How Global Conflict Is Rewriting Inventory Strategy For Distributors

Nashville And Infor Takeaways

Welcome to Around the Horn in Wholesale Distribution with Kevin Brown and Tom Burton. Sponsored each week by Lead Smart Technologies, Tom, Kevin, and their guests review the news of the week and dive deep into the topics impacting manufacturers, wholesale distribution, independent sales agents, and the global wholesale supply chain. Whether it's MA, SaaS and Cloud Computing, B2B e-commerce, or supply chain issues, we peel back the onion with our guests into the topics that impact your business the most.

That's right. Nashville. Yeah, Nashville was fun. Glad you brought that up. No, it was great. Really cool. Um, got to spend uh it's today, Friday, Wednesday evening at the uh country music hall of fame, which was worth going back to and doing all the whole tours and stuff. I had an opportunity this week to be uh Monday evening for an event and all day Tuesday and Wednesday and back yesterday after a few days with our folks from uh Infor, the great folks that do uh ERP and warehouse management and all kinds of other technology for distribution and manufacturing. They had their annual uh Tug event, they call it the Users Group, and uh wonderful third-party group that helps them with that as well. Got to meet with some of the executives from that group. But uh fantastic event, super well run. Um, friends uh Daniel Mangan and Steve Levy and James Mumford, that uh some have been on the event. They uh put together a series of great meetings for me. In fact, uh, I think you just got a picture up there. So we're with our buddy Dirk Beveridge. Uh Scott Wagner is there, second from the left, and Scott's with N A E D and uh an industry influencer, which is what this discussion level was. I don't think if I ever had used that term around any of my kids, they would think that that's the case. But uh uh we got together, myself and Scott and Dirk, and and I got to meet with uh Kevin Samuelson and uh Mauri Cross and Rick Ryder that are in that picture, who are some of the senior most executives, including uh Kevin being the CEO of Infor and Mari the chief customer officer, and Kevin leading their AI initiative, or uh Rick leading their AI initiatives, and so forth, and just just a great group of people. And we talked about things like you know, platforms and AI and um AI slop and a lot of the stuff that we talk about here, and you know, some of the challenges that wholesale distribution is having and what customers are facing. Mari and I had a couple great, great um uh bit of time together talking about that. And so it was great to be with those executives and see the direction that Infor is going, which is a lot of it is in parallel with thinking. I wish we were a fraction of their size at Leeds Mart, but uh the thinking is so in alignment with the importance of uh extendability with software and technology and platforms and platforms versus point products and uh managing your data, protecting your data. So it's really good. Uh great uh pick here of uh our friend Dan Schubert from the National Association of Wholesalers and Distributors. Uh, Dan is going to join us for our 200th episode coming up, it looks like. And Dan uh showed a whole new side of himself. Got to see him up live with a karaoke band, not just karaoke, but band, and then uh Daniel Mangan there doing his best uh country western uh George Strait, all in black, there. I guess Johnny Cash. So that was really fun. But the other piece that I was back there for is they gave me the opportunity to lead a panel. So not a great picture here, but not too bad. And uh so I had uh an opportunity to join uh some great folks from uh from Turtle, the large electrical distributor, and McNaughton McKay, and uh then Scott Wagner again from NAED. And this was a co-sponsored event between NAED and Infor. We did it on the stage uh at uh the sports bar at the Omni Hotel in Nashville, and it was really cool because it was live cast. There was a big group of people there, and then it was live cast to I think you said between 800 and a thousand people uh were had logged into that live. And we talked about uh it was a really cool discussion. We talked about the buy side of distribution and and the levers that they can pull to really impact business uh and business growth and margins and so forth, and how that's actually with technology has been changing more and more. So great few days. Uh just love the folks at uh at Infor, just a great partner. They're with us regularly on the show, with Steve having been with us. We've got more from their executive team joining us. So shout out to everybody there. Thanks for the invitation, the hospitality, and the thoughtful conversation. So just I can't even start with a number of conversations I had with people there. That was just really enjoyable. If you uh are connected with me or follow me on LinkedIn, I I put three big posts up yesterday about uh my takeaways on the event and a lot more fun pictures as well. So it's good. It's good. So bad man, it feels good to be home.

