What you're going to see are areas of stability. You're going to see some countries that are going to negotiate what I would call a standing truce on tariffs. I think the markets will believe the deals that we strike. Yeah, okay. The deals that we get done. When Donald Trump does a deal, he wants it to be the last and final deal.
Hello fellow data nerds. My guest today is Brandon Daniels. Brandon is the CEO of Exiger, which provides AI-powered supply chain and third-party risk management solutions to Fortune 500 companies and government agencies. Exiger has annual revenues of over $150 million and was acquired by Carlyle and Insight Partners for $1.2 billion in 2023. Brandon, welcome to World of DaaS.
Hey, it's good to see you, Oren. Thank you for having me. I'm very excited.
Now, let's start with the topic of tariffs. What do tariffs mean for supply chain risk management?
Yeah, I mean, for supply chains right now, tariffs mean chaos. It's tough because no one knows what tariffs will actually embed themselves into the market right now. There has been a tariff roller coaster. So, at the moment, it looks like there's going to be a broad, lower but broad reciprocal tariff. But at the same time, I know that the administration is right now working deals with Mexico and Canada and even Vietnam to bring down the potential reciprocal tariffs and we don't know what that's going to mean for the market. For our customers, it means a lot of uncertainty. And you know that corporations and the markets hate uncertainty.
And so, it means a good deal of conservatism around spend decisions, around investments, around supply chain optimization opportunities. For us as a technology, it means an absolute boom, because our customers are recognizing that multi-tier visibility is a necessity in today's very volatile market, in today's very volatile world. It is requiring our customers to understand how products that they make can go through 30 transoceanic hops before they land on a store shelf, right?
Yeah. And how each of those can be subject to a disruption or a tariff or whatever it might be.
And I don't think anyone can predict the future, but we probably can predict that it will be increasingly unpredictable. My guess is that these tariff rates are going to keep changing. There's not going to be stability at least in the next 12 months, or do you disagree?
No, I totally agree. I think that what you're going to see are areas of stability. You're going to see some countries that are going to negotiate what I would call a standing truce on tariffs, right?
But even then, how much do you think the market will believe it and therefore invest behind it, or are they going to just presume it's going to be higher and invest behind a worst-case scenario?
Yeah, I think the markets will believe the deals that we strike. The deals that we get done, when Donald Trump does a deal, he wants it to be the last and final deal. It wants to be the deal to end all deals. It's in his vernacular. I think that everything that stands in ambiguity, the market will disbelieve. Anything that is subject to a broad-based standard reciprocal tariff, people will think is going to be subject to change. But the core concern is how many iterative changes will you make to the benefit of United States or European or Asian corporations on a continuous basis. For example, what China did with microelectronics tariffs - they said the tariff is not on where you're buying the goods from, but on where the manufacturing of the wafer happened. That's a very nuanced and surgical attack on US fab capabilities. That's going to lead to a lot of very detailed regulatory tracking, which I don't think people are prepared for.
And what are some of the non-obvious changes you think we should expect in supply chain?
I think some non-obvious ones are that different markets have different levels of tolerance for cost change. If you go back to 2008, when oil prices spiked, there was reshoring of entire supply chain lines like IKEA's furniture building shifted to Danville, Virginia. So the interesting thing over the next five years is the types of manufacturing that will come back to the US due to tariffs and whether those industries will be sustainable. The ability to reset supply chain lines has become fast because you can build a plant in years, maybe under a year. Not in the US, but in other places.
But in the US, there are places like North Texas that are deregulated. You think you could create a factory in one or two years there?
You could, because you have special economic zones where you can build quickly, drop in automation, and offset labor arbitrage.
So like the benefits of China - everyone manufactures right there, moving goods between factories. Could you imagine a special economic zone in the US to rival that with port and train access?
Absolutely. They replicated that model in Mexico. I would imagine the US will build similar economic zones. And those will be high paying advanced engineering jobs because to compete with China, you can't use traditional manufacturing processes.
Interesting. And who do you think will be the winners of these new tariff and trade policies?
