is dedicated to the burgeoning presence of Chinese vendors on TikTok, offering counterfeit luxury goods at a fraction of the cost.

Tony describes encountering Chinese sellers promoting fake luxury bags, highlighting the deceptive nature of these offerings:

Tony [19:44]: "He's showing people stitching together these bags... promoting the link to purchase the fake."

Steve Chou criticizes this strategy, arguing that it undermines reputable brands and creates unnecessary turmoil in the market:

Steve Chou [21:46]: "I actually think this is the dumbest strategy ever... fakes have been around for years, but now they're flaunting it."

The hosts discuss the potential long-term repercussions of such tactics, including eroding trust in genuine brands and complicating the manufacturing landscape.

Steve Chou [24:10]: "If you're selling on Amazon, you might not be aware, but now on social media, it's overt."

This segment serves as a cautionary tale about the challenges of intellectual property violations and the importance of safeguarding brand integrity in the digital age.

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5. Small vs. Large Businesses: Navigating the Trade War

Tony expresses concerns that smaller e-commerce businesses may bear the brunt of trade wars more than their larger counterparts, who might secure preferential treatments or resources.

Tony [30:29]: "The little stores, they're going to get just crushed because they don't have the cash reserves."

Conversely, Steve Chou offers a contrasting perspective, suggesting that agile small businesses may actually fare better due to their flexibility and lower overheads.

Steve Chou [30:31]: "We're agile, we have very few expenses... it's not as big of a deal."

He argues that without massive capital investments, smaller businesses can pivot more easily in response to changing trade policies.

This discussion highlights the divergent impacts of trade wars on businesses of varying scales and underscores the importance of adaptability for survival.

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6. The Future of E-commerce in an AI-Driven World

Towards the episode's conclusion, Steve Chou and Tony shift focus to the broader implications of AI on the job market and the necessity for individuals to cultivate multiple income streams.

Steve Chou warns of the pervasive influence of AI, suggesting that even traditionally secure professions are vulnerable:

Steve Chou [35:18]: "No one's job is safe. You used to think engineers were safe, but AI is replacing even those roles."

Tony echoes this sentiment, emphasizing the importance of generating an audience and diversifying income sources to safeguard against future uncertainties.

Tony [36:14]: "Building an audience, getting people on a list so that you can talk to them even if you don't know what you want to do yet."

The hosts advocate for proactive measures, such as starting an e-commerce store or other ventures, to ensure financial resilience in an increasingly automated and unpredictable economy.

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7. Conclusion and Final Thoughts

Steve and Tony wrap up the episode by reiterating the challenges and opportunities presented by current trade dynamics and technological advancements. They encourage listeners to remain informed, agile, and proactive in their business strategies to navigate the evolving landscape successfully.

This episode serves as a comprehensive guide for e-commerce entrepreneurs, offering valuable insights into managing the complexities of tariffs, leveraging platform dynamics, and preparing for an AI-centric future.

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Notable Quotes:

• Steve Chou [06:52]: "There's no winning in that situation."

• Tony [10:30]: "It's like there's just so much uncertainty."

• Steve Chou [33:31]: "China is still cheaper than the US by a factor of two."

• Tony [30:32]: "The little stores... they're going to get just crushed."

This episode equips listeners with a nuanced understanding of the current economic climate and actionable strategies to thrive amidst uncertainty.

Transcript

[Steve Chou]

Welcome back to the podcast, the show where I cover all of the latest strategies and current events related to e commerce and online business. In this episode, Tony and I break down how tariffs and trade wars are quietly reshaping global commerce and what that means for your business and your wallet. From rising costs to supply chain chaos, we unpack the billion dollar consequences no one's talking about. But before we begin, I wanted to let you know that this is the last call for tickets for Seller Summit 2025 [e-mail] the Seller Summit is the conference that I hold every year that specifically targets e commerce entrepreneurs selling physical products online. Unlike other events that focus on inspirational stories and high level advice, mine is a curriculum based conference where you will leave with practical and actionable strategies specifically for an e commerce business. Every speaker I invite is deep in the trenches of their e commerce business. Entrepreneurs who are importing large quantities of physical goods and not some high level guys who are overseeing their companies at 50,000ft. I personally hate large events. So the Sellers Summit is always small and intimate. Every year we cut off ticket sales at around 200 people, so tickets sell out fast and we've sold out every single year for the past eight years. If you are an e commerce entrepreneur making more than $250,000 or $1 million per year, we also offer an exclusive mastermind experience with other top sellers. The Seller Summit is going to be held in Fort Lauderdale, Florida from May 6th to May 8th. Right now this is the cheapest the tickets will ever be. So head on over to sellers summit.com and grab your ticket. Now onto the show. Welcome to the My Wife Quitter Job podcast. I go on a week vacation with my daughter, tour colleges and I come back and I feel like the whole world, all hell is broken loose.

[Tony]

Yeah, you missed a crazy week.

[Steve Chou]

I did miss a crazy week. And I discovered that my daughter likes the east coast which makes me very sad because I want her to stay in California.

