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- [00:01]
Scott Miller
I'm Scott.
- [00:02]
Bill Reinsch
I'm Bill and we're the Trade Guys. You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm H. Andrew Schwartz and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade Guys.
- [00:21]
Scott Miller
Thanks for listening to Trade Guys. This is Trade Guy Scott. Bill and I welcome a special guest. This week we have joining the podcast, Evan Smith, the chief executive officer and co founder of Altana AI. He has an interesting story about how high technology is making supply chains both more visible and more manageable. We hope you enjoy this episode and thanks again for being here. Welcome back to the Trade Guys. This is Trade Guy Scott. And Bill's here with me as well. And we have a special guest today that I think will be well timed for the mayhem in Washington at the moment. As our audience knows. Well, there's this sort of operatic top level trade negotiation going on between President Trump and lots of other economies. And while that carries out, that has its own implications, its own interests. But at the same time, underneath that, there are thousands upon thousands of traders who are just trying to figure out, how do I help my customer get his or her product from A to B? How, how do I do that legally? How do I manage my obligations to the custom services? What do I do with all this chaos? So there are new tools that help the trader, particularly in situations like the one we face now. And that's why we're so pleased to welcome Evan Smith. Evan Smith is the chief executive officer and co founder of a company called Altana. Altana Technologies is a supply chain visibility and AI company. They're based in New York, but their flagship product uses AI to help build a dynamic map of global supply chains, helping businesses and government make informed decisions. And so, Evan, welcome to the program. We're delighted to have you. Maybe you can tell us a little about yourself and your company and we'll go from there.
- [02:09]
Evan Smith
I'm delighted to be here and I'm going to embarrass somebody on our team named Amy Morgan, who is a legend in the world of global trade and trade compliance. And she is just completely starstruck on my behalf that I'm on this podcast with both of you. She's a massive admirer. So shout out to Amy Morgan. I heard. Well, I'm flattered to be here. You both are legend in this space. So quickly on me. I grew up in Alaska. I was a weird kid in Alaska because I was very globally oriented. Wrote My high school senior thesis on the pending collapse of globalization all the way back in 2003. So this kind of thing has been on my mind for a long time. I like these big kind of macro system problems and I've been an entrepreneur. So I, I left Alaska to go to university and by the time I was 22, I started my first company. And the through line for me and everything I've ever done since then is I'm really drawn to these big world scale macro systems problems where there's environmental dimensions, national security dimensions, economic dimensions, and you can solve really complex systems level challenges with things like renewable energy or you know, supply chain AI. So that's a bit about me. Altana is a seven year old company. We're a venture backed business. So you know, we're doing the hyper growth, change the world thing and our big idea is that it ought to be possible to know the whole global supply chain network and that it ought to be possible to manage the entire product value chain of any product in the world. And the reason that that's provocative, you will appreciate this and your audience will, is the whole premise of globalization and outsourcing was to actually like fragment that whole landscape, right? So you're only supposed to have the direct buyer supplier relationship and not concern yourself with that multi tier value chain back to the soil. And so it was a real benefit to near term shareholder returns and it was a benefit to the, you know, the middle class of the world to have this massive diffusion of global supply chains and this hugely interconnected trading system take hold. But we find ourselves in the 21st century and you know, the mid-2020s here, having to confront a lot of the side effects and unintended consequences of that way of doing business. Right. And so geopolitics are kind of front and center, but so are the climate dimensions and the labor rights dimensions and the fragility and resilience concerns that, you know, really came to the fore during COVID And so that, that's, that's why we started Altana. And those are the kinds of problems we're helping both the public and private sector solve.
- [04:46]
Scott Miller
You know, say I'm a supply chain manager. What's the elevator pitch for Altana?
