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Hello and welcome to another episode of the Odd Lags podcast.
I'm Jill Wisenthal and I'm Tracy Allaway.
So obviously, Tracy is something that we've grown more interested in lately and it has very interesting sort of a macro trade maybe political implications. Is this sort of the booming numbers we see in US Mexico trade?
Absolutely so, US Mexico trade has picked up, as you have pointed out, and I'm kind of curious about the reasons why this is what most interests me at the moment, as well as like the physical process of moving goods from Mexico into the US. But there's the story this
idea here about friend shoring. So given the Trump trade war and its ongoing evolution under the Biden administration, tensions happened rising with China, there's this idea of companies maybe moving some of their production away from China into either Southeast Asia or maybe Mexico. So we've seen a bit of a pickup. I really want to know what is driving it. Is it actually that friend shoring idea, or
is it maybe something else. I know, Mexico, for instance, is a really big exporter of car parts, so how much of that is driving it? I've seen Brad Setzer discuss this a little bit on Twitter. So I am excited to get into Mexico US trade totally.
And you know you mentioned, you know, sort of Trump kicked it off after he won the twenty sixteen election by beginning the process of tariffs sound China and rewriting NAFTA which became the USMCA and really sort of encouraging a shift in supply chains to North America to the Western hemisphere. And then it probably really accelerated further with COVID and just the mass of headaches that everyone had
getting stuff out of China. And so right, that's sort of when the idea of like friends showing or near shoring like really picked up, like just sort of this
supply chain resiliency idea. And then this raises all sorts of other interesting questions because of course, if you're a Chinese company, like you're a Chinese automaker, say, or a company that makes other high tech goods and maybe you're worried about terrorists, we're like, well, can you set up in Mexico and get around evidence so that it's like, so it is still coming in from Mexico, but the
beneficial owner somewhere in China. Like, there are some really interesting questions that arise out of cross border US Mexico trade.
Yeah, it's funny you mentioned that. I was just reading an article in the FT that came out recently and they were talking about the number of container ships going from China to Mexico has hit eight hundred and eighty one thousand in the first three quarters of twenty twenty three, which is up from like six hundred eighty nine thousand in the same period from so a lot of growth just in the space of a year. And it does beg the question again of what exactly is coming through Mexico.
How much of this is a genuine shift in US trade away from China versus the sort of rerouting totally.
So we see the numbers and we want to get a better understanding what are the types of goods and so on. And I'm very excited to say, we really do have the perfect guest. It's someone from the freight world who's been working with US Mexico trade for a long time and now the co founder of a new company that's sort of going to focus on freight that goes cross border from Mexico to the US. Matt Silver, co founder and CEO of car Gato, Matt, thank you so much for coming on odd Laws.
Absolutely thank you for having me excited to be here.
All right, So, really simple question to start. If there's some piece of machinery that you want to ship from, say Texas to California, how much easier is that than shipping a piece of machinery from Mexico to California. May to flip it the other way around. For a given unit of good, what is the complexity of getting that good across the border rather than just shipping it.
Domestically, So shipping something from Texas to California, if you're a logistics provider or a trucking company, your main responsibility is to make sure that you get the freight picked up at that location in Texas, that it's scheduled to delivery, and that ultimately you go deliver the load on time, and that you get what was considered the bill of lading signed by the receiver and it turns into a proof of delivery and you're good to go. When you're
moving a shipment from Mexico to the United States. And let's say you're going from somewhere Lake Monterey to California. You would get that load picked up in Monterey by a Mexican trucking company that would bring the freight up
to the border. It would clear Mexico customs, go through US customs, dealing with a Mexico customs broker and a US customs broker and a border crossing carrier, and then you're working with a US trucking company that's going to bring that load from say Laredo, Texas to Los Angeles. And so for a cross border shipment, there's somewhere between six and eight parties involved in a single shipment, whereas the domestic shipment has you know, the trucking company and the shipper and the receiver.
As someone who has shipped a lot of stuff like home goods between the US and other places, the customs process is always more complex and more time consuming than you think it will be. On which note, Matt, how long would it take for that entire end to end process versus say a domestic shipment, which I guess just gets picked up. And then the uncertainty on the time is really just the driver going somewhere, and how long that takes. How long does that sort of customs process usually take.