You were just gone a couple days. It wasn't like you're gone a long time.

Well, man, I'm I'm old. I'm old. Had a beautiful hotel room. I was in a great hotel, great people, you know, everything was just well orchestrated, no travel hiccups, even based upon the the weathers uh that were going on and so forth. Um just turned out to be a good event in general. So glad I was there. Are you saying that uh I should uh should not be whining about the travel? I think you need to toughen up a bit.

That's what I think.

Um I'm gonna just reserve all comments on that. Okay. I will toughen up a little bit. We're gonna get to the second half of the year and I'm gonna be gonna nonstop. And so uh that's good. So should we dive in and do it, do a show today? Let's do it.

How We Run The Show

Yeah, good. Well, I'm Kevin Brown. I'm here with uh my lifelong friend, business partner, and co-founder and co-host of uh our show here around the horn at wholesale distribution. We get together every Friday, unless somebody's on an airplane in a hospital or on a planned vacation, and we even do it sometimes from planned vacations, and we uh discuss the news of the week and how it impacts wholesale distribution and manufacturing, and we talk about things like what's going on in the economy and supply chain and how that's impacting distributors and manufacturers. And we look at uh what's going on in MA and sales and marketing and technology and robotics and of course artificial intelligence, and uh we try to talk a little bit about leadership and people within a business, and we try and pull all those things from the news and tie them back into how that impacts our audience and wholesale distributors and manufacturers. So, again, we do this every week, and uh we do that by means of the newsletter that we send out. We send out a newsletter again, same title, Round the Horn in Wholesale Distribution and Manufacturing. Goes out to tens of thousands of people. We would love it if you would like to get that too. We'd be happy to share that with you. Uh if you don't get it and you would like to, please just let us know. You can get that at uh simply by sending us an email at hello at leadsmarttech.com. Additionally, you could uh just follow LeadSmart on LinkedIn. You'll see the updates to that. And there's also if you're looking at the LeadSmart Technologies page on the far left side of that page, you will see a banner, and that banner will say newsletter, and you can click on the newsletter and uh subscribe to it right there, and you can also just search for the newsletter on LinkedIn. So you could also go to our website for the show, which is www.aroundthehornpod.com and uh sign up there. But if you happen to be listening on Apple or Spotify or Odyssey or Amazon or any of the podcast formats, please hit the subscribe button, leave a review from there. You won't be seeing these two handsome faces, nor will you be uh seeing the newsletter that will be up on the screen in front of us. So you can go back anytime you'd like and uh catch us on YouTube andor Facebook Live or LinkedIn live and see the live recorded episodes there. But happy to have you with us, and uh, we're looking forward to the show and some good comments hopefully coming in for some of our friends that join us live here as well. We've got uh um handful of folks. Well, say, look, there's our good friend Mark Gillum from uh Enable that'll be with us on the show here in the next few weeks, and Bob's with us and got quite a few other people joining and coming in with us as well. So we'll look forward to comments that are with us today. And uh let's dive in, Tom.

New Fed Chair And War Risks

The uh maybe start with something that's not necessarily on the newsletter. You don't even need to throw it up yet. Kevin Walsh is being uh sworn in as we speak as the new Fed share. So, what are your thoughts on on him coming in and how that's gonna impact uh the economy?

