How business leaders are reacting to tariffs (with Flexport's Ryan Petersen) | Rapid Response

Whether it's reaching your first billion, expanding globally, or trying to build a new business model, every business has a different idea of progress. This episode is part of a special series in partnership with Stripe, empowering businesses to make progress.

We knew there would be tariffs coming, at least on China. Canada caught us by surprise. If they're going to put tariffs on Canada, then there's probably no safe haven. There's a little bit of paralysis setting in because you're like, well, It's changing every week. I don't think I want to make a— supply chain decisions tend to be long-term. I tell the team sometimes a lesson I got from my father when camping as kids, that you don't have to outrun the bear. You just have to run those campers in that next site over. So this is a lesson for our customers too. Hey, the tariffs are probably hitting all your competitors too. So it's how do you adapt? How do you react? What are you going to do differently in your business that is going to define whether you win or lose? It's not just what happens to you.

That's Ryan Petersen, founder and CEO of the global shipping and logistics platform Flexport. I wanted to talk to Ryan to better understand how tariffs and counter-tariffs are remaking global trade. Ryan shares what he's learning from clients around the world and gives us a behind-the-scenes look at how international commerce truly functions right now. Whether you're an exec facing supply chain panic or a concerned customer watching prices creep up, Ryan puts the so-called tariff war into context and offers insights about what to do now. He also shares why he's texting 40 colleagues a day and is more involved in the details of the business than ever. I'm Bob Safian, and this is Rapid Response. I'm Bob Safian. I'm here with Ryan Petersen, founder and CEO of Flexport, the worldwide logistics platform. Ryan, thanks for joining us. Thanks for having me.

My pleasure. Great to be here, Bob.

So we have seemingly entered a new era in global trade. Everyone knew that Donald Trump would focus on tariffs if he got a second term as US president, but few expected the speed, the scale of disruption that we've seen from China to Canada, now champagne from France. Are there moments in recent weeks where you've gone like, what just happened?

There are moments every day, it seems like. Yeah. Flexport's a platform for global logistics. We help companies ship cargo all over the world. We're also— we started as a customs brokerage. That was the very first thing we did. was help people figure out how much duty they owe and make those filings on every shipment they transact. So yeah, we're in it. We all thought we knew there would be tariffs coming, at least on China. Canada caught us by surprise. If they're gonna put tariffs on Canada, then there's kind of no, probably no safe haven. The other one that's really caught me by surprise, I didn't see coming, it hasn't actually been officially rolled out. They kind of put it as a proposal. So let's see if it comes out down the pipe, but is fees on Chinese-made ships whenever they make a port call in the US. And it impacts any carrier. So the companies that operate the ships, if they own a single Chinese ship anywhere in their fleet, or if they have even ordered a ship but has not yet been delivered from a Chinese shipyard, then they'll have to pay this fee on all of their ships every time they make a call at a US port. And it's a very high fee, about $500 on every container that they ship.

When a new tariff or one of these rules gets announced or gets talked about, like, what's the first thing you do? How do you keep track of what's real and what's not as there's all the back and forth about it?

We try to pride ourselves on being good at rapid response, on being good at figuring out what's happening in the world. We create little war rooms. It's basically a Slack channel where you get the right people involved. Most of these are open to anybody at the company, and we encourage people to come and share information. It's okay if it's not all perfectly true and accurate. We're trying to synthesize it, figure out what is important, and then importantly, have the right decision makers in there. discussing this. Often there's a Zoom call or some other way to get people coordinated and then figure out who needs to know this information so we can make some decisions. It's been really tricky. The first day, I think it was the first or second day in office when Trump put out an executive order on tariffs, but he started, if I recall, started with a Truth Social post.

Hmm.

And then it went to White House press secretary, and then it went to an executive order, and then a week or so later it became kind of official CBP memorandum. And in the very beginning, we're like, as soon as he tweets something, let's send an email to everybody. And then you realize like, oh, wait a minute, people probably want a little more stability and certainty and clarity. Because often the high-level stuff from the president doesn't have enough specifics to figure out what it really translates to. And you have to kind of wait for it to move down that pipeline before you can—

Yeah.

Not, you don't wanna overreact.