[Tony]

Well, that. Listen, you didn't have to take her on a tour of the east coast. You could have just said this is the only thing that exists over here in California.

[Steve Chou]

That's where all the ivies are now. She just has to get in.

[Tony]

That's right.

[Steve Chou]

Which is the hard part. So I figured today we, we talk about tariffs, trade war and what's going on TikTok with all the Chinese vendors and everything.

[Tony]

Is it. So is it just me? I feel like I can't keep up. I feel like every time that I try to like check the News or you know, get into a TikTok algorithm. The information is changing, like the tariffs and then there's not tariffs and there's tariffs on this. And then there's like, it's cha. Like to me there's not even like a true, like what's actually happening.

[Steve Chou]

That's actually the topic of one of my next YouTube videos. Because it, you're right, it changes like every week and like I was literally gone a week and you know, it's on, it's off. Terrorists are on, off. Oh no, there's some exclusions and whatnot. It actually, I already made the script for that and who knows, it might be obsolete by the time I publish it, but it actually, you got to take some time to compile all the information because it's changing. Yeah.

[Tony]

So here's my first question because I. And I also doesn't help that we, all of our friends are sellers. Not all of our friends, but a good amount of our friends have E commerce stores and so they're all posting on Facebook. They're frustrated, understandably. So like I've fully can empathize with them. But. So if you have a container on the sea currently. Right. So your container was shipped, let's just say last month, are you paying the new tariffs or are you under the old? Like, is there a grandfathering period? How is that working?

[Steve Chou]

There was a clause where if your, if your goods were already on the water before the reciprocal tariffs, they didn't apply.

[Tony]

Okay.

[Steve Chou]

But that was an old statement that was made. I'm not sure about the new reciprocal ones. Like the 125% one or the 141. Yeah, the first set there was an exemption.

[Tony]

Okay.

[Steve Chou]

I'm not 100 sure about the, the latter ones because I couldn't find any, Anyone any written documents on that one.

[Tony]

Yeah. And then my next. So I'm in full on tariff. Tick tock right now.

[Steve Chou]

Okay.

[Tony]

With all the Chinese suppliers, which is, it's kind of interesting since I've actually been to China, which is like, I'm seeing them walk through stuff and I was like, oh, this is legit. Like they're really in China. Like, this isn't a, this isn't an AI generated scene. This is legitimate, like factories and stuff like that. But I saw this one guy on TikTok which to me sort of embodied what I've been thinking about. Everything is, you know, because it's. We're, we're doing reciprocal tariffs, right. Which means we pay, they pay kind of thing. And this guy Is. And he's in China and he's like, let me show you everything that I have in my home that was made in America. And he opens up both of his hands and they're empty. Right. And then he's like, what in your house is from China? And I was like, I don't know. Everything. Everything except for the people. Like, so it seems to me that, like, are we exporting a lot of stuff to China? I mean, I heard about the whole Boeing thing that just got. China just canceled the Boeing order.

[Steve Chou]

But I mean, it's mainly like, soybeans and some other stuff from, from what I understand. Yeah, I do know this. And, and I can only speak for the textiles. Textile factories. I think they're hurting big time because right now we actually have an outstanding order where we put 30% down and we're just going to delay it. Right?

[Tony]

Yeah.

[Steve Chou]

And I know other people who are actually people in the class, they're not placing their orders right now and.

[Tony]

Right.

[Steve Chou]

And there's all these, like, leaked tick tocks from Chinese factories. They're saying everything's empty. You know. You know, the, the, the workers have no work. They. Or there was this another tick tock. And these get taken down instantly.

[Tony]

Right.

[Steve Chou]

I guess by the Chinese government. There's this one factory full of down jackets because the person who ordered them just canceled the order altogether.

[Tony]

Yeah.

[Steve Chou]

And we have a mutual friend, Brandon, who ordered a container of shoes. And I think his margins are only like 50 or something like that. And, you know, with 125 tariff, you know, what's he going to do? Is he gonna take it and lose money or. Or break even or lose money?

[Tony]

Yeah.

[Steve Chou]

Or is he gonna just refuse the shipment altogether and just lose all the money he invested into it?

[Tony]

Yeah. It feels like a. Like there's no winning in that situation.

[Steve Chou]

Right. But the factories are hurting, I'm almost positive. And even the messages from our vendors have sounded a little more urgent. Like, place your order now. I'm like, we're not gonna place order now.

[Tony]

Right.

[Steve Chou]

So they're hurting. And I'm pretty sure that the other countries, like, we. I didn't realize this, but I think we consume like a third of the world's goods or something crazy like that.

[Tony]

I'm sure we do. That feels low.

[Steve Chou]

So you cut that out or drastically reduce it. And then all these factories who've invested all this money in machinery, like, the machinery's got to run.

[Tony]

Right? Right. There's lots of issues when you shut the machinery down and you know they're.

[Steve Chou]

Probably still paying bills on that. And so it's got to keep going.

[Tony]

Yeah.

[Steve Chou]

And so it's a big game of chicken right now.

[Tony]

Yeah, yeah.