Well, we talked a lot about this last week um on the on the show. Honestly, I don't think anything's gonna change much temporarily soon, right? I don't think there's gonna be an immediate shifts, but I do think we will see again this whole back to this whole Iran war situation, which again seems to continue to be at a stalemate. I just was doing some more homework this morning. There's not a lot of movement. In fact, if it wasn't for the Pakistanian president and and the Pakistanian leadership, I'm not sure anything would be getting done on the whole thing. Um, the one thing, uh not to go completely off topic, but I didn't realize that this Strait of Hormuz has been a problem for many, many years. This isn't just like a um something that's certain, I mean, how many people ever heard of the Strait of Hormuz before this war? Right? This wasn't a household name. And supposedly this has been an issue for a while, and Iran has constantly been trying to move out their borders to the like 12 the straits only 21 miles wide. So that's like from here to Catalina Island, if you put it that, you know, from where we are, or it's or the Channel Islands where I am. And so it's not a very far distance, really. Um, and so they've been outreaching and putting their, you know, their their zone, I guess you'd call it, or their territory zone farther. They've been trying to have control. The U.S. has constantly been having naval presence in there. I mean, there's been a whole drama in the Strait of Ormuz going on for many, many years that no one ever talked about, right? And until now. And now they're really trying to figure out how to exploit that going forward as part of these negotiations, which is also causing. So just, man, the stories behind the stories here, I think, are just remarkable as you start to peel the onion.

Well, when you if you stop and think about, in fact, um I've got an article I'll include next week, ran out of room this week, but it talks about the choke points within supply chain around the world. And the the three biggest ones are Strait of Hormuz, Panama Canal, and the Suez Canal. And uh, when you get those pieces, any of those, and you've got you know two there in the Middle East that have uh major impact from a I'll say a geopolitical standpoint, you've got less pressure from a geopolitical standpoint with the Panama Canal, but you have issues that can come up with that regarding, as we saw early last year, with you know, having a lower, lower level of uh of water from a drought in the lake that that feeds into before you get to the other side of that. Uh, there's lower levels of water was where in the Panama Canal, so fewer ships could get through, which was slowing down the entire supply chain. So there's a series of choke points globally that uh we probably don't think about until there's a problem, right? And then now you've got this, you know, you're talking to about the Strait of Hormuz, and it's certainly something that you know we should all know something about if we went to our geography classes at some point, but uh it is a major choke point that is impacted by a very volatile government, and that is a component of what the U.S. is trying to do in this setting is get some stability to that as well.

So uh yeah, and if you look at this, right?

So this is the the straight here. Still know why it's not no it's why it's called the not called the elbow or the knee.

Yeah, let me refresh it because I don't know. But so this distance here is the 21 miles, right? Or between here and here is 21 miles.

So for those of you that are are listening and not watching, Tom has a a map, it's a live map that's up on his screen that's showing ships transiting uh or attempt wanting to transit the Strait of Hormuz. Yeah.

Um, so what Iran is saying is that they've got over half of it, right? And then on this side, they're claiming, well, we have the other half here. So they're trying to take ownership basically of this area. And then the most recent proposal I understand from Iran is is well, we want to have kind of a toll type of thing, but we'll give preference to Chinese and Russian ships going through here versus other ships that are there. I mean, anyway, I it just it I I I guess there's two things that hit me. One is how do all of these countries that all of these wealthy countries and all these oil things, how did this happen? Right? How did this how do we let this happen? Number one and number two. And secondly, did we realize as we invaded Iran and started this war, how this was going to factor into all of this, right? I I I can't imagine we didn't. I mean, we didn't absolutely no, but I mean we did to the degree, and I think we there must have been something. Oh, we'll just be able to, you know, handle that and brush that aside. There's just a lot more going on here, it appears, than hey, we're blocking the strait because of this conflict.