- [04:50]
Evan Smith
We help you to know and to manage the value chain of all your goods, go beyond a direct tier one supplier relationship, with whom you have that control and visibility and direct relationship. And then we help you understand where the component parts are coming from, where the raw materials behind those are coming from, and then to go beyond Visibility. So visibility is a starting point, but it's not an outcome. Right. So the outcomes we support are around things like provably remediating of compliance, exposure around forced labor. There's a huge import ban that kind of shook the entire global supply chain network. It's the Uyghur Forced Labor Prevention Act. We help you solve that problem and then demonstrably prove it to the US Government through what we call a product passport. So that's one example of an outcome. Another one that we're releasing now to the enterprise is an agentic AI system for customs classification. So just like a human needs to understand what are the inputs and outputs of the goods and where are they coming from in order to navigate not just a customs classification, but then your rules of origin and any kind of free trade program qualification. We're building agentic AI systems to sit on top of that foundation of the value chain and then get to those answers for our customers. Right. So that's another outcome on top of the visibility.
- [06:07]
Scott Miller
Sounds like a product made for today and quite, quite useful. So given the current mess we're in, Bill, why don't we dive into the mess and see your perspective, Evan, and where things might go?
- [06:17]
Bill Reinsch
Well, I can't resist asking, since you wrote your high school thesis on the demise of globalization, did you turn out to be right about that?
- [06:24]
Evan Smith
I was right, but I was early.
- [06:26]
Scott Miller
Yeah, I mean, in aggregate, peak globalization was 2007.
- [06:30]
Evan Smith
I wrote a long thesis. It's actually on our company's website, which I call globalization 2.0. And it's really the animating worldview behind our company. So the really short version of it is that globalization is here to stay. But it's going to take a very different form where Globalization 1.0. For the wonks and academics among us, there have been probably four globalizations, but the one that we all lived through over the last decades was really motivated by outsourcing and efficiency seeking and finding the lowest cost markets and the most specialized places to produce goods to. The next form of globalization that's taking shape I think is going to be reoriented around what I call trusted networks or trusted value chains. Trust is kind of subjective. Clearly there are geopolitical dimensions to this. So the US and China are in a Thucydides trap where, you know, a rising power and a declining power on a relative basis are playing out a zero sum geopolitical game. And that zero sum geopolitics is kind of for those of us who have economics and trade orientations, where where trade is positive sum, economics is positive sum, the more cooperation the better. That sort of friction and that, that breakdown in the system is kind of shocking. And it's expressing itself in everything from economic security policies like export controls or the Uyghur Force labor prevention act, like you know, import barriers. And then, you know, it goes without saying it's, it's showing up in tariffs and the you know, big explicit effort to sort of decouple and shift production away from China in particular by the US So that's kind of bucket one. I think the second one is around climate and sustainability and that's taken a backseat to geopolitics and to growth over the last couple years. But you know, you had a massive regulatory push by the Europeans and to a lesser extent by Americans to impose these supply chain sustainability regulatory requirements on the private sector and to mostly enforce those at the border. The and so what this turns into is a thou shalt requirement where the private sector has to know and then be accountable for the indirect supply chain, the tier 2, the tier 3, the tier 4, back to the raw materials and not merely their own behavior and not merely the counterparties they choose to do business with directly. So that's a big kind of profound sea change in the shape of the globalization. And then I think what Covid laid bare was that these just in time supply chains are efficient only when things are stable and in equilibrium. And when there's a disequilibrium, when there's a shock to the system, then this whole just in time working capital optimized model breaks down. And then you get the bullwhips and ripple effects that end up kind of breaking supply chains and breaking economies and threatening economic security. And so you add all that up and I think it points to a couple things. One is that supply chains really need to be managed as value chain networks and not discrete buyer supp pairs. So that's one. And then two is these overlays of geopolitics, regulation, climate, business interruption are really going to be fundamental to the design of these globalized economic networks going forward.
- [09:50]
Bill Reinsch
There is some data to suggest that Covid aside, trade is not so much declining as rearranging and that one of the rearrangements is that like minded countries are traded more with each other. So democracies with democracies and I guess authoritarian states with authoritarian states and a whole bunch of countries in the middle who don't want to get trapped by either side. Are you finding that?