Customs can take anywhere from one to three days. It could really go up to ten days. It could get longer than that if it takes a long time to prepare the paperwork. So the way that I always compare it from explaining this to somebody that has a basic understanding of freight is that a domestic shipment is your responsibility as a broker for you know, call it one to two days, maybe three days if it's a longer length of haul, but that load picks up and it delivers,
and that's it. For a cross border shipment, it can be any anywhere from seven to twenty days. So you got your your standard transit time that you know from Monterey is four to six hours. From Central Mexico could be about a day, and then it could take anywhere from one to three days to cross the border, and then you know there might be a twenty four hour wait time before the load actually gets dispatch for delivery
and then your standard transit in the US. So that's where it ends up at that seven to ten if not twenty days.
Let's back up a little bit. I mentioned that you're the co founder of a new company that's going to focus on US Mexico trade. You've been interested in Mexico for several years. Why don't you just sort of give us the quick background of how you became a Mexico trade person and why you want to continue making this bet.
A Mexico trade mega.
Let you know you can describe your proper title. I'm just going to call you a Mexico trade.
Person, Mexico freight expert, Mexico freight expert. May that's a little bitter Mexico Matt, there's a joke, but all right. So I got involved in Mexico freight when I was at Coyote. I was at Coyote for about a decade and some freight brokerage, yes, Coyote Logistics Brokerage. And I started the Mexico business while I was there by by sheer dumb luck and started building the network out and
growing the Mexico business. And I spent about three three and a half years doing that, and then I left Coyote in twenty eighteen started my own company called Forager. We were a cross border digital freight brokerage. So we built our own proprietary technology similar to like an uber freight or a convoy, but specifically focused on moving freight
between the US and Mexico. We were acquired by Arrival Logistics at the end of January of twenty twenty two, and then I left at the end of September of twenty twenty three. After helping integrate Forgernal Arrive and helping leading grow the Mexico business, ultimately left at the end of September and started working on Cargado shortly after that.
So what was the in inspiration behind creating a company that is dedicated to Mexico US freight. What's the opportunity that you see there.
I think there is so much complexity involved in moving across order shipment. Like I just kind of outlined that, I think there's a lot of need for technology, and with near shoring becoming such a major trend, all these manufacturers are moving production in Mexico. That's leading to the suppliers that have to support those manufacturers, whether it's their physical suppliers that are building the goods that are going into the parts that go into the car, or the
packaging that goes into CpG products. Ultimately, it could be those types of suppliers, or it could be logistics companies and trucking companies, but they're all rushing to support their customers in Mexico. And so as all these logistics providers and trucking companies get involved in Mexico, I believe that they're going to need tools to be able to do their jobs. And I think that there's a better way
to help them do their jobs. And it's just a matter of starting with the roadmap that we've built out to build what we're building at Cargatto.
Talk to us about what you see on the ground. So I know a lot of the investments in Monterey, you know, we know there's a Tesla factory, say twenty twenty four versus I think you said you've gotten to Mexico stuff about a decade ago. Talk to us about, like what you see happening on the ground in various parts of northern Mexico and elsewhere in twenty twenty four versus what it looked like in twenty fourteen.
Let me start at a really high level. When I started building with Mexico at Coyote, we were communicating with drivers in Mexico via those nextele phones where it was like a walkie talkie they would click to communicate with them.
And so now most of the drivers in Mexico, most of the trucking companies have smartphones, they have iPhones or androids, they've got laptops, they've got iPads or tablets, and so technology has come a lot further along in the last decade from a you know, physically what's on the ground perspective, Monterey has expanded massively. You know, I was down there a few weeks ago and the amount of new facilities that are still getting built. Everywhere you drive, you see
brands that you recognize, like I saw LG. I saw some of the different golf companies that produce golf balls and golf clubs and everything else that comes along with that. Manufacturing in money, there's lots of CpG brands that are starting to build up plants in money, appliances and electronics, and so you see all these different companies that are building in Monterey right now that the same things happening in Ramasresepei, which is just south of Monterey, and Salteo.