Yep. Well, I I think what there's a big I think there's another story behind a story there that you're describing. I think what uh probably came out of this was the two two components. One that the the initial bombing that was going on uh within Iran, and their expectation was that they would capitulate quicker than they did, right? And then there was the probably the human interest component of that and human life component of that that says if we take the country out and go too far with it, there's a likelihood they may even not only just attack their neighbors, but they may, you know, do some things to completely shut down production. And, you know, this is and and there's we have a few articles ahead that we'll we'll talk about this more. But this is so much more than just oil, right? It's it's all of the other commodities that are coming out of there, between helium and the fertilizer components and nitrates and so forth, that are really impacting, and they're impacting Asia and Europe far more than they have an impact here, but there's an impact here as well. And so I think there's and I was listening to one of the podcasts that we both like a lot and talk about here last week on the um the all-in podcast, what they were talking about in that setting as well was that you know it's it is becoming more and more apparent that there needs to be some likelihood of there's gonna be more bombing and more attacks going on to get to the bottom of this. Because, you know, right now, you know, obviously it looks like, and this is not a political show, this is a business show. Uh, but right now the look of from the look of things is really um the um uh the issue, I guess, behind this is there's they they are ready to stand by and drag this out and throw some bombs at neighboring countries and keep control of the Suez Canal and at the same time um watch the rest of the world kind of go through a squeeze because of the oil. And they watch the news just like anybody else, right? That this our current president in the U.S. has never had a lower approval rating. People don't like the high costs here, there's pressure to get out of the war, and they're prepared to wait because there's a little different view uh in that country of well, how it impacts their people, right? If you have a regime that is willing to kill people for their political views in the streets and not worry about it and not be concerned, then you've got the ability to put those people in harm's way and and uh not care about how the things impact them. So I think there's a bigger component to that, Tom.

Yeah, so going back to answer your question about uh Warsh being um the answer is I don't think anything's gonna change until something changes here. And I don't know what's gonna change here anytime soon as relates to the war, because there's not a lot of room. You know, I know there's talk, there's I think now there's a 40% in the poly market that there could be a rate increase by the first of the year. I just don't see that. I don't I don't see there's any way that that's going to improve a situation. This is again, as I've said before, not about the fact that we've injected a whole bunch of money into the system like we did during COVID. This is the fact that we have cost increases due to scarcity and issues with you know energy and all of those things that are there. So it doesn't give them a lot of a platform to lower rates, but at the same time, I think raising rates doesn't really solve anything either. So I guess that answer to answer your question, which you said, what do you think is going to be different or change? Not a hell of a lot, for at least for a while.

That's the I I think I've got to I feel like something's gotta change here before in this in this conflict before anything else changes. Um the um the idea behind

Supply Chain Choke Points Matter

that is and we've got you know the first article that we have this morning in the in the newsletter, right, is about the UN cutting global growth forecast at two and a half percent, and it blames the Middle East crisis, right? Right, full on, straight away, no ifs, ands, or buts. That's the that's the blame to it. And so the the component of that is that it's what it's doing with not just fuel again, but it's doing with all of the other commodities that are coming out of that and the growth of opportunity. You know, I remember in December and January, you know, you heard people talking about four or five, you know, maybe even six percent GDP increases, and you know, those things are just being cut dramatically now. And I think you know, if you read majority of what you I'm reading out there is saying if we could get to three percent, it would be great.

You know, yeah. Well, and this is a this isn't the US GDP, by the way, this article. Correct. This is global growth. Yeah, global, correct. And look, you know, the impact that we feel here, right, is our 658-gallon gasoline. For the most part, that is the impact that we feel here. Obviously, in the commercial world and things like that, that high energy cost is impacting there. But think about the rest of the world. I don't know that we I know I don't understand or have appreciation for the impact of what this has done into other parts of the world, not just Europe, but some of you know other countries in Asia and so forth along the way. So there's a lot of other impacts here, other than our six dollars. It's not like we're lining up for fuel like we used to in the 70s or whatever, right? Fuel is at least plentiful, it's expensive, but it's plentiful, right? So it's it's really interesting, I think, to understand more. And I think this is what this article is starting to go into is hey, globally, this has got a major impact. It's not just an impact in the US or in the Middle East where the conflict is taking place.