Can you step back and for, for our audience, just give them a picture of how Flexport sort of fits in the flow of global trade? If you're not operating ships and moving containers yourself, but you're moving a lot of information and helping people make decisions about how they're operating ships and moving containers.

Yeah. Flexport is the sort of coordinating layer. So, you know, it, it, our ocean freight business, which is our largest business, we also do air freight, trucking, Some rail freight, customs, as I mentioned, some other technology-related services, but ocean freight's the core business. And in that world, the simple way to think of it is that the ships only go from port to port, but that container needs to go from a factory to a warehouse. Our job is to coordinate that end-to-end movement and make sure the data travels in parallel, the financial flows, there's payments that are taking place. You can think of us as running that loop. So a company will place an order to their factories through Flexport. Factory receives those orders, they go and produce those goods, and then they place the booking saying, hey, it's, these are ready on this date, come and pick up the container. And then we dispatch trucks, clear the customs out of the country, get it onto a contract on an ocean carrier. And then, you know, kind of mirror image on the other side, coordinate the customs clearance and delivery. It's an ancient industry. Freight forwarding is called, has been around thousands of years really. In fact, there's evidence of long-distance trade that goes back older than art, you know, even older than the caveman paintings. So been a little bit slow to adapt to technology. You can see the kind of core technology problem there is on one container. No, the ships only go port to port. You gotta have all these other modes of transport. It might be a rail leg, a truck, the ports themselves. So they're all running different IT systems that don't talk to each other. And so I often joke freight forwarding, it should be called freight email forwarding. It's like our job, people like coordinating this and What we've done differently is sort of like build this integration pipeline to connect these various IT systems, build user interfaces for the people involved to get data or give us data, make that coordination, yeah, more efficient and more reliable.

When potential news comes out like, oh, certain ships, it's gonna cost you $500 more per container, like you have to then build that into your system so that all of your clients, when they're making their choices about how to optimize That suddenly changes, right?

Yeah, exactly. That one's, that one is still like a big TBD 'cause they haven't published it, you know, they haven't made it official and it's a little unclear. Ultimately, that's gonna sit with the ocean carriers themselves, and I don't know how they're gonna do it. My working assumption is actually they don't have the level of sophistication in the data required to model, like, was this ship made in China or not?

They don't even know how to answer the question if it's asked.

They're probably just gonna play some blanket average. You go, all right, every, every container costs $500 more now. But yes, it is. When tariffs change, we pride ourselves on being the first to find out, okay, here's all the customers that are gonna be affected. This is how much it would've cost them last year. Within an hour, usually we're, our team is on the phone kind of notifying customers about this, this new change that's happened.

And in, in this environment with the tariffs rolling around, how important is it to respond like immediately? How do you balance that? I wanna be on it versus Like, maybe I wanna know what's really for sure happening.

I think we wanna be on it as soon as there's certainty and then be very, very quick. Uh, we, we see it as an opportunity to really differentiate from some of the slower moving companies that are out there and just be like, we're gonna be the ones proactively telling you about the problem. We do have to balance it of like making sure you're right. I had a team down in Washington recently, a couple weeks ago, go visit CBP, uh, sorry, Customs and Border Protection. The, the regulatory agency for customs. And they told us that they're finding out about these new things, new rules, and they're finding out on Truth Social like the rest of us. So we're figuring this out as we go, man. It's pretty new.

For you personally, how do you deal with all this change? 'Cause this is not the environment you were planning on, you were hoping for. It's different.