It's happening in the Baihio, which is in Central Mexico, Cadetro, Aguas, Calientis, Guadalajara, Mexico City, Puebla. It's starting to spread all throughout Mexico as people realize makes a lot more sense to manufacture there than it does overseas.
What exactly is Mexico actually exporting to the US? So I mentioned in the intro famously there's a lot of car components and vehicles involved here, and you were just discussing some of the car companies that have been moving some aspects of production down there. But what are the things that are actually coming across the border? And has there been any changed there over the past couple of years or so.
I think it's been a lot of the same stuff. So, like a lot of the automotive companies, for example, have been in Mexico for decades, like General Motors and Ford and Brysler and everybody else. Like Tesla's the newest entrant to come into Mexico, and they've done it the loudest, but they've been there for a long time. Most of the automotive suppliers, and so automotive has along been a big part of it. Electronics, whether it's appliances or computers or TVs. I remember we used to ship video game
consoles to Mexico for a large electronics manufacturer. Beer is a major product that comes out of Mexico. All sorts of food products. Obviously, tequila comes out of Mexico, out of Jalisco. You've got mezcal coming out of Wahaka and some other parts of Mexico. There's a lot of components that go into anything electrical. And then you've got anything that you would find in an office, anything that you'd find around your house that's got wiring in it, there's
a really good chance that it came from Mexico. So most of the major appliance manufacturers have plants throughout back, whether it's LG or Samsung or higher which is ge. The majority of them are manufacturing in Mexico.
So what is the main case? Why are they doing it? I mean, I guess obviously some of it must be the USMCA and Trump's the tariffs on China. Maybe some of it the COVID supply chain frailties. But what is the pitch right now? A company is thinking about setting up to Mexico, how much is it about that and how much is it about, say, improvements in Mexico's own infrastructure such that a neighbor that's so close to the United States actually makes more sense as a manufacturing hub.
I think it boils down to a few things. USMCA update from NAFTA is definitely one of them, and so you touched on that. That encouraged more automotive parts, for example, to be made in North America that go into a car. That raised that percentage from sixty two and a half to seventy five percent. Pandemic was definitely another major piece.
So I remember at Forger we had a customer reach out a company called Premium Guard that said, we just acquired this plant from Federal Mogul in Mexico because our manufacturing in China was slowing down and so we needed to be able to continue to manufacture and sell filters in spite of the fact that China was shut down, and so we bought a plant in Mexico. We need your help shipping their freight from Mexico the United States,
and so overnight their volume just started shipping. And we saw that happen with a lot of other companies, and so the pandemic secured everybody is the second piece, and then the third piece is that the proximity makes a lot of sense. Like it's a three hour flight from Chicago, monor A to go meet with a customer, to go meet with the team, to meet with a potential vendor. It's I think, what fifteen to eighteen hours to fly to China from the US. So getting to Mexico's a
lot easier. Time zones are a lot more similar. They're not exactly the same, but they're similar, and so it's easier from a communication perspective. There's also a lot more people that speak Spanish in the United States than Mandarin, and so you're much likelier to find more cultural alignment, easier to communicate with people in Mexico than people in
Asia or overseas. And ultimately, that time that you can cut down on travel and everything else directly affects your ability to control quality and control cost and everything else. And so Mexico has just made so much more sense. And then on top of it, if you're setting up manufacturing and Monterey right now, it's like shooting fish in a barrel to be able to go find a provider
that can help you. If you're freight or help you manage your customs process because of the density that's already there. You're walking into a market that already exists. It's getting more expensive, but it's there already.
Tracy, have you been to Mexico. I have not, So I just this is going to be like the most part.
But I mean I have when I was like a kid and we lived in Dallas. I think we went to one of the border towns, but I barely remember it. Sorry, I feel like I have to be very specific here.
Yeah, this is like gonna be the most boring point. But like to Matt's point about how it's just a three hour flight, Mexico is so close from like anywhere, and like you could just take a long weekend trip. There's so easy. And every time I traveled to Mexico, like on a vacation, I'm just like it's like it's right here. And so that point about I was just a three hour flight from Mexico maybe seems obvious, but it also is like it is so easy.