[Steve Chou]

I personally think we're in a better position because the last time Trump came into office, we already kind of found vendors in India and even the US And Europe, different parts of Europe. So it costs more. But we're shifting production and our stuff's easy. Like, we're probably like a special case because we're basically selling pieces of fabric.

[Tony]

Right, Right.

[Steve Chou]

But I imagine for someone where, you know, only China can make their product, it's, it's, it's tough. You can't just shift production really quickly either.

[Tony]

Well, that's the thing that I think is so fascinating is that it's not like if, well, all of a sudden it becomes unaffordable or not. It's cost prohibitive to import from Asia. Right. Because of the tariffs. It's not like you can just throw up a factory in Wyoming. Right. Like, there's all sorts of things that go into that. And the other thing that I think is in this, I don't want to get political, but, like, have you ever lived next to a factory?

[Steve Chou]

I have not.

[Tony]

So I live next to a paper plant. It's just everything smells, it's disgusting. Like, like there's a lot of, like, I don't think people really want to live next to some of these production facilities. Right. Like, a lot of them are dirty. You know, the environmental impact is huge. And it's not like you can just throw up a plant and then get it staffed. Right. Like, you've got to. People have to relocate. There's just like a whole big. It's not like this can be solved in like 30 days. This is like a one to two year, like, process. If you want to start manufacturing something somewhere else.

[Steve Chou]

I mean, minimum. Like, I think the Tesla factory took three years or something like that. The one in Austin.

[Tony]

Yeah.

[Steve Chou]

So.

[Tony]

So it's like, well, even if you're like, fine, that's fine. We're going to manufacture. You're going to manufacture your own linens. Right. Well, that doesn't. You can't just like all of a sudden put up a factory in your backyard, you know, it's, it's much more complex than that, which I think makes things even more complicated for people. Although you were able to move some of your suppliers or you moved to different areas. Right. Like, how realistic is that for other people? Like, for you, textiles, there's definitely, I feel like A bigger.

[Steve Chou]

Yeah, I mean, every country does them. It's just.

[Tony]

Right.

[Steve Chou]

To varying degrees. And we don't even do anything fancy. It's not like we're making clothing.

[Tony]

Right.

[Steve Chou]

Dresses or, you know, I mean, it's literally a piece of fabric with lace around it.

[Tony]

Yeah.

[Steve Chou]

Right. So for us it's easier. And the last time this happened, you know, we were like, okay, let's just make sure we have alternative sources in case stuff goes down. So we're okay, I think. I mean, you know, it's going to hit our margins.

[Tony]

Right.

[Steve Chou]

But our margins are pretty high anyways, so we'll just make less money. But, you know, even if we were to pay the 125 or 40, whatever, whatever percent it is right now, it wouldn't affect us that much because of margins. I'm just thinking about the people who have like 50 margins or 60 margins. Like, essentially, if you double the cost of the good, then you're not going to be profitable.

[Tony]

Right.

[Steve Chou]

And so here's the thing. Like these tariffs just hit so sudden without warning that you can't even prepare. You can't all of a sudden charge double for what you're saying. Right?

[Tony]

Right. Yeah. And you didn't have time to like. So we say sudden. I mean, I do feel like Trump campaigned on tariff. So, like, I think you could argue that you knew it was coming.

[Steve Chou]

I don't think he was talking about 60.

[Tony]

Well, right. No, no, I'm not like, saying that. But like, even, even if you knew in November, that's not enough time to change anything, right? Like, you probably already have stuff in production, you know, like, I know the timelines that we had, it was 60 to 90 days from, like deciding. So even if you want could pivot, you can't pivot that quickly.

[Steve Chou]

Oh, yeah, for sure you can't.

[Tony]

So where I see this being hugely problematic is that so for you, for some of my clients, if this was me back, you know, when I had my E Commerce store, you already have a customer base, right? So you can kind of leverage the fact that you have a customer base to continue to stay in business. But if you're trying to launch a business, right, and all of a sudden your margins get chopped, Right. So you are already probably. I think when we, when you first start out, your margins probably aren't as great as they can be because you're new and you don't know what you're doing. And then you have to pay advertising costs. Right. Because there's no way you can just start a business and not spend money to get customers. Right. So you're spending money on people.

[Steve Chou]

That's not true anymore, actually. Well, people are just launching on TikTok and so.

[Tony]

Right, right. But TikTok, I mean, TikTok's not cheap. Like, if, if you're using affiliates and coupon codes and things.

[Steve Chou]

I don't know, I just mean organic.

[Tony]

Oh, yeah, yeah. But I don't think that's everybody.

[Steve Chou]

Yeah.

[Tony]

I think you have to understand TikTok to be able to do that. Well. And so I'm like, how do you even get started in E commerce today?

[Steve Chou]

Because I was thinking it's easier now, really? It's easier to start than it is to have already had something running and have this thrust upon you.

[Tony]

Interesting. Why would you. I think the opposite, but maybe I'm not thinking.

[Steve Chou]

Well, I'm giving a workshop this afternoon. Right, Right. And every time I do these workshops, I find a new product.

[Tony]

Right.