Well, let's let's tie all this back to you know, the reason that we're here and the audience that we're here for is uh wholesale distributors and manufacturers. And it kind of goes to the next article that we have there from Reuters uh from yesterday talking about U.S. manufacturing activity rises to a four-year high in May. And that's the great, great statement that I really liked in that article is it said uh they call it an inventory whip. It says distributors are moving away from just in time and back to just in case logistics, right? The supplier delivery times, you know, are lengthening and stretching out more. Uh, we've had the, you know, we're gonna talk more in a few minutes about tariffs, but you've got the whole tariff component of that, you know, that's been going on as well. And so you've got a huge margin squeeze going on here, and then you've got a supply squeeze. So now you've got this, you know, whipsaw type thing happening where it's saying, okay, well, people are rushing to go boost inventories and um uh because they want to make sure they're gonna be able to get things, right? Because the other side of that, you know, we haven't talked about is we've got this fuel issue and the pricing issue. Well, guess what? That goes into every delivery truck, it goes out into every locomotive that is bringing a you know, every summer, let's take it from the start. Actually, it's an increased cost of delivery from a container ship coming from China to the US, and that container gets unloaded onto a semi-truck or a rail car. All of those need fuel, and then you move that to the next level to it gets landed to the distributor. Now the distributor is putting it on their trucks, and gas is what you know, 20-30% higher than it had been, and uh more in some places, and you've just got this trickle-down effect. So now it's like, okay, I'll load up on my inventories because they may be much more expensive. But then what happens with all of that when all of a sudden we have a free flow of of uh tankers going through back through the Hormuz Strait, and uh we've got to settling in from all of this. It then then we've got the whipsaw back the other way.

Yeah, we had this before, right? We had this before prior to some of the tariffs that initiated, right? The kind of the the the front line.

Now you but it's it's compounded, right? Because now you have the tariff component and so forth. So yeah, so that's the the big challenge with it. So, anyways, uh let's kind of move through some of these while we're still on the sub the uh economy section. So Fed survey shows household view of the US economy is worsening uh before the War with Iran, 8% of adults said their families sometimes or often lacked enough food with that. And that's just growing now. So the sentiment is difficult out there right now. And you know, the the sphere of influence that we have here in the show are, you know, for the most part, people that are, you know, well, well employed, just not employed. And uh there are some, you know, and I just look at it and it's like I hate what I pay for gas, but the impact that it has on me is very different than it has on some other people. There's people that, you know, I I have a dear friend of mine owns a small company that does uh shower door and and and uh closet glass closet doors and so forth. And he himself drives a thousand miles a week, and he's got eight or ten trucks out there, right? Well, they'll survive, they'll be fine, right? They maybe they've raised their prices a little bit, but think about you know, the person that is struggling to get by that has to drive a ton. It's it's difficult right now.

Yeah, it's interesting. You know, I've had some conversations, and granted, I'm probably not conversing with the lower end of the of the spectrum, but certainly middle class and upper middle class friends, family, and so forth. And what I hear is yeah, the prices are a pain, but I'm offsetting that pain by the gains I'm getting in the market and my 401k and all that kind of stuff. Right. When that music stops, which it will at some point, and you weren't all of the price increases are not being offset by the stock market and the gains that people are making again in their stock market and 401k, then I think we have a very different situation, right? Now, I and I think that's what's keeping us right now from basically going into a recession or a recessionary situation is people and the consumers continuing to spend because they're still feeling wealthy with the stock market and everything like that. And it offsets the $6.50 gas or even the other inflationary thing or you know, price increases that we see. But what if the market was down 30% on top of all of that? What do you think the sentiment would be then? Exactly right, versus the other. And think about all the people that are quote unquote retiring or close to retiring and relying on 401ks and and you know investment income or and from things like that, right? A 20 to 30 percent drop in the market, which is not ridiculous, you know, and that very well could happen. That's meaningful, right? Yeah.