Wait, I'm glad you brought that up. Actually, the idea of obvious. So I'm thinking how to frame this question. So I realized there is already a degree of trade between the US and Mexico obviously, and there is the free Trade Agreement, of course, But why hasn't Mexico been a bigger market before, like, let's say, twenty years ago. Why didn't this happen earlier? What was the hold up?
I think the technology advancement was a big piece. Again, there's been manufacturing down there for decades, like General Motors has been down there I think for fifty years or something like that. But it was while Trump was in office and started the whole trade war thing with China and said we're going to bring everything closer to home and branded the usmcas America First. But in reality, quote unquote America First was really about North America, and so
that encouraged trade for all of North America. And I think that was the catalyst that caused all this growth to happen. And then the pandemic kind of tipped it all over. But you know, it's been growing steadily for twenty or thirty years. Now.
What about infrastructure, You know, Joe brought that up. We've seen some concerns over things like congestion in the Suez Canal. At various points in time, You've seen attacks on ships. You've seen drought in the Panama Canal. Has Mexico built out its infrastructure at all to make the exchange of goods easier or is it benefiting from I guess, deteriorating infrastructure elsewhere in the world both.
I think, you know, there's definitely those external factors that are providing benefit. But you know, there's been some investment in infrastructure in Mexico, and the highways are getting better, the toll ways that most trucks are going to use are getting better. There's definitely still a need to better
support it and better regulate it. So, for example, in the United States, you could go on a website and you could find a bunch of details about a trucking company and a matter of you know, three minutes if you just type in their MC number their dot number. You can't do that with the trucking company in Mexico. And there's no regulation over freight brokeriges in Mexico. And so I think what I would ask of Mexico to do to make things better would be figuring out ways
to help with security issues like theft in Mexico. You know, the cartel issues in Mexico definitely continue to be an issue. And then the infrastructure side of it is really related to the actual information related to the companies that are involved in the transactions and being able to register them, being able to understand what they do, because otherwise it's just the wild West, and that's how you end up with freak getting stolen.
Joe, have you been on the Mexican trucking boards there are Mexican shocking boards.
No, I have it, But I find that to be a really interesting point that I'd never thought of, which is we talk about infrastructure as highways or toll roads or canals or whatever, but the idea of like also it's important that there be some sort of centralized place where you can just look up the reputation of a freight brokerage or a truck and company, and how valuable it is for the government to be able to centralize
that and just sort of smooth. That is not something I had really thought about before, but it is infrastructure in the sense talk to us a little bit more obviously the security situation. So it seems like this is one area where under the Homlo years, over the last five or six years, maybe no progress at all on security, whether we're talking about homicides or the strength of the
cartels in certain parts of the country. Talk to us a little bit more about what you're seeing on the ground from that perspective, and then how risk of freight, theft, et cetera goes into companies making investment decisions.
So there are parts of Mexico that are totally fine when it comes to moving freight, like you know, knock on wood. I rarely hear about issues with product coming out of Monterey, like out of northern Mexico or central Mexico. It's usually product coming out of southern Mexico, like near Puebla,
So Pueblo. There's a big Volkswagen plant there and it's about two hours south of Mexico City, and so it's relatively close to what I would consider to be a major market, but a lot of carris are scared to go there because of theft, and there's a lot of
cartile activity there. And then Vera Cruz, which is along the Gulf of Mexico, and so that's southern part of Mexico, is still very frightening for a lot of trucking companies, for a lot of shippers, for a lot of freight brokridges to get involved in moving freight there, and so that's where there's a lot of cartele activity. I've also seen, you know, shipments get stolen coming out of Jalisco and
Aguas Calientis, which is in central Mexico. So it's not to say that it doesn't happen, but the concern is definitely in southern Mexico. And then from a perspective of what people think about when they start investing in Mexico.