[Steve Chou]

So this time, instead of going to China, I just clicked on India in the US and because you have. When you're first starting out, you have the option to shift your production right away from the start.

[Tony]

Yeah.

[Steve Chou]

Right. Whereas if you already have stuff and you've already worked with this vendor for years designing something, then you're in trouble, so.

[Tony]

Oh, yeah, yeah. Our vendors had mold, stuff like that. We weren't going to switch.

[Steve Chou]

So if you're brand new, I wouldn't say it's easier, but, like, you have options. It's much more flexible.

[Tony]

Yeah.

[Steve Chou]

Not like you're locked in.

[Tony]

That's a good point. Yeah. I didn't. I wasn't really. I was thinking about it just in the, like, hard cost to launch.

[Steve Chou]

Because it's not like these tariffs affect only one person. They affect everyone.

[Tony]

Yeah.

[Steve Chou]

And it's just a matter of time before they run out of that inventory and then everyone's gonna have to jack up the price. So if you're starting out now, you have more flexibility over vendors and the playing field's level, essentially.

[Tony]

Yeah, I can. I can see that. So if you are thinking about start like, okay, I guess the next question is, if you have an existing business, how do you jack up your prices without sending your people into a complete frenzy, your customers?

[Steve Chou]

So what I've seen so far, and I'm not sure if actually you probably have noticed, I've been getting a lot of emails from stores that have said, hey, you know, the prices are going up. This is your last chance to buy.

[Tony]

Yes, I've seen that and whatnot.

[Steve Chou]

What can you do as an existing vendor, you just have to. I mean, what we're doing is we're actually going to be increasing the prices just kind of gradually. You know how, like, you go to your favorite restaurant and you notice, like, your portion size are smaller, but the plate is getting bigger.

[Tony]

Yes.

[Steve Chou]

And it happens kind of gradually, like. Yeah, you know, over a year or so. A couple of years. That's how we're gonna do it.

[Tony]

So you're doing the boil the frog technique.

[Steve Chou]

Yes, yeah.

[Tony]

Slowly increasing.

[Steve Chou]

There's different schools of thought, though. Some people will say just rip the band aid off.

[Tony]

Yeah.

[Steve Chou]

But we have enough SKUs. Like, we have like 600 SKUs or something like that at this point.

[Tony]

Yeah.

[Steve Chou]

Where, you know, you raise them kind of gradually in different categories. I don't think people really notice.

[Tony]

Interesting. So you're doing a slow, slow roll.

[Steve Chou]

Slow roll across different categories.

[Tony]

So one thing I've noticed that the auto manufacturers are doing is they're. They're actually dropping their prices. Have you seen this?

[Steve Chou]

No, I didn't see that. Dropping or maintaining.

[Tony]

Well, it's dropping in the marketing sense. Right. So I know Ford recently rolled this out and Hyundai is doing something similar, is they're doing employee pricing. So basically they're charging you the price that if you were a Ford employee, you would pay to buy a car from.

[Steve Chou]

Okay. Hyundai is a special case because they manufacture their cars, I believe, in the U.S. right.

[Tony]

Yeah, I think in Kentucky or one of those places. Yeah.

[Steve Chou]

Yeah. So of course they can afford to do that and that's a good marketing strategy for them.

[Tony]

Yeah. So it's interesting because I think some, like the card manufacturers are, Are trying to get creative. Right. Like with. Oh, it. But like, it's interesting because I was, I read an article about it and it was like, yes, Ford is giving employee pricing, but they've upped their interest rate. Right. So, like, they got rid of their 2% finance. You know, it's like. So they're. They're gonna make it up on the other end, you know, to some extent. So they're not like, truly just giving things away. Um, and I noticed that Hyundai, like, not only are they doing some, like, employee pricing type stuff, they're giving, like if you buy one of their electric cars, you're getting the free. They're like during a free installation of the, the power pack, whatever that you need in your house. So they're, they're, you know, I think some people are trying to capitalize since everyone's talking about how expensive things are going to Be I think some companies are trying to come in and like, oh no, look at us. We're still going to give you a good deal. Right. So I think that's another way people are doing it and they're going to make it up on the other side. Right. Which if you're a car manufacturer, you can do that because you tend to finance everybody.

[Steve Chou]

Yeah. I know here because my sister in law just bought a car. I mean, they're jacking up prices. Not on the sticker, but what the actual price is when you actually try to buy the car.

[Tony]

Yes. So it's like one price, but then when you. Yeah. It's like an extra $6,000 of who.

[Steve Chou]

Knows what y of some markup that they make up. But the MSRP stays the same.

[Tony]

Yes.

[Steve Chou]

Yeah, yeah. Because Toyota manufactures a lot of their cars in Mexico, I believe. And Mexico, there's a 90 day reprieve on the, on the tariffs right now.

[Tony]

Right, right.

[Steve Chou]

So it's really just China. Really. And, and the textiles and, and I think there's a reprieve on the electronics now. Right. That Trump just imposed.

[Tony]

Yes. Which I find interesting.