Um, but let's let me can I interject something to go with that, Tom? I just looked up this stat really quick, right? It says 62% of U.S. and this is from a Gallup news poll. It says 62% of U.S. adults are invested in the stock market. But that's in some form, right? So that could be through their, you know, through a contribution from work, it can be some holding of some sort, but it's a direct ownership. Only 21% of families own individual stocks. So let's look at it from that standpoint. You've got, you know, 38% of the country doesn't have anything invested in that and can't play off of that. So what is that? That's um, you know, um give or take hundred million people that aren't at all. Uh, but then you've got the other component of that. You've got uh, you know, the a third of those people don't have any, I'm sorry, two-thirds of those that 62% don't have any individual stocks that they own. So you've got this vast majority of people that, you know, the the warehouse guy that just started two months ago, or the maybe the younger field sales guy that isn't in included in your company's e-sop or or a 401k or whatever you might have. So there's a big component of people that don't have any of those things. So they're not getting that rise that you just you described.

No, and that's well, and that's a whole nother issue, right? Of where you have sort of the in the political area, you know, the the people that the the haves and the not haves. But I'm just talking about there's a lot of people, obviously, per your statistics there, that are that that judge their wealth factor and their spending based on their even their 401k. Right. They get their 401k, you know, statement in the mail, or they watch it on, you know, their stock gap or whatever the case may be. And that is the gauge of determining that am I in good shape or not? Yeah. Or and I would say the second thing being how housing and and property. Yeah.

Well, so I I won't agreed. No, I wouldn't argue any of those things. My um the the comp the thing that I think resonates here and significance is and comment was made here about you know all of these surveys and so forth that are going on and sentiment and so forth. And I kind of listen sometimes to my wife who gets frustrated with the cost of things and and uh you know, and the people behind some of this is you know, the the question that really lags there is what is your view? Would you prefer to have a dot pay a couple bucks more for a gallon of gas and a you know 75 cents more for a loaf of bread, or the terrorist risk and the nuclear risk that goes with all of those things? So it's everybody just gets to decide what is what does all of that mean for them and how they feel about these things. I think we very quickly, and and I'm appreciative of the comment that was made, is that we sometimes very quickly go to that component of you know my my immediate pain and how things are impacting me versus what's best, you know, globally on things.

Well, and I think there's two issues. So, yes, the the comment here and and and Bob was saying, right, is wait a minute. The reason we quote unquote entered into this war, right, was the risk that Iran brings not only to the Middle East, but potentially the US as well, and or a very big risk to the US as well. Yes, right. So we had to we had to handle that situation, right? Well, for a lot of people, one, they don't believe it, they don't believe there was ever a situation or is a situation, and two, if they believe it, it's certainly not impacting them right now, right? Correct. It doesn't change what they go eat for dinner tonight. Now it could impact them in the future, obviously, or their kids or their you know their family and so forth, but it doesn't impact them right now, whereas the two dollar increase in gas does impact us right now. So, yes, I agree it's it's we have to kind of zoom out, if you will, and look at things. But I don't think as a as a culture, we do that very well. We tend to focus on what is in front of us right this second, and that's it.

Right.

Well, it's a it's immediate impact to me versus the big picture,

EU Tariffs Deal And Execution

right? So yeah, so let's let's jump ahead here a little bit and look to uh there's an article here that we published about the EU overcomes fierce internal debate to agree on tariff deal with the US. Uh interesting component, right? So this is there's a July 4th deadline that was on all of this. Uh big push back and forth in Europe about their overall view and and uh whether they wanted to do all of this. But the agreement now, and it's been agreed to by the uh European bloc as a whole through a democratic process to agree to this, which was the the image in the article here, is the handshake of the uh head of the EU along with the President Trump, is okay, so now they've said they're prepared for this, and we're we're willing to now we've we've voted as all of the nations that vote within the the European Union that they've agreed to this 15% tariff cap. So now we've got the margin pressures and all of the things that that are agreed to, but then they've got this balance of well, which which one of your US tariff statutes are we going to be paying this under? So it's it's I think there's a big picture component to all of this that says, and it's beyond the EU. And I I'm interested in your thoughts on this and anybody that wants to comment on this. But what's going through my head is okay, you've got the EU that has said we in lack of a better term, capitulate, right? And we will agree, and we're gonna we we want things smooth because we need to be shipping our cars and our electronics and all of the other important things. Um, so we're in a good position there. Um let's let's sign this, let's get it ready to go. So now that we have that, there's two components to that that go through my mind, Tom, and I want to hear what you have to say. For the first is okay, what other nations come along and say, you know what, it's it's time for us to just do what the EU did. So there's that component, and you I guarantee you that you know, Bessent and and uh Secretary Bessent and uh Lutnik and all of the others from the administration are pushing those other nations now to say, you know, you uh EU is in line, right? You need to come in line similarly. So then now we have that thing that's saying, okay, we've got all of these countries who are acknowledging their willingness to work with us on this. What are the courts going to say, right? Because we've got a whole group of people here. You've got the the other, I'll just say the other side of the aisle that's trying to push this through and make these things look illegal and not allow the president to do this. But through the wranglings behind the scenes, he's gotten the entire European Union to say, okay, we're in.