Another thing related to the regulation and infrastructure side is that in the United States, cargo insurance is something that is required of freight brokerages and trucking companies, and so anybody that's shipping goods in the United States, there's cargo insurance that insured those goods if there were a truckload that got into an accident and the goods were destroyed. Separately, there's insurance if a car was damaged or if anybody
was hurt, but there's insurance for the freight. In Mexico, there's no requirement for freight to be insured, and so none of the freight providers insure it, none of the trucking companies insure it, and most of the beneficial cargo owners, like the manufacturers, some of them don't know that it's required, and if they do, they try to get it insured, but it becomes kind of a headache. And so that's another big area is the fact that insurance isn't required.
And so when people think about where they're going to set up manufacturing, they think, is my freight potentially going to get stolen? And if so, am I going to have to replace it? Or do I have insurance that can cover that?
Wait, this might be a good opportunity. And I realized we probably should have asked you about this earlier. But can you walk us in excruciating detail, like the process of how these goods get moved? And again we touched on it earlier, but like who hires the trucking company here? Or like who hires the freight broker? And then like is the trucking company? Is the freight company actually US incorporated? Or is it Mexican? Who are the drivers? How does
that like immigration process work? Is it a Mexican driver going into the US? Do they switch over at the border? Is it a US driver? I honestly have no idea, but it seems like the process is important here.
Yes, let's start at the very beginning. I'm a transportation leader that works at a large manufacturer in the United States, like one of the big automotive companies, and I have my manufacturing plants set up in Mexico. I've got some of my suppliers set up in Mexico. I've got some of my factories in the United States or my assemblies in the United States, and I need to make sure that my stuff gets from Mexico to the United States
on a regular basis. And so I'm probably going to run an RFP or request for pricing on an annual basis. I'm going to reach out to all of my providers. I'm going to go to a group of freight brokerages that I work with, especially when it comes to Mexico, that I trust and know, that can provide good quality cross border service, who have the scale that I need. And then I'm also going to rely on a lot of the trucking companies that I've had long relationships with
that continue to provide dedicated direct service to me. And so I'm going to say, hey, let's say I've got ten thousand shipments a year that are coming out of Mexico to the United States. I need capacity for that. I've got out of those ten thousand, two thousand of them are going to come out of Monterey going to
my plants in the southeast. Four thousand of them are going to come out of my Mexico City facility going to my plants in the Southeast and in the Midwest, and then the rest of them are going to come out of my Stanley's boot to see a facility going to Dallas, in Atlanta and Chicago. So, all of you trucking companies and your freight brokerges, I need you guys
to provide pricing for me. And typically they're going to say I need it to be door to door, which means that I need you to be able to handle the entire thing from the pickup in Mexico to the delivery in the United States. Separately, I'm going to hire my own customs broker because I already have a customs broker that clears the freight for me at the border, and I've got that relationship. I've had it for fifteen or twenty years.
Real quickly, what does a customs broker do?
So customs broker acts on behalf of the manufacturer the importer and works between them and the US or Mexican government to file taxes and duties and make sure all the paperwork gets fine, all right, keep going thank you like a travel agent kind of yeah. And so they act on behalf of the shipper, and so you there's always just saying that, like you marry your customs worker and you date your forwarder, you're stuck a lot longer
with your customs borker. You sign a power of attorney with them, and they're filing all this paperwork that has the exact number of nuts and bolts that are inside of your trailer, every single little piece of detail. If they get one thing wrong, that could cost you a lot of money. And so you have a long standing relationship and you don't want that to change. And so you go to your trucking and freight providers and say, give me your pricing on all these locations in Mexico
to all these locations in the US. Those guys are going to then either use whatever pricing data they already have, or they're going to go out to their existing network, or if they're their own trucking companies, they already have their pricing internally, and they're going to provide pricing door
to door to be able to handle those moves. And so let's fast forward after the RFP, after the shipper decides or I decide, Hey, I'm going to hire these brokers and these carriers to be my main providers on this freight. I'm going to start tendering them loads. And so I'm going to go and tender a load to Joe's Trucking in Laredo, Texas, and say, hey, Joe, I've got a load for you guys going from Monterey to Atlanta.