[Steve Chou]

Can we talk about like all the TikToks I use? You mentioned you're on like the.

[Tony]

Yes, yes.

[Steve Chou]

So if you guys aren't on Tick Tock, and I know a lot of you guys listening probably aren't on it. What Chinese manufacturers have been doing to fight back is they've been like talking about how all these luxury vendors like Ferragamo, Hermes, Hermes, Gucci and all them.

[Tony]

Yeah.

[Steve Chou]

Do in fact manufacture all their bags or a large percentage of their bags in China, whether they're sent to Europe afterwards to just get rebadged.

[Tony]

Yeah.

[Steve Chou]

And what they're doing is they're offering these links to buy these bags direct.

[Tony]

Yep.

[Steve Chou]

At like 10% of the cost.

[Tony]

Yeah. And they're actually. So I've, I, I'm in luxury bag. Tick Tock. I don't own any luxury bags. Let's be clear. Steve's going to make it sound like I do you.

[Steve Chou]

Do you have a Kate Spade bag?

[Tony]

That's not though. An hermes bag is $35,000 and they don't even let you buy it if you want it. You have to like get their good graces to purchase something.

[Steve Chou]

Do you consider Gucci or Coach a luxury bag?

[Tony]

Coach, I would not say Gucci probably is like on the border. Right. Okay.

[Steve Chou]

Ms. Toomey, do you consider to me a luxury bag?

[Tony]

No, absolutely not.

[Steve Chou]

Oh my God. We'll go on. Anyway, I'LL let people in the comments.

[Tony]

Like, yeah, come at me, come at me today. But what I think is interesting is that they especially so like Hermes, I feel like is the one that they're really going after. Which is so interesting because Hermes has like worked really hard to build this. Like.

[Steve Chou]

Yes. I just wanted to take a moment to tell you about a free resource that I offer on my website that you may not be aware of if you are interested in starting your own online store. I put together a comprehensive six day mini course on how to get started in ecommerce that you should all check out. It contains both video and text based tutorials that go over the entire process of finding products to sell all the way to getting your first sales online. Now this course is free and can be [e-mail] free. Just sign up right there on the front page via email and I'll send you the course right away. Once again, that's my wife. Quitter job.com free. Now back to the show.

[Tony]

Absolute like gated brand, right? Like if you have the privilege to purchase an Hermes, right? Like it's like a big deal. So they basically are showing like people stitching together these bags, right? And I mean I don't know if they're Hermes bags or not because I'm not like a authenticator, but they look like the bags, right? They're the same. And he's like talking about the palladium hardware and he's talking about the type of leather and he's showing all the different things and they're showing people stitching it and you're like, oh yeah, those are, those are made in China, right? And then they're obviously promoting the link to purchase the, the fake, right? The, the dupe. But to me it's like, it's a great strategy, right? Like if you can take down some luxury brands, like they're, it's, it's like gonna send this. It's like a domino effect to me of like how people are going to start reacting to what's going on. And they're also doing it with furniture. Have you seen the furniture?

[Steve Chou]

Yes, I have seen the furniture. One.

[Tony]

Yeah.

[Steve Chou]

I actually think this is the dumbest strategy ever, personally.

[Tony]

Interesting. Okay.

[Steve Chou]

And I'll tell you why. Like, let's say I am a business owner, right?

[Tony]

Yeah.

[Steve Chou]

And I make stuff over there. Like let's say I'm Hermes and I see China is doing all this stuff. I am never ever going to give my business to China ever again.

[Tony]

You, you say that. But where are you going?

[Steve Chou]

India. It's not like. So India is probably poised to be the next China right now.

[Tony]

Yeah.

[Steve Chou]

Because they were the first to say, hey, you know, we're not retaliating. Let's negotiate.

[Tony]

Yeah.

[Steve Chou]

And there's other places to do this. I mean, it's going to be painful. But, like, they basically just pissed off all the luxury brand manufacturers.

[Tony]

Yes, they did.

[Steve Chou]

And they just pissed off anyone who's even thinking about making anything in China now.

[Tony]

Yeah. So, yeah, I definitely was like, whoa, this is. But to me, this feels like you cornered like the lion. Right? Like, like we, we made these decisions and China is like, you want to mess with us? Like, we're coming after. Like, they just want to blow everything up. Like, figuratively speaking. Right, sure.

[Steve Chou]

But I mean, it's dumb in the long run.

[Tony]

Yeah, I. I think overall it's dumb. And I.

[Steve Chou]

Also dumb. I'll let you finish.

[Tony]

Well, no, I also wonder, like, who are these people making the content? Is it truly that. Because they'll say, like, in my factory, I'm like, that's not your factory. Right. Like, that's not the factory owner having these conversations. So, like, who's giving permission for this content to be put out there?

[Steve Chou]

Yeah, I. I don't know. I'm sanctioned by the government to a certain extent.

[Tony]

Yeah, for sure.

[Steve Chou]

Okay. So this is why I think it's also dumb. And granted, like, these fakes have been around for years. You go to China, like, every street corner, you can get them. Yeah, Right. The people who are buying these Hermes bags, the Birkin bags, they're not going to carry the fake. Right, Right. The whole point of it is status. Right, Right. And if you're someone of status and you want to show it off, you're not going to carry a fake.