- [10:15]
Evan Smith
Absolutely. The more interesting finding is when you start to Peel back the onion on that first layer. What you see is I'll pick on Mexico and the kind of North American trade picture. So beginning in the first Trump administration and since, obviously there's been a big shift in the trade pattern, started off on, you know, some specific categories of goods with the two 32s and 301s, and now it's moving wholesale. And what you saw was Mexico becoming a. I'm going to use the word trans shipment. But for the trade geeks on the call, that has a specific legal meaning. So both in the legal sense and in the more general kind of figurative sense, what you see in our data and our platform is that a lot of the input goods and in some cases the final goods themselves, in a literal transshipment case, those goods are, rather than coming from China to the United States, they're now being routed through Mexico. And then, you know, there's more scrutiny on rules of origin and, you know, the push for real compliance in usmca. And then you see more and more of the kind of gamesmanship literally in the data, you know, because we can tell what's a component part into what is an output part, and we can go down to very specific value chain level understanding. And so my view of politics and theater aside, my view of the Trump administration's current trade strategy is more or less to induce the trading partners with whom it wants a strong trading relationship to mostly tighten things up vis a vis China, right? To create those stronger barriers from that sort of rerouting of goods from China to those third party countries and into the United States. That's been the big arc of things.
- [11:51]
Bill Reinsch
How can your technology or Altana's products help companies navigate that in a few ways?
- [11:58]
Evan Smith
So at the very highest level, we can actually give our customers a global trade control tower. So I want to have this top down executive view where I want to, say, simulate tariffs and I want to see the stacking logic of these 232s or these 301s or the IPA tariffs, or I want to create my own scenario. And how do those not only kind of show up as an inbound US Tariff simulation, which is kind of the easy thing to do, but. But the hard thing to do is to say, okay, I've got a global value chain for my goods and where are the inputs and outputs coming from? And to. And then how do those start to accumulate tariffs across all these tariffs and retaliatory actions from other countries? And how does that start to erode my margins? So in short, we can say, here's a sweeping view across every one of your product value chains and according to these different tariff scenarios that you can simulate, here's your revenue at risk, here's your predicted spend impacts, and here's your gross margin erosion as a result of that. So that's one we can help our customers to answer questions at the level of a geopolitical incident. So if I need to remove these countries from the trading network, which of the inputs to those products at what points on Earth and which suppliers and facilities do I see that impact, and what's my revenue impact associated with that? We can now enable a click of the button where they can model the export restriction from China around critical minerals and permanent magnets and see exactly how that flows through to each of their products. Okay, so that's at the big kind of sweeping macro view. At the micro view, you might say, all right, I need to start to take action here. I need to. I need to find a new supplier where I have this single source dependency, where there's a tariff impact or a geopolitical or some business interruption kind of consideration around it. I need to find a new supplier through Altana, which we can do. I need to model that and sort of recalculate my network and say, okay, what are my landed costs now? And what are the kind of vulnerabilities and implied by having this new relationship? So that's one thing you might do to actually take action. We have a whole AI system around classification, country of origin, and now the USMCA Free Trade Program Qualification. So we've been helping a lot of our customers over the last three, four months to provably qualify for their goods for USMCA and to just lower their duty burden. And in some cases at the scale of our customers, we're talking about hundreds of millions of dollars of savings.
- [14:20]
Bill Reinsch
Yeah, we've discussed that in the past. I've sort of thought of that as largely kind of a. For a lot of companies, just a paperwork exercise that they never bothered to do, and so now they're having to do it. What do you do for them that they can't do for themselves?
- [14:33]
Evan Smith
On the USMCA specifically?
- [14:34]
Bill Reinsch
Yes. Yeah, right.
- [14:36]
Evan Smith
Yeah. So it can be merely a paperwork exercise if they really have a hold on where all the inputs to their products are coming from. A lot of companies don't. So think about a Fortune 50, Fortune 100 technology company that relies on contract manufacturers. They have very little visibility into where the input components are coming from as they go to the contract manufacturer in Guadalajara and that contract manufacturer, I'm giving some real examples, might not have the internal data, documentation or even motivation to make that attestation themselves and say these are USMCA qualified, so they've got to go figure that out. That's a real example where we're helping them work through that. In other cases, we have an AI system that says, here are the things that go into your goods and from where, and here's what we think is missing from that picture. And if that missing content is such that you can't demonstrate a tariff shift or you can't demonstrate the regional value content under the trade rules, then our system actually aims the business toward those gaps in coverage and says you need to go fill in these gaps. Right. You have information to get from X, Y and Z, you get these component parts. But to really complete the picture on a tariff shift or regional value content, you need to go fill this in. We have a collaboration layer. Think about it as like a better survey tool where our customers can then go from that platform, from that view of their own product value chain and then request that of their suppliers and then fill in those gaps in what we call a product passport. So, and then the, the automation around all the substantial transformation logic so we can get you right to the basically evidentiary stand with a generative AI explanation from the underlying data.