The winners are undetermined. For US manufacturers to win, we need to nuance the tariffs quickly so that component-level items are excluded from tariffs while end-use goods have tariffs to bring manufacturing back. Then maintain commodity supply chains into emerging markets.
And why is it so hard to refine lithium in the United States? Is it just because it's dirty?
There are three reasons: regulation, doing it up to US standards, and building mining and processing capabilities. It's a challenge from an infrastructure perspective. If we can get approvals under 5 years, then we can expedite. But after that, you need to clean facilities and maintain cost symmetry after economic incentives.
Shipping isn't super cheap either. So if someone was making something nearby, there's a built-in advantage. Right now, China creates rare earths and uses them in country. If they had to use them in Mexico, it would be harder for them.
You're bringing up a great point. In the '80s, countries deverticalized and had hyper-specialization and globalization. The only place where that didn't happen was in communist countries because they own all industries. They perfectly verticalized. But that makes it hard to innovate. That's where the West still has a competitive advantage - specialization drives profit motive to innovate. That's why I think the West still wins in the end.
Are there countries you think are the most likely losers? Or industries?
I think some countries reliant on infrastructure investment from China are losers. Like Zambia, which is supposed to become the third largest copper producer. But Chinese investment led to issues like a dam burst that spoiled 200 miles of river. Now Zambia will have to borrow money from China to clean it up, ending up in debt bondage. Those countries become captive to China. Brazil and Zambia are in for hard times.
What about countries like Germany? Where do you fall on that?
I think Europe will navigate the next 20 years, maybe not as a unified EU due to differing defense investment opinions. But countries like Germany, Italy, UK still have important global relationships and supply lines that will keep them in a commanding position.
But in Germany, the car industry is dominant. With electric cars, fewer suppliers, and the best electric cars aren't being built in Germany. That could have a huge effect.
I think that's right. The rebalancing with the US in car manufacturing could reduce EU capacity. American car manufacturers sell next to nothing in Europe compared to the 3.5 million vehicles purchased there. It's asymmetric.
We got to get bigger roads for our F-150s in Amsterdam. Now, there are areas where trade restrictions are super leaky, like Russian oil and Chinese goods packaged in Vietnam. How does one fight these leaks?
It's difficult to fight leaks because companies don't want to know. The buyer doesn't want to know. It's in their best interest not to know. Global regulation and governments investing in transparency is the only road. After 9/11, the US used dollar processing capabilities to identify terrorism-related transactions. For example, Exiger found Huawei rerouting equipment to Iran. The kind of oversight needed has to be invested in global policing organizations, then flows to corporations like it did with banks scaling up anti-money laundering. To see similar change for sanctions, IP theft, forced labor, you need enforcement. The UFLPA seizures at the border are a first step, but criminal enforcement is needed.
It's one thing to figure out things coming in, but figuring out things going out is super hard. You send it to place A but it ends up in place C.
It's really tracking the money. Our customers have used our technology on the federal government side. We have 65 federal agencies using our technology, the most widely adopted supply chain risk technology in government agencies. But they have to use that visibility to support policy, which takes time. We released reports on our reliance on Chinese pharmaceuticals and another on Deep Seek funding from PLA. We showed that China scored tens to hundreds of millions into Deep Seek through grants and research, and what we believe is IP theft from US universities. But taking that information to action takes weeks, months, years.
Yeah, with Russian sanctions, France's exports to Russia went down and to Armenia and Kazakhstan went up. But still hurts the Russians because they pay 20% more. So maybe that's reasonable if it has no cost to the French economy.
This issue of transshipping and rerouting impacts the ability to impose sanctions. For example, Stanley Black & Decker competes with Milwaukee Tool, but Milwaukee Tool is Chinese-owned using the Milwaukee brand. They do all their manufacturing in China, send it to the US. When tariffs impact products from China, they move to Vietnam. In 3 years, they switched. But you think to yourself, how is that real? They haven't verticalized supply chains from China back into Vietnam. This opacity leaves companies at an economic disadvantage because China can wield extra-territorial power with veneer centers around the world.