But and I don't, you maybe you know, I don't think this agreement is based on any of these legal reasons or means of collecting tariffs. If he's agreed with Europe that we're going to collect 15% tariffs, does that matter what legal channel that that that is being managed under?

Yeah, that's so that's the conflict that's built into this article, right? Is like how does that play out with what we're saying here? And there's no, I don't think there's any clarity on that yet, uh, as well as this.

So I don't understand why there would need to be clarity. If I'm if I make a deal with you to for 15%, who cares what legally what legal statute is being used to drive my arbitrary tariffs?

How how do you collect them through CBP if the CBP doesn't have a methodology to go collect those? Right? What I I don't know the full answer to that. And maybe somebody that listens in does. It'd be a great thing to to research a little bit further. But um, but that's that's the the the rub here now is that how do you go, how do you execute against that in this setting?

Yeah, I think there's what I read in this, I think there's three things going on, and I and I think it's an intelligent move, by the way, by the EU. One is hey, let me hedge my bets. Absolutely, right? Let's just get this, you know, 15%. We can live with that. I don't know if that's reciprocal, but it's a long, it's close to the reciprocal for a lot of the tariffs that exist for the imports that are coming in. Secondly, let's put some predictability back into things, right? If you look at wasn't that one of the articles we talked about. Absolutely. Yeah, stability is it's this instability in all things, right? So distributors said their biggest issue was unpredictability. So let's put some predictability back into it. And I think the third thing is hey, I want to use this as a as a tool to get some additional favored nation status with the US and with the administration, right? To me, that would be a smart move, right? To say, look, okay, let's just cut through the noise, we'll pay the 15%, we'll we have some predictability. And now, how are you gonna help us really go to the, you know, get aligned to our goals with by the fact that we did come to the table early and first in doing those things. Now, as far as the infrastructure and administration that's required to collect tariffs, that's already in place, and those are gonna have to be in place no matter what, because we're gonna be collecting tariffs in one way, shape, or form, regardless of what the court what statute the court is, and I'll I'll just finish this, but you remember that the court is or or blocking the things that were the statutes that the Trump administration used to arbitrarily collect tariffs from different countries. Yeah, right. Those were not agreed upon tariffs with the country, those were arbitrary, you know, you must pay type of things, and was using those statutes to implement those standards. So I again, unless there's more to this than I don't understand, I can't imagine if there's an agreement on it, regardless of the statute changes, gets approved, disapproved, you know, knocked down or whatever.