- [16:19]
Bill Reinsch
One more question, then I'm going to give it back to Scott. Let's bring this into this week. Okay. And sort of contemporary time here. It's been an eventful week. We've got a whole long list of tariffs now coming into place. August 1st, unless he postpones. Again, this is the, the famous taco argument that's been making the rounds. We'll see about that. But, you know, the tariffs are numbers that are specific, more or less same numbers as from April for most countries. There's a few that are a little bit lower. There is one that is noticeably larger and that's Brazil, which we get to following this announcement on, well, announcements Monday, Wednesday. Anything that happened this morning that I've missed, we're doing this on Thursday, July 10th. What patterns are you seeing in how supply chains are adapting? Particularly what are you seeing in Southeast Asia and in Africa?
- [17:09]
Evan Smith
Well, I spoke to it a little bit before, but I think the trend to the extent that there's signal in the, in the noise on this seems to be that the Trump administration is trying to reduce the ability for a trading partner to be a backdoor for Chinese goods to enter the US Market at A lower price. That's the trend in some of the design on these tariffs. We'll see what happens on August 1st. There's clearly a lot of theater to this, but they're moving to a world where these, you know, component based tariffs and 232s are going to be more enduring. And I think they're using these sweeping country level tariffs to achieve much more of their geopolitical objectives than necessarily a trade specific objective.
- [17:56]
Bill Reinsch
We're certainly seeing that in the case of Brazil, I think. Scott, what's your take on this week?
- [18:01]
Scott Miller
Well, there's always, I call this operatic process, which I think it is. It's a lot of drama associated with any time President Trump, Trump keeps a campaign promise, which he does pretty routinely as politicians go. This week it was a lot about just announcing that we still think people are cheating us and we still want them to stop that and we're going to make them. And then this was just a reminder after tariffs being off the front page for a while of getting him back on and creating a sense of urgency. And one of the things that I think we're familiar with the president's negotiating style is he likes to stir things up with a very demanding offer, really extreme position, and then let people negotiate with themselves for a while. Now that'll work with a few targets. And for a long time, and particularly in the first term, President Trump really focused on big traders. And now he's deeping down in and the real question is whether this will result in any real benefit or if we're going to get a whole lot of deals like the UK deal, which was it's helpful. I think it provides a little stability. But we didn't solve any real market access problems in that agreement. And I don't think many of the people who are involved in the private sector are actually expecting a lot of market access problems to be solved. So it's a lot of stirring the pot. But there's also work that's being done. And Evan is a great guest because he's pointing out the insane complexity of all this and the fact that firms are doing things away from the tariff wall to make sure their products are available. So a lot of transshipments is often just toll processors who are taking the last step or taking a different step in a process that happens a lot in chemicals, partly because rules of origin are clear. You have a chemical reaction, it's a new product for a new use. It's a change in tariffs. So with that level of simplicity in the regulatory Phase or the tariff schedule itself and rules of origin. Companies manage their business so that they can, if they've got a product that's subject to tariffs, to send it to send to Mexico and have a process take place at a fine chemistry plant or something like that, and then it moves on in through the NAFTA supply chain. So there's a lot of that going on that nobody sees, nobody works with. But I think that's the reason our current situation is lots of drama and talk at the top level, but import prices aren't going up and haven't gone up. So it's an odd circumstance, but it's confusing. As I'll get out.
- [20:21]
Evan Smith
I think we can count on three things through all this. One is that the baseline level of tariffs coming to the United States will go up. You know, there's a negotiation playing out. But wherever this thing settles, there will be basel tariffs at a much higher rate than we've experienced in almost a century. So that's thing one. Thing two is China. There's clear policy intent to build a trading wall around China and to reduce the potential for trading partners to be a backdoor for Chinese goods through the value chain.
- [20:49]
Scott Miller
This is real decoupling, basically.