[Tony]

No.

[Steve Chou]

Right. So the people who are buying these cheap knockoff bags are people who probably wouldn't buy the real thing anyway.

[Tony]

Oh, absolutely. Yeah.

[Steve Chou]

Right. So it doesn't really technically hurt the big brand outside of causing this huge commotion that's pissing off every person, basically. They're just telling the world that if you're. If you give us your ip, we're just going to copy it and sell it for pennies on the dollar.

[Tony]

But also, I feel like they've already been doing that.

[Steve Chou]

They have, but not overtly. Right?

[Tony]

No. Right. Yeah. Like, I mean, how many Asian brands, Chinese brands are on Amazon right now selling and undercutting? I mean, that's the whole strategy right now. Right. Is they get. They put 15 Chinese sellers on one product. Right. And put the other person out of business. Like, they've been doing this for a long time. It's just now they're like flaunting it.

[Steve Chou]

Okay, so they've been doing it for a long time, but through the Amazon channel where it's like less overt now. It's all over social media and now, like, you're going to think twice before ever using China as a manufacturer again because they're just going to knock you off. Like, it's overt now.

[Tony]

Right, right, right.

[Steve Chou]

Whereas before, if you're selling an Amazon, you might not be aware that all this stuff is happening.

[Tony]

Yeah, yeah.

[Steve Chou]

And here's the thing. Before also, like, you could easily police this if you want. And China was pretty good. Like if you went through the measures of trademarking and.

[Tony]

Right.

[Steve Chou]

Copywriting or whatever in, in China, they could, they would actually shut down the factory. But it seems like they're removing that restriction now.

[Tony]

Right.

[Steve Chou]

And so what large company is going to want to manufacture in China with these risks ever again?

[Tony]

Yeah, no, I think, I think it's like, to me, it just feels so chaotic right now and it's like, okay, we can't stay in this level of chaos long term, can we? I don't think so, but maybe, maybe we can. Maybe this is just like the new, the new world we live in. Right. It's just absolute chaos.

[Steve Chou]

And how are they getting away with this? Actually, so. So they're not using the word Gucci or Louis Vuitton.

[Tony]

Right.

[Steve Chou]

But if you click on it, it's the exact same. Like, it's like you're buying a dupe in China. Right?

[Tony]

Yeah, yeah.

[Steve Chou]

How can they get away with this on Tik Tok Shop? Why? It's like blatant trademark and copyright violations that.

[Tony]

So I don't know. Have you clicked on any of the links?

[Steve Chou]

I have.

[Tony]

Okay. I haven't clicked on links because I was like, I don't know. So it's being sold directly through TikTok shop.

[Steve Chou]

Yes.

[Tony]

Okay. So some of the ones that I have seen have not been. So the. I'm. I'm not in that side of TikTok. I'm in the side where it's like, click on our, like, bio and there's a QR code and the QR code takes you somewhere else. Like, it takes you off of TikTok. So that's what I've been seeing. And they're like, don't, don't DM us because we get so many messages make sure you just use the QR code to go. So they're not doing it directly on TikTok. The ones that I've. That are primarily in my feed, which makes more sense to me. I can't believe they can get away with that on TikTok shop.

[Steve Chou]

This is just an aside, but if you're on TikTok, how do you scan a QR code?

[Tony]

I know, I was, they were like, screenshot it and do this. And I was like, what? Like, I. It's too much for me.

[Steve Chou]

Yeah. But yes, on TikTok shop.

[Tony]

Okay, that's so that to me, that feels like it will be taken down sooner rather than later.

[Steve Chou]

I mean, it's already been, you know, three a week. Pretty much.

[Tony]

Yeah.

[Steve Chou]

I mean, usually it doesn't take this long to take things down.

[Tony]

Yeah.

[Steve Chou]

And TikTok's a Chinese owned company. Right. So maybe.

[Tony]

But they're not allowed to have TikTok in China. They have to use a VPN to get on it.

[Steve Chou]

No, no, no, no, no. I'm saying like it's still controlled by.

[Tony]

Oh, yeah, yeah.

[Steve Chou]

Right. So maybe they're just a little lax on taking it down.

[Tony]

Yeah, I could see that. Like. Oh. What? I didn't see anything.

[Steve Chou]

Yeah, no, we're on it. We're on it.

[Tony]

We're researching.

[Steve Chou]

So who knows where this is going to go? I mean, I just know there's a lot of colleagues who have shipments or they need the shipments and they need the inventory. Yeah, right. So what do you do right now? I, I don't think we can last that long. I certainly don't think that China can last that long either.

[Tony]

Yeah.

[Steve Chou]

So I, I don't know what's going to happen.

[Tony]

Is there any benefit as a seller to just laying low right now, waiting it out, not really doing anything? Is that, is that like a safer bet or is that more of a risky. Like you need to start having another plan and taking action right now.