Can you pick it up for me? And you're based in Laredo, Texas, so you're based in the United States. You've got an MC number, a dot number, insurance and all that stuff. You're going to turn around and go, all right, which of my partner companies in Mexico have
my trailers in Monterey? And so you're going to call Jose's Trucking in Monterey and say, hey, Jose, can you take one of my trailers over to this factory in Monterey, get loaded with these automotive parts, and then bring it up to Neueva Laredo, which is the Mexican side of the border and drop it off. At that point, we're going to hire a border transfer company kind of like a drage company at the ports, and we're going to say, can you guys move this trailer from neuevl Laredo to Laredo, Texas.
So that's the trucking company. Joe's Trucking does that. Then Joe's Trucking has a driver that's based in Laredo that's going to take the load from Laredo in the same trailer all the way to the final destination in Atlanta. That's one way that it happens.
Wow, I see, So it sounds like the majority of it does switch over at the border.
There's a version of a switch over, whether it happens where the freight goes on the same trailer all the way through, which is called through trailer or door to door, or if it gets unloaded at the border and moved onto a different trailer, which is called transloading. Both of those are options, and both of those get done every
day by brokers and three pels and carriers. Sometimes it's a US driver, sometimes it's a Mexican driver that takes the load from Nuevo Laredo, they cross it with what's called B one visa and then they go deliver the load into the United States.
I don't know why. It's always amused me. There are a lot of cities in the US that start with new because the old country is the original name, except in the case of Laredo in the US, and then the Mexican partner on the other side is Nuevo Laredo. It's the only one that I know of like that.
So you mentioned that there are not requirements for freight insurance, that there isn't a centralized database where you can just type in the number of the trucking company and figure out like who they are and what their deal is. How much does that put an emphasis on, basically the sort of like boots on the ground or feed on the ground of trusted relationships and actually getting to know who you actually can work with in the absence of sort of like more formal regulatory regimes.
So it's a culture thing and it's a process thing. So when you're doing business in Mexico, you're usually going to go to dinner, You're going to go get drinks with somebody. You're going to build a relationship It's not just about a formal, you know, commercial agreement. You sit down in an office and you shake hand and you're done.
And this is something that I experienced definitely when I was at Coyote and forger and arrived, but also something that I've heard a lot over the last few months as I've talked to other brokerage leaders who are leading, you know, the Mexico business for other freight burgriges, and I say, what's the number one thing that drives how you go about evaluating your carrier base? And several people have said, I have to go down and be able to get drunk with.
Them on tequila.
I have to be able to Yeah, I have to be able to drink tequila and kind of he os with them and look them in the face and understand or look them in the eyes and understand if they're actually going to provide great service for us and if they're going to answer their phone when I call them.
So you've obviously founded your own company to specialize in US Mexico freight. Do you see other competitors in that space? Are people like building out trucking supply in this particular area at the moment.
We're building software. We're not building a service business. You know, we're not trying to build like another cross border freight brokerage. We're building software for all those brokerages. I don't see anybody else trying to do what we're doing because of the complexity that goes into it. I do see a lot of freight companies that are expanding in the Mexico.
So just like a Arrive bought Forager a couple of years ago, there are tons of other brokerages now in the US that are looking to buy companies in Mexico by specialized cross border providers. There's also I've seen people that used to work for me, I think that have gone and started their own businesses that are either focusing on cross border or including it as a part of
what they do. And so I think there's a lot of these providers that are going to come out, you know, we're trying to go solve these problems for their customers, and I'm excited to be able to support all of them as they do that.
So I realized this is going to be sort of like a gimme or softball question or book talking opportunity. But you wouldn't be starting yet another sort of Mexico focused company if you weren't bullish on the prospects of continued growth. So we had this incredible growth of the last ten years, Mexico has surpassed China over as the number one source of imports into the United States. How much more could it grow? Like how much more runway or green space is there for the US Mexico trade.