- [20:51]
Evan Smith
Yeah. I had a conversation with a member of the National Security Council back in February and he said there's a explicit policy intent to be fully decoupled from China within four years on critical industries, so defense, aerospace, pharma, food. So, you know, if you're running a big global business or a small one, you should be betting on that trend. I think that's a safe bet. And I think the third thing to take away, and this is a bipartisan thing, it's going to keep coming, is component based tariffs. That's the kind of talk of the town in D.C. component based tariffs. So think, you know, 301s, 232s copper this morning. Right.
- [21:28]
Bill Reinsch
You mean sectoral tariffs on specific industries?
- [21:31]
Evan Smith
Well, it's not the sectoral but also component. And so they're saying the component, the percentage of aluminum from this region is subject to a tariff. Right. So what that implies for the private sector is again, you've got to know the value chain. Right. Like the policy design is they're forcing the private sector to really know and manage the value chains of their goods. And in this case, you know, there's money on the line where you have to be able to make an attestation and hold up under an audit.
- [21:58]
Bill Reinsch
Yeah, I have a rant coming on here, but I'm going To save that. It wouldn't be a podcast if we didn't have one. But let me pursue what you said for a minute. The interesting piece of that is the Vietnam agreement, although there's no text, there is a provision there, according to the President, that there's going to be a 40% tariff on transshipped goods. So how do you see that? Is that going to be effective and how do you enforce it? How meaningful is it if that's the only country that does it? Or do you think they're going to try to put that into all these agreements?
- [22:30]
Evan Smith
They're going to try to put a feature like that into all these agreements. It's effectively what happened with Canada and Mexico. Right. They said everything's at 25% unless it's USMCA qualified. And they're forcing the early renegotiation of the USMCA in order to tighten up some of those China loopholes. So that's clearly the policy intent. How do they enforce it? This is a little cheeky, but it's true. The answer is in part with us. The U.S. government, U.S. customs and Border Protection, uses our platform to enforce these laws.
- [23:00]
Bill Reinsch
How do you define transshipment?
- [23:02]
Evan Smith
Well, I define it in the legal sense, like from a trade law sense. And it's the lack of substantial transformation.
- [23:11]
Scott Miller
Which is basically a customs fraud, if you are classifying it as a product of a country where it was not substantially transformed.
- [23:18]
Evan Smith
And that's where there's a body of international law and trade law where I think this stuff settles. So there's sort of the headline. But. But what does it turn into? And from a legal enforcement standpoint, at the end of the day, it's going to be rules of origin and substantial transformation.
- [23:32]
Bill Reinsch
Well, right. But there are the easy cases at the extreme where, you know, the product is shipped from country A to country B and they take off the country A label and put on the country B label and then re export to the United States. That's customs fraud. That's simple. There is the Chinese steel slabs being exported to Korea where they're rolled into sheet strip or wire. That's a substantial transformation. That's pretty clear too. What happens when it's more complicated, when the Chinese are shipping finished solar wafers to Vietnam for incorporation into panels. Is that a substantial transformation or not?
- [24:09]
Evan Smith
Well, I don't mean to deflect, but this is where I think the actual negotiated legal agreements will give us the answer.
- [24:16]
Bill Reinsch
One would hope, yes.
- [24:18]
Evan Smith
At the end of the day, they have to because, you know, there's trade law.
- [24:21]
Bill Reinsch
Yeah, but that's part of the rant. If you look at the UK agreement, which is three or four pages, that kind of detail is conspicuously missing.
- [24:28]
Scott Miller
Yeah. And there are bound rulings in that field as well.
- [24:31]
Evan Smith
And those things take years to negotiate, which, you know.
