Morning Brew Daily - CEOs Warn of Price Bumps From Tariffs & Waymo Rolls Out in Austin

Episode Date: March 5, 2025

Episode 532: Neal and Toby cover the latest on tariffs concerning China, Mexico, and Canada all signaling their intent to hit back with tariffs of their own against the US. And CEOs warn tariffs will increase the price of everyday goods. Also, Commerce Secretary Howard Lutnick considers removing government spending from GDP. Meanwhile, Waymo is ready to hit the road in Austin, Texas as it plans to showcase its launch at SXSW. Lastly, a quick rundown of the headlines from the day. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow There are risks involved with investing in ETFs, including possible loss of money. ETFs are subject to risks similar to those of stocks. Investments focus in a particular sector, such as technology, are subject to greater risks and are more greatly impacted by market volatility, than more diversified investments. The Nasdaq-100 Index® includes the 100 largest non-financial companies listed on the Nasdaq. An investment cannot be made directly into an index. Invesco Distributors, Inc. Learn more about your ad choices. Visit megaphone.fm/adchoices

Marketers, tell us if this sounds familiar. You invest in something that seems incredible like millions of views, but then don't see any revenue. Instead, invest in what looks good to your CFO. LinkedIn Ads generates the highest row ads of all major ad networks. Spend $250 on your first campaign on LinkedIn ads and get a $250 credit. Just go to LinkedIn.com slash MBD. That's LinkedIn.com slash MBD. Terms and conditions apply.

Good morning for your daily show. I'm Neil Fryman. And I'm Toby Howell. Today, day one of the trade war sent stocks tumbling, businesses scrambling, and Canadians ditching their politeness. Then Uber and Waymo are teaming up Power Ranger style this week to offer driverless rides in Austin. It's Wednesday, March 5th.

Let's ride. 2025 is quickly becoming the year of the very long speech. Days after Adrian Brody set the record for the longest Oscars except in speech in history, President Trump last night delivered the longest speech ever. before a joint session of Congress, the unofficial State of the Union lasted one hour and 39 minutes, topping the previous record set by President Bill Clinton in 2000, who spoke for one hour and 29 minutes. No one longs for the days of Richard Nixon, but he gave the shortest state of the union on record

clocking out after 29 minutes in 1972 or just about a curb year enthusiasm episode. So what the heck did he talk about? CNN calculated the exact minutes and seconds Trump spent on each topic. immigrants in crime got the most air time with just under 10 minutes, followed closely by trade in tariffs at 8.5 minutes, which we'll get into what he actually said about that topic in our top story. Elon Musk, who was in attendance, got a 40-second shout-out to go along with the two minutes spent talking doge. That was more than the minute and 30 seconds he devoted to inflation,

which was likely intentional. Neil, zero time spent thinking the Academy, though, which thankfully moved things along. Now a word from our sponsor, Invesco QQQQ. Neil, I was thinking about longevity today. Don't tell me you're taking magnesium pills and cold plunging. No, I'm thinking much bigger than that about companies that have stood the test of time, companies that make up the Invesco QQQETF.

It's been tracking the NASDAQ 100 for over 25 years. It's basically been around longer than me. Aren't you 28? Ah, the last three years don't really count. But think about that. Invesco QQQQ has been giving investors access to innovative companies. since before we had iPhones. It's one of the OGs of innovation funds.

With Invesco QQQQU, you can rethink what is possible. Before investing, consider the funds investment objectives, risks, charges, and expenses. Visit investco.com for a prospectus with this information. Read it carefully before investing, full disclosure in podcast description. Well, Trump's long promised tariffs are here, which means that price hikes for everyday consumers, like you and me, on everyday goods like electronics and gas are looming, unless a compromise can be reached, which we'll get to in a little bit. Target and Best Buy set the mood yesterday, warning that prices will increase following Trump's

25% levies on imported goods from Mexico, Canada, and China, with some hikes hitting shelves almost immediately due to short supply chains. Target CEO Brian Cornell told CNBC yesterday that they may be forced to raise prices on fruits and veggies as soon as this week due to a heavy reliance on Mexican imports in the winter. Best Buy sang a similar tune telling investors on an earnings call yesterday that price increases on its gadgets and gizmos a plenty are highly likely due to tariffs. China and Mexico are the company's top two supply chain sources with over three-fourths of its products source from those countries. The market didn't like the sound of that at all and Best Buy fell 12% to be the biggest loser in the S&P 500. It looked like the red wedding out there in general yesterday too.