I founded Flexport in Really, we say 2013. That's when we got our license by Customs and Border Protection to be a licensed customs brokerage. So it was 2014 was a pretty chill year. I don't think anything major happened. 2015, we had a port slowdown on the West Coast, and there was like 3 months where you really couldn't import a container into the West Coast. It was so backlogged and people were missing Christmas season and stuff. 2016, the price of ocean freight collapsed. to levels never before seen in the history of humanity. You could ship a television across the Pacific Ocean in an ocean container for $2 that year. I mean, it was just like dirt. It was free. In fact, so bad that one of the ocean carriers went bankrupt, Hanjin, a big Korean carrier. We had cargo stuck on their ships and couldn't get off. And then Trump came in '17, '18, '19, put in all these new tariffs every day, every week, whatever. Then you had COVID and the backup of Container ships stuck off the Port of Long Beach. There are famous images. And we had war in Ukraine, Red Sea. You couldn't ship through the Red Sea. We still can't ship through the Suez Canal right now. And then this, so like we're kind of used to it. I tell the team sometimes a lesson I got from my father when camping as kids, that you don't have to outrun the bear, you just have to run those campers in that next site over. So on some level, We, it's bad for our, this is a lesson for our customers too. Hey, the tariffs are probably hitting all your competitors too. So it's how do you adapt? How do you react? What are you gonna do differently in your business that is gonna define whether you win or lose? It's not just what happens to you.

And in some ways there's more demand for your services when trade gets messy like this. Although it's, as you describe it, it's been messy nonstop.

Yeah, no, I definitely, our, our, our work becomes certainly more important. We did, we never celebrate it. Obviously it's really bad for our customers. We think it's bad for business generally, bad for the economy. And, and probably a lot of this stuff's bad for America, I think. But hey, I'm not— nobody cares what I think on that regard. But it, it can be good for us if we're better than responding than our competition is. And if we're able to solve problems for our customers, there's a million ways we can add more value in this environment.

Among your clients, is there any consistency around how folks are responding and adjusting to the tariffs? Are business leaders, are they, are they angry? Are they frustrated? Are any of them excited?

They're angry and frustrated. I've definitely seen both of those sentiments. The frustration is both on the duties impacting their business and on the lack of certainty about what's next and how to set things up. I think people are resigned and understand duties are higher from China. If you have an option to produce elsewhere, people have been pursuing that, by the way, for a decade or more because Chinese labor costs are much higher than they, you know, and good for China, right?

Mm-hmm.

They're like paying their people more, people are making more money, But if you're just looking for cheap labor, China hasn't been the go-to spot for a long time. But the tariffs are accelerating that. So last cycle it was mostly targeted at China, so people felt, let me go set up in Vietnam, Malaysia, Cambodia, Mexico, Peru. We've seen it all. Now I think people are a little bit paralyzed. Maybe that's another sentiment. There's a little bit of paralysis setting in 'cause you're like, well, it's changing every week. I don't think I wanna make a— Supply chain decisions tend to be long-term, you know, multi-year, like you're setting up a new factory relationship, new logistics network. A lot of people are kind of paralyzed waiting for the other shoe to drop and figure that out. It's very interesting, you know, even people who voted for Trump and then they're like, oh, actually this is hitting my business pretty hard. I'm not sure I like this. So it's a mixed bag.

And there are a lot of business leaders who supported Trump. So that's why I asked whether any folks were excited about it. But it doesn't sound like in your world there's a lot of—

Well, nobody really likes to pay more taxes, right? And tariffs are ultimately more taxes, probably the I mean, there's some American manufacturers feel like, hey, okay, good, this is leveling the playing field. But a lot of them use imported components in their goods. So, but it might impact others more than them. And ultimately that is the game of business. If you gotta outcompete your competition, if you're made in America, this is, you're probably feeling much better about things right now. But the big problem, I think why tariffs are gonna be very difficult to really change, they're trying to change the culture and the economic base of the country and move us to start making things again. I think that's a noble cause. Like, you should manufacture more in America. But the fundamental problem is that the US dollar is just so strong that even if you put tariffs on, it's still cheaper to buy stuff from other countries. Unless they weaken the dollar and make it just like much more expensive to import from other countries and make our products cheaper to export to other countries, I think it's going to be hard to transform the sort of trade imbalance. 20 years ago, for every 100 containers that coming into the country, 80 would go back with goods in them. Today it's 30, and 70 containers are just going back truly empty. So if you see these big container ships, you're near a port, take a look. If it's sailing outbound, you see all those containers, 70% of them on the way out are just empty containers. That's a problem, honestly. Like, we should be making more stuff. But I think as long as the dollar is kind of the global reserve currency, And it gives you such purchasing power to go to other countries and buy stuff, then that's what businesses are gonna do. Water flows downhill.