- [24:34]
Bill Reinsch
Yeah, it's overdue. But this is what we're going to get, is a bunch of agreements that are like the UK agreement, I think, 80% aspirational and 20% tangible, because there are actual concessions. In the UK agreement, they gave up the ethanol tax, we made a deal on cars. So there are things in them that are actually matter. But in the absence of a Vietnam text, we don't really know what they agree to or what they've not agreed to. They have not confirmed, as near as I can tell, anything that Trump said. That doesn't mean that he was wrong. But it would be nice if somebody in the Vietnamese government said, oh, yes, that's what we agreed to, you know, which hasn't happened yet. Thinking about how it's going to play out, though, it seems to me we've evolved into this kind of cool, kind of giant game of chicken, which is appropriate if you're going to talk about tacos, I suppose, in the sense that Trump is purely trying to use US leverage to get other countries to do what we want. And I think Evan gave a very good description of what it is that we want and he's bullying them into it and his gamble is that they'll fold. You know, and the Canadians folded last week on the digital services tax and we'll see who else folds. Interestingly, the UK did not fold on their digital services tax, which surprised me a little bit. If it's such a big item, you'd think we would have pressed harder on that. But there's gambling on the other side, too. That's what I think we need to think about and I hope you guys can react to. If I were the other countries, I'm thinking, you know, Trump's kind of painted himself into a little bit of a corner here. The campaign rhetoric was these things are all free because the foreigners pay the tariff. Now, nobody but him believes that, but that's what he told the American people in March or so. The rhetoric changed and it changed from no pain to short term pain, long term gain. There is going to be a cost, but at the end, everything will be better. The minute you say that, then it's on him to produce the gain. And it seems to me from the way the public is going to look at this is the tariffs are the pain, the agreements are the gain. So if there's no agreement, there's no gain. So here we are. Instead of 90 agreements in 90 days, as Peter Navarro promised, we have three or two depending on how you count China. Different people have different views about that. We have three. And it seems to me that what we're seeing from other countries, none of whom will admit it, is that they're slow rolling this with the thought for two reasons. One, domestic politics. The United States is asking them to make concessions that are very difficult for them to make. I mean, Trump pinpointed this with Japan. Buy our rice, you know, buy our cars. Well, They've been spent 40 years refusing to do that. It's not an easy give for them not to say that they won't, but it's politically very difficult, particularly two weeks before an election. So that deal may be cut later. But they've got to be thinking if we wait and drag this out, maybe he's going to get worried that there won't be any deals, which means that his strategy will have failed and his tactics will have failed and then maybe he'll lower his standards and we're going to get agreements that are actually more like traditional trade agreements where we get something as well as the United States getting something. So we'll see.
- [27:42]
Scott Miller
Well, look, I, I, you may be right, Bill and I, I think that countries are going to observe their counterparties very carefully and they're going to see who got what and why. So for me, the model so far is Mexico. The Mexico did a brilliant job of handling what was a huge confrontation could have been devastating to the Mexican economy. And they've stick handled that awfully well so far. Even though Mexicans don't play hockey, they've got the technique down and they, they maneuvered very well. In any case, with that, Evan, we'll give you the last word, including, since this is a program on trade, a shameless plug on how people can find your company. We completely within our bounds.
- [28:18]
Evan Smith
So well, I'll start there because it's quick. You can find us online at www.altana.AI a l t a n a dot a I how do I think this plays out? I mostly agree with you. I think there's not a super strong incentive for these other countries to come to the table concessions when the tariffs are in abeyance. Right. There's a 10% baseline. Okay. That's becoming normalized. Right. So we can count on that. But these 25, 35 40% tariffs on a country by country basis. One, you've got the US court system playing out. There's an injunction right now, but that's got to work its way through. And so these IEPA tariffs, in other words, might not be here to stay, period. And so it's going to require an act of Congress or, you know, some other tool in the toolkit to tariff countries this sweepingly and at these levels. So that's kind of point one. Point two is, I think, you know, I've said this before on this conversation, but to the extent that you're looking directionally at this, the trend to me is just very clear. It's the Trump administration is trying to build a trade wall around China. And so if you're the European Union and there's going to be U.S. tariffs on Chinese goods in the 30 or 40% range, when you kind of add up and blend all the different 232s and 301s and baseline tariffs, where do you think those goods are going to go? They're going to go to Europe. There's some really interesting game theory on this whole thing where the Europeans probably wouldn't say this out loud and they might want to admit it. But my guess on the direction of travel is that the Europeans in the US do something and there's some quid pro quos. It's probably not going to be a one sided deal, but that the big outcome of whatever that negotiated agreement is is actually going to be a tightening vis a vis China. And I, I think you're going to see a lot of those dominoes fall in a similar way Vietnam just did. Right.