[Steve Chou]

Okay. So, I mean, I can tell you what we're doing, but I mean, I can't speak for other people. Here's the thing, like, there's no visibility on what's going to happen in the future.

[Tony]

Right.

[Steve Chou]

And when there's no visibility, you can't really plan for it. So let's say you shift all your production to India, for example, right? Well, let's say the trade talks with India fall apart. I don't think they're going to, but let's say they do fall apart. And Trump issues 125 tariffs on India all that work that you just did.

[Tony]

Right.

[Steve Chou]

Could be potentially undone.

[Tony]

Yeah.

[Steve Chou]

Right. And for us, like for a small vendor, it's, it's not as big of a deal.

[Tony]

Right, right.

[Steve Chou]

But for someone like Nike, let's say, or Louis Vuitton and they, they're investing in factories in these other countries like they all did in Mexico, like they all did in Vietnam. Actually Vietnam was the largest investment that Chinese factories have made. And now Vietnam has like a 40, I can't remember the numbers, it's like 46. Which instantly obliterates their, you know, their investments there. Right.

[Tony]

Yeah.

[Steve Chou]

So how do you plan in order for things to go back to normal? Trump has to give some sort of road map. Right?

[Tony]

Yeah.

[Steve Chou]

Okay. The tariffs are set. This is a long term thing, not this like, oh, you get a 90 day reprieve off the tariffs because you have no idea what's going to happen in 90 days. Right. You're not going to switch vendors every 90 days.

[Tony]

Yeah. That's really not even possible. Yeah. My, this is my fear and this is just my own personal, like this is not based off anything. My fear is that companies like Nike, big, big manufacturers, right. Like that we don't compete with in any way. Right. They'll find the loopholes, the tax breaks, the incentives. Right. Like there will be provisions made for them to like be able to stay in business. But it's the, it's the little stores, right. It's the million to $5 million stores that are going to get just crushed because they don't have the cash reserves. Right. Like, they don't have, they don't have the ability to one get like the breaks maybe that will be given to other companies or they just don't have the, you know, customer base and the to, to withstand it.

[Steve Chou]

I actually feel the complete opposite way.

[Tony]

Interesting.

[Steve Chou]

Okay. And the reason why is like you're, as a small business owner, like I'm agile, like I got like very few expenses.

[Tony]

Yeah, Right.

[Steve Chou]

Whereas if you're a large company like Nike, you gotta make factories.

[Tony]

Yeah, yeah.

[Steve Chou]

Right. Huge capital outlay and all that. So it's a huge risk. So when you're agile and, and you can make these changes, it's to me, it's not as big of a deal. And all those breaks that you're talking about, I actually have a video coming out, actually I'm doing office hours today on all the ways to avoid tariffs.

[Tony]

Yeah.

[Steve Chou]

And they're available to everyone. It's not like if you're a large company, you know.

[Tony]

Right.

[Steve Chou]

You can take advantage of these and the small companies can't. It's just like the larger guys have more resources to do some of these things.

[Tony]

Right.

[Steve Chou]

That I'm talking about. But it's available for everyone. You can't, like, discriminate based on size. What you can possibly discriminate on is by industry. So, like right now, semiconductors and electronics have gotten. Yeah, but something's going to have to be done about textiles for some of the larger factories.

[Tony]

Yeah.

[Steve Chou]

I don't know what's going to happen, but it will trickle down to stuff that we do. Right. Whatever happens.

[Tony]

Yeah. I think, I know that you guys are agile like Bumblebee, but I think that not all, not that you're a small brand, but smaller brands, you know, not a lot of them are, are already strapped and tight. You know what I mean? Like, you, you have a business model that is, actually has a lot of cushion in there, but some people don't. Some people don't have that level of margin to work with to be as, as flexible.

[Steve Chou]

I guess what I'm trying to say is we're not making, like, huge capital investments.

[Tony]

Right.

[Steve Chou]

On machinery and people and infrastructure. Yeah, right. If a product doesn't work, we just don't make it or we stop selling it and move on to something else.

[Tony]

Yeah.

[Steve Chou]

We're a different vendor. So I think the, the larger companies have a lot more at stake here.

[Tony]

Oh, for sure. Yeah.

[Steve Chou]

Right. Than the little guys. You know, it's so funny. So this workshop that I'm giving this afternoon, like, I've changed, like, a lot of the content. So before it was an example how to source from China. Now the examples are a comparison of sourcing from China versus the US Versus India. And so I chose a product and I, I'm, I, I'm running the numbers for all of them. And what's funny about it is that even with the tariffs, China is still cheaper than the US By a factor of two.

[Tony]

Oh, yeah. I believe it.

[Steve Chou]

Right. And India. It just kind of depends because you can't find like the exact same thing in India. You're probably gonna have to do some talking. Like you can get a base price, but it just ends up being slightly cheaper with, with the current tariff. I don't know. We'll see how this lecture plays out. But it's just interesting because there's, there's options for us.

[Tony]

Yeah.

[Steve Chou]

And that's why I think that the US Is in a better position because we have the option of sourcing from different places. Whereas if you're a Chinese factory that's dependent on U. S. Demand and all of a sudden that demand goes away. You can't manufacture that.