I mean, some people are looking at the tariffs and the retaliatory tariffs and the sort of the changing environment as like a pullback from globalization overall. Does it have you rethinking anything about the premise behind Flexport's business or, you know, how you think about global trade in the long run? Or do you think like, Hey, inevitably global trade's going to keep growing and this is just going to be a bump in that.

That's, I mean, on some level I have to believe that. It's like dependent, my business needs there to be more global trade, but I do believe it. I'm a big history buff. And if you look at the long run, we've seen 4% annual growth of global trade since the Mongol invasions in 1200 AD. And you're doing a lot of Stuff that happened in the world that was pretty ugly in that time period. And if you look at that graph, it looks like this Silicon Valley, like hockey stick OpenAI growth curve, even though it's only 4% growth. Because if you take something and you compound it 4% for 800 years, you're just like, oh my goodness. When you look at that graph and you zoom in, you see World War II. You're like, oh, look, like trade kind of like had a little stall out right there. Went down even a bit. And nothing, I, you know, God willing, let's all pray. I don't think we're looking at anything that looks like World War II right now. So I assume that there will be a blip here. Trade may go down a bit. It's out of fashion for sure. But there is something just like very fundamental. Human beings want to trade. It's a, it is the foundation of civilization. We want to trade with one another. We want to, you specialize in what you're good at. I'll specialize in what I'm good at.

Yeah.

We'll trade. We're both made better off. This is how wealth is created, how civilization advances. Like on the individual level within a country, 2 people, you know, doing trade, doing trading goods and services. And on the global level, it's just like there's going to be demand for it.

Ryan's acknowledgment that some businesses are being paralyzed by the changes and uncertainty in US trade policy echoes what I'm hearing from other CEOs. Now he talks about the different tactics businesses might adopt to deal with the changes. Second-order impacts that are being overlooked, and how AI and machine learning could smooth out some of the bumps. Plus, why Ryan stepped down as CEO and then returned. Let's jump back in. We've seen Walmart try to push back on suppliers in China to take up the cost of tariffs, which kind of sparks resistance from the Chinese government. Do bigger organizations like Walmart have more leverage in tariff turmoil versus smaller businesses? Or like, is everybody in the same boat? Like there's no better or worse?

Well, the bigger ones always have more negotiating power. In theory, a company like Walmart moves so much goods, they have more negotiating power. Where it's actually nuanced is in, there are markets, and we were in one throughout last year where there's more demand for container shipping than there is capacity of the shipping network to move the goods. And that was last year really true because of what happened with the Suez Canal and the ships having to run around Africa. That dramatically reduced the capacity, right? The same ship is moving fewer containers per year because it's going a longer journey.

Right.

And so you had more demand than capacity. The volume, the price went way up. It can actually, in such a market, be an advantage to be small, counterintuitively, because You just gotta squeeze. It, it's hard for Walmart to find a new home for 100,000 containers and get 'em all moved.

Uh-huh.

But if you just got one, you know, and you're a hustler, like you could probably find some slot for your one container to get on there. There's some benefit to being small if you're nimble. And Walmart has more professionals who are probably more connected and have certainly more negotiating power. And there's plenty of advantages to scale, but there's always an advantage to being nimble and entrepreneurial and having skin in the game and hustle.

So, Do, do you see any particularly creative hustling going on right now? I mean, are, are businesses like trying to rush to ship things before more tariffs take effect? Any particular gimmicks underway?

A lot of that took place earlier the year, kind of end of last year. People were moving goods in ahead of time. One of the things I heard when— so Mexico and Canada put in, or Trump put in tariffs on Mexico and Canada. They relaxed the ones on Mexico, but not Canada. But when they relaxed it on Mexico, everyone assumed that Canada would get a deal done the next day too. And so there were, one of the railroads told us that there are thou— that day, I assume this is kind of cleared out by now, but that day there were thousands of rail cars full of goods from Canada that were meant to come to the US and they got instructions, just pull over to the side of the train tracks and wait because you don't want to pay 25% duty today if it's going to go away tomorrow.

Uh-huh.