- [30:11]
Scott Miller
That's interesting because the country by country plan that President Trump wants to negotiate with Europe about, they're really not capable of doing that. But you, you've identified something where they can act as a customs union and do something that is supportive of the President's overall plan. So that's, that's very interesting way to think about it.
- [30:29]
Bill Reinsch
I talked to somebody earlier this week on who said pretty much the same thing. I mean, he had a kind of a different vocabulary but said that was the, the objective, although he focused more on Japan and Korea than on the eu. And at which point I said, oh, that may be the objective, the US Objective, but for those particular two countries, it's a very difficult ask because of the geopolitical situation, their, their proximity, the long standing relationship they've got, which is not necessarily always a happy one to say the least. But they can't really entirely divorce themselves from China in the way the country's much farther away with smaller trading relationships can do. So I don't know if he's right. I mean, I think the thing that sticks in my mind is that you may be right right now. And I have no doubt at all there are people in the administration who believe that, and that's their policy. At the same time, you know, Trump's had this view for 40 years, you know, long before China was a trade issue. Well, even before that. And it's a victimization dialogue. The United States has been taken advantage of by everybody for a long time. And all of his predecessors didn't do anything about it. And that's not just China, you know, that's everybody. I think it's bigger than that. But that doesn't mean that you're wrong. It just means that I think there's more to it.
- [31:42]
Evan Smith
I agree with your statement. I'll stay clear of some of the politics on it. But I will say, you know, the President clearly believes in tariffs. The President, the lower court notwithstanding, has been mostly free to exercise tariffs from the executive branch. And it's like one of the things that somebody who's used to being in control is kind of happy to do because he's proven the ability to do it. The point is we've got three more years. Then who knows what's coming up next. But the bipartisan kind of arc of history thing that I would bet on is that there's a geopolitical competition playing out between the US And China and that the global supply chain is contested. It's already contested. We're seeing what's happening in critical minerals, we're seeing what's happened in critical trade lanes, we're seeing what's happened at the Panama Canal, we're seeing what's happening at tariffs. So that's the direction to travel. And the noise on a day to day basis with this country or that country is probably just that, just noise.
- [32:42]
Bill Reinsch
Well, the one to watch, and we have to close now, but the one to watch, I think is Brazil, which is very interesting because it reminds me of Colombia, where he slapped on the tariffs not for economic reasons, but because the President wouldn't accept deportees, which ended fairly quickly. It looks like Brazil is not going to end so quickly, partly because what's clear about it and what makes it different from what we've been discussing is that Trump's objection in Brazil is it's about Bolsonaro and Brazilian politics and litigation in Brazil, it's not about trade. We have, you know, we have a surplus with Brazil. You know, they were originally in the, in the 10% category. So here we are injecting politics into economics and doing it in a way in which the president of Brazil really has no control. This is in the Brazilian court system. And it's not something that he can, despite what Trump may think given our court system, it's not something that he's either, I think, willing or even able to truncate. So we'll see. And it also, it's turned out, I think, politically it's a giant gift to Lula because he's irritated everybody in Brazil about the Americans. So.
- [33:52]
Scott Miller
Well, you know, one of the great things about this show is it's a weekly podcast and there's always something to follow up on.
- [33:59]
Bill Reinsch
Next week we'll be back with Brazil.
- [34:00]
Scott Miller
Yes. No doubt about it.
- [34:04]
Evan Smith
And I will happily stay out of it.
- [34:06]
Bill Reinsch
And well, we, yes, we don't want to suck you into that one, but we do want to thank you, Evan, for a very enlightening and thoughtful conversation and a really good description of not only your company, but how you're helping other companies navigate the choppy waters that we're certainly in right now.
- [34:24]
Evan Smith
I'm really excited to be here. This was a lot of fun, you guys.
- [34:27]
Scott Miller
Well, thanks for doing it and thanks to the audience. Hope you enjoyed this. And we'll be back next week.
- [34:38]
Evan Smith
To our listeners.
- [34:39]
Bill Reinsch
If you have a question for the Trade Guys, write us@tradeguyssis.org that's tradeguyssis.org we'll read some of your emails and have.
- [34:49]
Evan Smith
The Trade guys react to it. Foreign you've been listening to the Trade Guys, a CSIS podcast.