There's two things that I'll point out about this. One is, first of all, Tesla is building their plan there. It's not built yet, So none of that increased volume that we've seen is because Tesla is a plant there, it's not built yet. And there's a lot of other companies that have announced investments but that are not built yet, which means that there's a lot more growth coming from just that volume. And I think there's gonna be a
few things that are going to come from that. One is intra Mexico volume is going to grow significantly along with drayage volume in Mexico, and that's why you know we're seeing the skyrocketing of container moves going into Mexico from China. And then the other big thing is that
as all of this starts to happen. I think there's a lot of other room in Mexico in terms of like you know, white space or green space that people go build in the Baheo is still not saturated yet, Like there's still markets in central Mexico that is not saturated. If public can get better from a security perspective, there could be a lot more manufacturing in that area. There's I think over six hundred Mekilidoras that are just in Wares alone, which by the way, Mikilidora is a manufacturer
that it's sports the United States from Mexico. There's a ton of manufacturing opportunity there. And then I think we can end up seeing a lot of production end up moving to Tijuana, Mexicali and hermo Cio, which is south of Nogallas. And so I wouldn't be surprised at all to see growth happening well beyond monter A and most of the rest of Mexico is still you know, wide open in terms of investment opportunity.
What happens if Trump wins the presidency. So I realized that Trump administration renegotiated NAFTA, so you know, presumably Trump isn't targeting Mexico specifically. But on the other hand, given the growing trade deficit and given that Trump you know, sometimes unveils ideas that are not exactly expected, and one of those recently was a universal ten percent tariff on imports. Is there a risk there that Mexico trade does come under scrutiny from that administration?
Again, I think he definitely made some comments last time around when he was in office that made it seem like he was gonna start a trade war with both Mexico, and I think it was posturing around getting the USMCA done. And so look, I think if he gets re elected, it's it could definitely cost some issues with trade because we've already seen it cause issues. I do think what would end up happening is he would be much more affirm about the whole thing about China sending stuff into
Mexico and then coming to the United States. And I don't know that we're going to see any bid cars like certainly throughout the United States anyway anytime soon, but like I saw them everywhere in Mexico and I was there, Oh yeah, I.
Saw be a bunch of bids on the road when.
You're there, Oh yeah, MG. I think is another brand that used to be British and it's owned by the Chinese now, Like oh, I think yeah. I was in all cars that were Chinese cars, and they it didn't seem any different than a European car or a Created car or American car anything that I've been in before, but the brands were different.
I was in Salulita recently near Port of Ayre, and I was looking out to see if I would see an Ebuyds. I didn't see any when I was there, but maybe I just missed them. Also, there weren't a lot of cars around there. Sorry, keep going no.
But and like you've got to like be looking for it. But and I noticed it when I walked out of the airport because I was like, oh, that's a logo I've never seen before. And I just I know a lot of these automotive companies from working with them in
past roles. And so I think I could see Trump putting a lot more emphasis on Chinese imports in New Mexico that come in the United States and making a push to try to stop that, and then that will have a downstream effect because there's a lot of manufacturers that I've talked to in the United States who have said, hey, my suppliers were in China. They've established joint ventures in Mexico to support US, and they've they're building plants in Mexico.
And so if that ends up being something where Trump puts a teriff on those types of companies, it will have a direct impact on every American consumer and all the manufacturers that are building stuff and selling stuff to the consumers, because their prices will go up and the cost will go up.
To make what is the effect on trade if there was a much tighter border crackdown when it comes to migration, and we did see this a little bit, I believe last year when the US Customs and Border Protection halted trade in some areas out of due to the rise in migrants. How do they interact with each other?
It causes delays when they pull people that are supposed to be clearing freight away from clearing freight to go you know, heard people and so I remember when this happened, I think while Trump was in office, and then Governor Abbott did the same thing or similar thing somewhat recently. Is like they pulled people away from helping clear the freight examining it and enabling it to come across the border and said go, you know, round people up and make sure you get them where they need to be.
And that pulled people away from clearing freight, which created longer lines of the border, created longer truck lines, which caused delays, and ultimately could have caused disruptions in people's supply chains because of the need for a lot of these parts. Most what's this freight, by the way, coming out of Mexico is manufacturing driven. It's not distribution driven, and so it's all stuff that's going into production that's
going to help make something at all. And so if you stop at the truckload from moving, it could cause an entire supply chain to shut down.