And then you start to get congestion on the rail and it backs up. And we're currently seeing a lot of congestion in the Port of Vancouver as the railroads have backed up into the port and they're not able to pull goods out. So there's all these second-order effects that the government is just not— no one's good at modeling second-order effects in the world. It's a complex system. And the government certainly just doesn't really have the ability to figure out like, oh, we put this, for example, that port fee that I was talking about on Chinese ships. Most of these ships will make 3 port calls. They'll stop in Seattle, then Oakland, and then LA. But if they're having to pay $1 million per port call, they're just going to go, ah, forget Seattle and Oakland. I'm just going to go to LA. And you could probably model that. And hopefully the government has realized like you're going to, you might bankrupt the Port of Oakland and the Port of Seattle because people are just going to skip it. But then second is what's going to happen in LA, and this is very hard to model. You're just going to get these congestion bottleneck buildup if everybody does that. It doesn't have the throughput, and you're gonna have these crazy long supply chain delays and backups. And I highly doubt when they put in this thing that's supposed to promote US shipbuilding that they did any kind of modeling of what the long-term or the medium-term impact is. But it's really a mess for our customers. I think there are some companies that won't make it out the other side of this where they can't move manufacturing, their products maybe not a must-have. And, you know, the tariffs will require you to raise your prices. So will people keep buying that product when it's 30% more expensive? Like, we'll find out.

You founded Flexport, you ran the company as CEO, and then a couple years ago you stepped away. You brought in an outside leader to be CEO, but then a year later you, you were back as CEO. With all these headaches right now, do, do you wish you'd stayed away a little longer?

No, no, no, not at all. I wish I'd never left the first time. I never really left. I became executive chairman, but operations is all about doing the same thing you did yesterday a little bit better and reviewing every metric and dashboard and saying, finding metrics you're not happy with, outliers, and looking to eliminate waste and improve processes and things. And it's not my background. I'm an entrepreneur through and through, more of a creative product type development. new innovation. Uh, and so I was looking for a partner that could help turn that crank, like just get better and better every day. Um, and it's very hard to hire an outside CEO to come into a culture and learn the business, new industry, learn the culture. As experienced as somebody might be, every company's different, every industry's different. You gotta, if we ever hire another CEO from Flexport, it'll be somebody I promote from within after 10, 20 years in the company to like, Really learn how it all works. So, uh, I, I'm, I never really meant to step aside. I actually just genuinely thought the guy I hired would be better than me at the job, but I was wrong. So I got more confidence in myself now this time around.

Hmm. Yeah. Airbnb CEO Brian Chesky, who's a friend of this show, has been a guest with me many times, has talked about what he calls founder's mode, which is an idea I think that you've endorsed. What does founder's mode mean for you and what does it look like for a company like Flexport?

Man, Brian, a friend of mine as well, and really influenced me a lot. I would say a couple of different things. One is really focus on managing the work and not the people. That a lot of the kind of professional advice of CEOs and board members and advisors is like, you know, you just gotta hire a great executive for each department and then like trust them and don't meddle too much in their world. Like they know what they're doing and just empower them. And then they're doing the same all the way down and you end up Nobody really taking ownership and having skin in the game and making decisions. Um, so founders should like ignore their executives whenever they want to, uh, and just go straight to the front line, ignore all hierarchy and management, talk to the customers, obviously a lot, talk to the employees writing code and the ones selling and doing the work and not just try to manage through managers, like get into the work, make more of the decisions.

So, so, so you don't trust everyone who works for you the same way, or?