[Tony]

Yeah.

[Steve Chou]

You can't go to other countries and say hey can you buy my 100000 lightsabers?

[Tony]

Right.

[Steve Chou]

Because the US isn't buying them anymore. And, and uh, the US buys so much junk compared to other countries.

[Tony]

Yes.

[Steve Chou]

I don't think there's any other place like the US Is willing to buy all this junk. That's just my assessment.

[Tony]

No, I totally agree. Like it's, there's a lot of stuff, Right? Yeah. So it sounds like you're pretty like you think this is a great time for people to get into e commerce.

[Steve Chou]

No, no, no, no, no. I'm not saying that for sure.

[Tony]

You're like no, I'm not saying that for sure.

[Steve Chou]

And I'm saying that it doesn't affect, it's not as negative as, as you think. And if you're starting from scratch, you actually have options because you, you know, you don't have any ties to any existing factories in terms of like the best time to start. Here's how I see it. Also, AI is replacing jobs right now. I mean you should see the Silicon Valley. Like I've been chatting with co workers, they're not hiring new engineers anymore.

[Tony]

Yeah.

[Steve Chou]

And a lot of these companies, and I'll use the example here, there's people in different countries like the Philippines or where the labor is cheaper, operating robots in the U.S. remotely. Right. And there's this whole wave of robots or AI that's building all our stuff already.

[Tony]

Yeah.

[Steve Chou]

Right. So the way I see it, like no one's job is safe.

[Tony]

Yeah.

[Steve Chou]

Like you used to think that if you're an engineer or whatnot, your job was safe. Right. Because you're one of very few people that can do to do these things. But I honestly think thanks to AI nothing is safe. So it doesn't have to be e commerce but you have to be doing something on the side just in case because this is only going to get worse. Just wait till Tesla releases their fleet of self driving cars. I mean this is already happening across in Waymo. Right. Waymo is in all these major cities now it's going to Japan and that's going to replace all the Ubers, right. All the Ubers and Lyfts, Uber eats, maybe doordash at some point. So if that gig economy is gone, what are you going to do now? You got to have something on the side, doesn't have to Be E Commerce. It's just got to be something. I don't know. How do you feel about that?

[Tony]

No, I agree with you. I think I was working on office hours yesterday, and I was just using AI to. I want to talk about lead magnets, right? Because I think that's. I think now more than ever you need to try to be building an audience, right? Getting people on a list so that you can talk to them even if you don't quite know what you want to do yet. Right? Like just getting the right demographic on a list. So I was like, you know, I wonder how far I can use AI with a lead magnet. Right? Like. Cause I'm like, that's kind of been my little hobby lately is like, what can AI do that that I didn't think it could do? Right? Or like, how far can I take this? So it basically built the entire lead magnet for me, but then not only that, it told me how to implement it and what tools I needed, and then it showed me how to set it up in convertkit or Kit. Right. Like, it basically. I mean, we're not too far away from it literally doing the whole thing for, like, where I don't have to be a part. Part of it at all. Right. So when I. When I started playing around with that yesterday, I was like, this is really fascinating because the deeper I get into it, the more I realize that, like, I think you and I were talking about how graphic designers are going to be obsolete, right? And at first I was like, I don't know, like, totally. But the more I, like, dig in, Canva's about to release some crazy things next week. Like, the more I see this stuff, I think, you know, it's amazing what we're going to be able to do with. With not a lot of people, right? We. Without the level of expertise that you thought was, like, absolutely required in the past.

[Steve Chou]

Photographers, Graphic designers. Writers. Yeah, photographers. Models.

[Tony]

Yeah.

[Steve Chou]

I mean, H and M is already using AI models to model their clothes. I mean, so where does it stop? I mean, these are already thousands of jobs, if not millions of jobs being displaced. Yeah, already, Right. So what is there left? You got to start something on your own. And granted, like, the best people, like we mentioned the last episode, they're always going to have jobs, right?

[Tony]

Yeah.

[Steve Chou]

Best people are going to. But what about the remaining 80%? Yeah, the remaining 90. You need to have some sort of income on the side again. It doesn't have to be E commerce. I don't think this environment is that great, period. Because there's just so much uncertainty. Like you need predictability, is it to, to do stuff right? Yeah, but that's the way I feel right now. And I think, like since we were talking about e commerce for most of this episode, it's, it's not as dire as you think because when you're first starting out, you have flexibility. It's, it's mainly the people who are more entrenched who are going to have these, who are seeing all these problems right now. Hope you enjoyed this episode. If you have any comments about the trade war, I'd love to hear them. For more information and resources go to my wife quitherjob.com Episode 588 Once again, tickets to the Seller Summit 2025 are now on sale over at sellers summit.com if you want to hang out in person in a small intimate setting, develop real relationships with like minded entrepreneurs and learn a ton, then come to my event. Go to sellersummit.com and if you're interested in starting your own e commerce store, head on over to mywifequitherjob.com and sign up for my free 6 day mini course. Just type in your email and I'll send the course right away via email.