Matt Silver, thank you so much for coming on odd Locks. Really appreciate explanation, the level of detail and clarity, and maybe I have some I think I have a little bit more understanding now of how goods get across the border, but I appreciate.
You taking the time. Absolutely, thank you for having me.
Tracy. There was a lot in there that I like, but I'll just start with the simple point, the idea of like sort of registries and regulation as sort of making doing business much easier. I think is a point that's easy to forget. Like we think of regulation as some sort of like a curtailman of business. But if the regulation is you have to put in some info about yourself into a website that anyone can look up, it makes life easier for everyone.
Yes, to some extent. I mean I guess it helps from an insurance perspective and things like that. It goes back to sure the sort of like rule of law institutional strength thing. Yes, I have to say I kind of want to go to Laredo.
No, I do too?
Is that weird?
I have this.
Weird impression of Laredo because my dad always complains about it because I think he did his Air Force training there, which wasn't a fun experience for him. So he's always been kind of down on Laredo. But I feel like I want to go and watch the like the truck switch over totally.
I would.
I've always wanted to go to Laredo and also go across the border to Nuevo Laredo. Also, I really want to go to Nuevo Leone, the capital of Monterey, Like if you look at its skyline. There's some great pictures of it, like it looks like this sort of like like if you just looked at the skyline on a picture like Google Images, you'd think it's like some rise East Asian city because it looks so modern and gleaming and nestled in the mountains, like you think you'd be
looking at somewhere in Taiwan or Career or something. So I want to take a I want to take a Nueva Leone trip as well.
Yeah, that'd be interesting. So that was fascinating. I especially liked Matt's detailed description of you know, from the time the request for trucking or a quote is made to like the end goal of actually moving the goods. That was really interesting. I guess the one question I have, and Brad Setzer has written quite a bit about this, but like, how much of the increase in Mexico US trade that widening deficit has been a post pandemic recovery
and maybe more car imports being made. We've certainly seen that in the numbers versus that friend shoring idea or a mix of both. But it does seem to me like maybe there's also the thing that you mentioned in the intro the idea that like the trade statistics undercount some Chinese imports or they don't take into account Chinese imports that are going through Mexico and then onto the US. So I guess I still have some questions around that overall picture, but that was super interesting.
The thing that I'm really interested is whether, like we're going to see a sustained capital deepening in Mexico. So you build a big Tesla factory and then suddenly there are a lot more people that have had the experience of building a factory, right, and so that presumably you can do. I mean, it's the story we always talk about with the rise of East Asian manufacturing. But then you have that sort of learning, and then you have more people that know how to do other advanced manufacturing.
Some monkeys jumping from trees, that's right, are monkeys going from tree to tree as Housemen's.
Dis cardio houseman pudding. Like to me, like, that's really exciting if that sort of takeoff, those sort of network effects can be built up, and so then you have manufacturing that leads to more manufacturing. And then of course theory at least that it requires like some success from the public sector, both on security and then also infrastructure, electricity,
highways through almost the country. Still not great, but it seems like there could be the seeds there of some sort of like sustained, sustained increase in wealth, which would be pretty cool, or just the.
Idea that capital attracts additional capital. Yeah, people see stuff getting built. It's kind of like a network effect. Everyone gets excited one thing is built and that enables a bunch of other things. Absolutely, I can't believe I said monkeys jumping from trees. I suddenly had an image of, like, I don't know, a chimpanzee, like just leaping out of a tree, going ah and falling to the ground. That doesn't make sense in a trade context. That's not a good trade analogy.
Leave it there, Okay, all right, we're.
Leaving it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.
I'm Jill Wysenthal. You can follow me at the Stalwart. Follow our guest Matt Silver Hea at Matt Silver Follow our producers Kerman Rodriguez at Kerman Arman, Dashel Bennett at Dashbot and Kelbrooks at Kelbrooks and thank you to our producer Moses Ondem. For more Oddlots content, go to Bloomberg dot com slash odd Lots. We have transcripts, a blog, and the weekly newsletter that we write every week, and you can chat with fellow listeners in our discord discord
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