the S&P 500 fell 1.2% with more than 80% of the stocks in the index closing lower. After a great start to the year, all the post-election gains for the S&P 500 have been wiped out. Neil, the vibes were not great yesterday, though later in the day, Commerce Secretary Howard Lutnik, did say that the U.S. would likely meet Canada and Mexico, quote, in the middle with an announcement coming as soon as today. Stock futures did tick up as of that announcement, but in the meantime, vibes are still not great. No, economists have warned forever that they've been around that tariffs will lead to price increases for consumers, for businesses. And that's what we saw from the earnings reports from Target and Best Buy yesterday. Trump did acknowledge that prices may go up due to his tariffs in that unofficial state of the union last night.

He said tariffs are making America rich again and making America great again and will happen rather quickly. There will be a little disturbance, but we're okay with that. be much. So there's Trump acknowledging that prices may go up for Americans due to these tariffs on the three largest U.S. trading partners. How much should the, is the typical U.S. family might see price increase as well. The Peterson Institute calculated that the average U.S. household will pay more than $1,200 a year under the current tariff regime. And let's go through what those tariffs might impact. I said everyday goods affecting everyday people. And it really is because one of the biggest things that will go up is the price of gas. Oil refineries,

process and transport Canada and Mexico's crude to the United States. So they are being tariffed multiple times. And so about two-thirds of all crude oil imports into the U.S. will take a hit, which means that the Northeast especially could see an estimated 20 to 40 cent increase in gas prices per gallon by March. West Coast and the Midwest are likely to follow as well. And then also, if you have young kids, you're probably looking at this going, oh my gosh, because 80% of toys are imported from China. So you could see price increases on stuff like, you know, the mighty dump truck that could get a $10 increase, according to Basic Fund, COJ, Foreman. And then also the auto industry, we've talked about this a lot at this point.

But the auto industry has a very complicated supply chain. A lot of parts go back and forth over the border. So that is expected to be especially vulnerable to these tariffs. Yeah, for some numbers on that, the average pickup truck is expected. to cost $10,000 more that is sold in the United States. And that's why you saw shares of Ford and General Motors take a beating yesterday. The average crossover utility vehicle will rise by at least $4,000. That's according to the Anderson Economic Group, while the cost of an electric vehicle

will rise three times as much. So that's $12,000. That's why you have auto industry executives basically calling Howard Ludnik, the Commerce Secretary, calling President Trump and saying, please stop. We need an exemption here because without that, our production is going to shrivel up and estimates say that in the next few weeks, a third of U.S. North American auto production could halt altogether because the flow of all these parts across Canada, the United States, and Mexico will essentially stop.

And we mentioned the international response because it has come in hot and fast. Canadian Prime Minister, Justin Trudeau, said that, the 25% tariffs and Canadian imports is, quote, very dumb and vowed to fight back with 25% tariffs of its own. China also announced countermeasures. Those are starting in mid-March, 15% tariff on chicken, wheat, corn, and cotton, 10% on stuff like pork, fruit, or pork, beef, fruits, and veggies. And then Mexico also is scheduled to announce their retaliatory tariffs sometime later this week. So especially the comments coming out of Justin Trudeau yesterday, where, I mean, using the words, quote, very dumb is, you know, as in Canadian terms, as about as

inflammatory as you can get up there. So definitely you saw some pushback from the United States alleys. So looking ahead, we had these comments from the Commerce Secretary Howard Lutnik yesterday saying that maybe Trump will meet Canada and Mexico in the middle. We might get announcement today about some rolling back of terrorists. But a vibe of uncertainty is still permeating the markets, is still permitting businesses who, these auto manufacturers, especially, who need to figure out where they're setting up plants. This is a multi-year process when you make a large capital expenditure. Where are you going to do it? Are you going to do it at all? So the uncertainty is going to lead to just essentially a regime of savings where people just