Well, I'm glad you brought I'm glad you brought that up, Tom, because what uh now I'm going to uh remind everyone that might be listening here that I I can hallucinate as can the tool I'm using right now in front of me, Gemini. But I asked the question related to this. Uh you know, I do a little peek behind the scenes. I have all of our articles up here on Gemini and or on uh um Chrome, uh Google Chrome, and I have Gemini running the side panel, you know, helping me with the breakdown so I can ask questions about the articles. So I asked it very quickly because it had given me a breakdown on the article. And uh I said, how does this uh CBP collect this if we don't have a current agreement in place? And it said this hits on the exact structural breakdown. Yes, it needs to start right away, and um, it relies on a loophole on the executive's broad authority to execute trade agreements. So this is a trade agreement in place to your, and that's right ties to what you were saying. So it says, how does it collect uh this? It says the short answer is a presidential proclamation. When the EU deal goes live, the White House will issue an executive presidential proclamation directly to the Department of the Treasury and the CB to CBP to modify the harmonized tariff schedule. Uh the blueprint that CDP does not write tax law and their enforcement armed. Once the proclamation lands, they get started with their work. It says, and the loophole is even if a court rules that the specific statutory mechanism, like section 122 or IEPA, is invalid, CBP legally is legally required to follow the active presidential proclamation until a court issues a specific injunction. Now, why, and that was kind of where I was leading earlier, Tom, was like there is now pressure on these courts that if you've got the EU, now the impact of the tariffs on the EU versus, say, China, are very different because of the amount of trade that goes on, right? But if you've got an uh a group as large as the European Union that has said we're shaking hands and we're we've now voted as an organization that we're thumbs up willing to pay this to not risk it being any worse, and now we just have a presidential proclamation. Why would the courts I mean, what's the point of wasting the time?

You mean wasting the time of of trying to block any of these things? It doesn't make sense, it wouldn't make sense. There's not a lot of driver for that, but for the countries where there is an agreement, right? Yeah. So again, I think you're it would be, I could see like if I was sitting in there in the EU or European Union and one of those people, I could see the argument, right, that they're looking at going, well man, do we just do we cash in now and hedge our bets and take the 15% and and try and figure out how to make this you know a positive uh all the way around so I can improve my favorite nation status? Or do I, you know, hold my cards and and you know hope that some of these other things work through and maybe we end up with nothing or little down the road. But I do think what I said before, the predictability, the hedging, and the favored nation status and the brownie points that they should get for this outweighs the 15% or the and clearly they know we have a we have a comment here that talks about you know the EU here.

It's a smart move to not bite the hand that feeds you, right? And and you know, we we've said this all along in these discussions, Tom, right? Is that the there will be tariffs, right? It would be silly not to think there are going to be tariffs. And so they will get through at some level. So why not have a a workable agreement that's in place, right, and work from there and and hope that uh the president sticks with it and doesn't want to change things again. So um let's kind of move off that topic just with the time that we have today. There is, though, I think, an important article uh as we move into our um uh manufacturing, distribution, and MA segment.

HVAC Price Fixing Lawsuit Watch

This is an article that is kind of important for people to be watching, not just if you're in the HVAC side of things, but if you're in distribution tied together in general, it's from um uh ACHR uh news, and it talks about the we and we published an article about this a few weeks ago, right? There's a major lawsuit now, uh, but it's been expanded about price fixing amongst some of the largest companies in the HVAC space, carrier, train, daikin, and ream. Um you know, of course, everybody says it has no merit, but the discussion is that there was a lot going on uh throughout um some of the groups that they work within. Um the um air conditioning heating refrigeration institute provides some uh pricing uh models and uh puts a lot of market data and information out there. And this whole lawsuit is tied to what's going on with collusion. Uh the the concern is, or the lawsuit is tied to this collusion and price fixing that ties amongst that as a whole. And I think the unique piece is that this could happen in any market, uh, whether you're talking about roofing materials or industrial or pipe valve and fitting or whatever it might be. And it this article goes in and talks a little bit further about what happens uh when you have some of this industry information that goes across the board. What happens, and then you tie that tied it back. And I think it's important. We have um ourselves at Leedsmart, we have quite a few organizations that uh and buying groups that we're partnered with. Now you sometimes have that buying group or trade group influence where it says, hey, you know what, we're working on pricing models as a large group with a particular group of manufacturers. This this I think has the potential to get really sticky. And uh if it gets legs and really moves a lot further, deeper than it is right now, um, and the courts move ahead with it, it could have some pretty big impact on things.