No, I don't. I don't trust anybody. I trust but verify, I think is what Ronald Reagan said. There, there's this notion that micromanagement is like this really bad thing. It's a terrible, it's like the worst word in business and management. But micromanagement is only bad if your boss is an idiot. Like if your boss is like in tune with what you're working on and is involved in helping you make good decisions, you're like, this is great. I like working like that. So, It was really influential having Brian say that because I'd already kind of learned those lessons the hard way. I'd done the ultimate of like hiring a big CEO and setting him free to do whatever he thought was the right thing, and it didn't work out for us. And now I'm like, I'm everywhere. I'm texting 30 or 40 people every day, phone calls. You make people know at Flexport? No, you just get like a random Google Meet invitation to come talk to me about what, and I'm, you know, and are they like, uh-oh, oh no, Brian's after me now. It's become normal. They know I'm just like, wanna learn. I'm not like yelling at people usually. Those are good. And then the other 2 things that Brian told me that I implemented that were just like so fantastic for us is do a twice a year, get the top 150 people in the company together in person to really review roadmap strategy. What are we building? So we run this like internal conference. I call it the Velocity Summit. Driving speed in the right direction. And that was like transformational for our culture. And then the other big one was he said, hey, take all your tech that you've built and package it up and do a big launch every 6 months rather than incremental kind of soft launches that don't get much attention. That was really game-changing. We just did our first one 3 weeks ago and it was like, it forced our marketing team to spend way more time with the tech org. Where in the past, I feel like our marketing team would find out we built some new tech, like when it went live, and then they would like maybe scramble to create some collateral sales decks or something. Now they're like months ahead of time strategizing how are we gonna tell this story, et cetera. So like so many upsides. So yeah, I've gotta thank Brian a lot.

Are there, are there any changes yet in how goods are moving around the world that you think like are gonna persist? Lessons or guidelines to, to keep in mind?

Certainly it's good to say what are the things that are gonna be true no matter what in the world. So, you know, people are gonna wanna produce, they're gonna manufacture their good wherever they can get the highest quality at the lowest price. Okay? That's gonna be true. They're gonna want reliable transit times. They're gonna want low prices on the logistics. They're gonna want lots of choice. So those things are true. So you have to invest in those like long-term cycles. There's always gonna be some regression to the mean. So you wanna hedge for that. And then you wanna understand like what's never happened before that's now possible because of technology.

Mm-hmm.

And, and make sure you're the one investing in making those things happen. So if you look at like a transaction where you're shipping a container around the world, for every $1,000 that a company spends on that, about $100, 10%, is going to the layer that I was describing earlier of the freight forwarding, freight email forwarding, the coordination, the, just the labor of coordination. To connect all the dots and make these, not the blue-collar labor that's moving the containers, driving them and sailing the ships and whatever, just the coordination layer is 10%. We estimate 80% of that can be eliminated with technology, largely AI-based automation routines. So if you make everything 8% cheaper, that doesn't matter what happens, the world's going to want that. So we know we have to invest in that regardless.

The changes from tariffs and how they're affecting global trade versus how AI will be impacting global trade, it almost sounds like you feel like in, in the long run, the technology's gonna have a, may have a bigger impact.

It'll have, it will certainly have a big, big impact. It'll lower the cost. As I said, it should make things more reliable. There's a, there's a lot of cost to eliminate For example, we have algorithms now that play Tetris with your cartons inside and load the containers more full. On average, we can have people eliminate about 10% of their containers, 10 to 14%, depending on how poorly you optimize the stuff before we met you. So things like that, better route planning. Technology's way better at this than human beings that just go, oh, okay, let me pick that one. What we have is a database of every ship going everywhere and the cost, and then machine learning will pick you the cheapest one that will get you there on time. So like there's a million, million ways to make things more reliable, cheaper. And yeah, regardless of what happens with tariffs, everybody's gonna want that.

Well, this, this has been a great education for me, Ryan. Thanks very much for taking the time and sharing all this with us.

Yeah, my pleasure. You know, it's changing pretty fast. So if there's some— happy to come back on over time if there's some other new developments, which there likely will be.

Listening to Ryan, I get a deeper appreciation for the complexity of global trade and how hard it is to predict where the impact of tariffs will net out. Beyond even the back and forth of which rules will and won't be implemented, there's a level of interdependence in the global economy that defies simple solutions. In nearly every episode these days, I find myself returning to the adage of focusing on what you can That doesn't necessarily mean every CEO should be personally texting 40 team members each day, as Ryan apparently does. But it does mean that we need to have a higher-level, 30,000-foot view of the environment that we're in, a theory about how things might play out in the long run, and then continually test that theory against the evolving on-the-ground reality. The Trump administration has created a in the road in global trade and many other areas, but that doesn't mean where the road goes from here is defined. So where do we want it to go and what can we do to help make that happen for our businesses and for ourselves? I'm Bob Safian. Thanks for listening.