don't spend money because they don't know what U.S. policy will be. And you saw that even before tariffs were implemented in that manufacturing survey that we talked about yesterday, where manufacturing in the United States is almost at a state of contraction because manufacturers are just not investing when they don't know what the tariff policy will be one day to the next. The final embodiment of that vibe that you were just describing, I think a newsletter from the information put it very well. I was reading it this morning. And it started with the line, if you're unhappy about the weather in San Francisco, you'll only have to wait a few minutes until it changes. That line is starting to seeing very applicable to the Trump administration's

terrorist plans. There are, there is this feeling of uncertainty around it. It does change day to day, hour to hour, minute to minute, it feels like. So you are right that there is still this uneasiness permeating kind of the business landscape. And we'll see. Maybe tomorrow we have a completely different story to tell. For eight decades, gross domestic product or GDP has been the standard for measuring economic growth in countries around the world. But some Trump administration officials say they want to change how it's calculated in the United States. Over the weekend, Commerce Secretary Howard Ludnik, he's getting a lot of airplay today, mentioned he wants to strip out government spending from GDP, saying that governments have historically messed with the figure

and that removing it from the ingredient mix would lead to more transparency. That remark came a few days after Elon Musk said that a, quote, more accurate measure of GDP would exclude government spending, adding that governments can artificially inflate GDP to make it seem like the economy is doing better than it actually is. These comments raised a lot of eyebrows among economists who went to bat for the current way GDP is measured. Their defense had two main points. Number one, GDP is already sliced and diced in numerous ways. So if you want to get a sense of economic growth without government spending, you can easily do that. Number two, it would set a concerning precedent for lawmakers to meddle in what is supposed to be an independent economic

statistic. In the word of David Wilcox, a former director of research and statistics at the Federal Reserve, the implication is that it is okay to manipulate economic data for political gain. Toby, never before has three letters caused so much drama. Yeah, the real fear is that it is a slippery slope. You do not want political meddling in these supposedly independent federal statistics. You could undermine trust in that federal government data, especially if it is being perceived as an attempt to, you know, mask the impacts of Doge's cost cutting on the broader economy. You are right, too. We already have those statistics to calculate GDP minus government spending. So why are we putting forth this idea that it is somehow this thing that needs to be

separated? We already can separate it. But some conservative economists do see it a different way. They think isolating government spending from other economic measures would paint a more accurate picture of the current economy because they were pushing back and saying under the Biden administration, a lot of the increase in GDP we are seeing was a result of government growth, not private sector growth. So to them, that is growth in the wrong places. And they just want to make it clear that we want to separate that off and see what the real economy is actually functioning like. So that is generally the thrust of the argument you're seeing from maybe Elon and the rest of those economies. Yeah, Lutnik, here's how Lutnik put it. He said, if the government buys a tank, that's GDP. But

paying a thousand people to think about buying a tank is not GDP. That is wasted inefficiency, wasted money. And cutting that while it shows in GDP, we're going to get rid of that. So he's saying essentially the government, if they wanted to inflate GDP numbers to make it look better, They could just pay a thousand people to sit there and play solitaire. The pushback on that is that GDP in and of itself does not make any value judgments about how money it's spent. If you pay for something and you buy something, that should be counted in GDP. If the company buys pencils or the government buys pencils, pencils were bought and that should be accounted for, and you don't make any value judgments. Maybe somebody makes a horrible movie.

What's his name? Francis Ford Coppola spent $2,000. $250 million of his own money making Megalopolis. No one watched it. You could make the case that that was extremely inefficient. But did he spend that $250 million? Yes, and that should be counted as GDP. Of all the director's names coming out of your mouth there, I was not expecting that. And I just watched Apocalypse Now on the plane coming back. It was so good. So no smear to him, but he may have thrown a lot of his money in the trash. All right. Let's move on here. We're going to take a quick break so you can go refill your coffee, but we'll be right back.

This episode is brought to you by Perfect Bistro Cat Food. Cats, this ad is for you. Has your human ever called you picky, persnickety, choosy? If so, Perfect Bistro Cat Food is for you, with ingredients like wild-caught tuna and pasture-raised lamb, tantalizing textures, and delectable flavors that meet even the most discerning cat standards. You're not picky, you're just perfectionists.

Perfect Bistro, Mealtime Perfection for every cat. Have your human visit Perfect bistro. If you're a no talk in the Uber kind of person, good news, your next ride might be dead silent because it might not have a driver at all. Starting this week, Uber is rolling out self-driving Waymo Robo taxis in Austin, Texas, marking a major expansion for the Google-backed company. Waymo's Robotaxies will be available across 37 square miles of Austin, so your next ride from Terry Blacks to Franklin's to compare brisket quality might be solo dolo without a driver. If you're not quite ready to trust a car with no one at the wheel, fear not.

Uber is giving you the option to switch to a human-controlled vehicle instead. This expansion marks another big momentum moment for autonomous vehicles. As Waymo looks to prove, it can spread its wings beyond Phoenix, San Francisco, and Los Angeles, where it's been cranking out rides. Its robo taxis are now averaging 200,000 paid rides per week, up from about 10,000 weekly rides just two years ago. Now the goal is to keep expanding without running into the kind of safety issues that derailed GM's cruise robo taxis in San Francisco last year. Neil with South by Southwest, the big tech and media conference kicking out this week.

Waymo is getting a shot to impress thousands of visitors. This is the big time. You know that this date was circled on their calendar saying we need to release this partnership, this robo taxi service before South by Southwest. So all these techies and media people can come in, take some rides, and then go back to their respective cities and, you know, brag about how they took a self-driving taxi and how great it was. And we should mention that you're not guaranteed to get a robo taxi. You can change your preferences in your Uber profile so that you are more likely to get a WMO robo taxi to ride in. So you can't just select one or the other.

And then in the other case, if you don't want one, you can also select preferences that won't let you. But this is live. It's another major milestone moment for self-driving cars. and it is a very unlikely partnership because if you go back to 2016, Uber and Waymo hated each other. Waymo sued Uber and its subsidiary auto for stealing trade secrets. Two years later, five days into that trial, which was a really big deal encapsulating the self-driving car industry. The two sides settled. And now they're, you know, linking back up with each other in a very interesting partnership that shows how maybe we're seeing the fledgling business model

of a self-driving robot taxi fleet would work. That's a classic enemies to Friends arc right here. I do have to mention, too, that it's not just south by southwest that made them, you know, roll out in Austin. It's also symbolic because that is the backyard of Tesla and Elon Musk because Tesla reincorporated its headquarters in Austin, so Waymo is kind of planting its flag in its backyard and saying, hey, we're hitting the streets of Austin before you are Elon with your fleet of robotaxies that it plans to roll out in June. So really, I think there's two races going on here. One, there's the autonomous vehicle supremacy race between companies like Tesla, companies like Waymo, and a few other challengers. But then there's also a race between the provider networks, think Uber, think Lyft, who manage and dispatch the vehicles because Lyft is also planning to add robo taxis to its network in Atlanta later this year.

They're partnering with a different company called May Mobility. They hope to have self-driving cars in that market as well as Dallas by next year. Uber has also joined forces with AV ride to begin dispatching robotaxies in Dallas next year as well. So I think we are seeing two simultaneous races right now between the people creating the technology and the people dispatching that technology. So the race is on. It's kind of insane to think about that self-driving cars are here. Right. They're literally here.

You can take a self-driving car in Phoenix, Austin now, San Francisco, and Los Angeles. I mean, after years and years of saying that these things are coming or they're not coming, they're literally here. We are in a self-driving world now. I know. And the one thing that you just have to avoid, though, is those big egg on the face safety moments, which is really the thing that sunk.

I mentioned GM subsidiary crews. That just no longer exists anymore because it had its California license suspended back in 2023 after one of its cars, you know, dragged a pedestrian. So there are these, there is a risk factor here. But so far, Waymo has been pretty squeaky clean on its safety record.

So it's just looking to continue that momentum. Let's sprint to the finish with some final headlines. Black Rock may have prevented a geopolitical spat from escalating at the Panama Canal. The asset management giant agreed to buy two major ports along the canal from their Hong Kong-based owner as part of a $23 billion deal, perhaps placating President Trump, who threatened to take back control of the canal over Chinese encroachment. C.K. Hutchinson, the Hong Kong company in question, owned ports at either end of the Panama Canal, a key trade route used by many American ships as a shortcut between the Atlantic and Pacific

oceans. It maintained that the transaction was, quote, purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama reports. But you're allowed to be skeptical since U.S. pressure was building on Panama to cancel its contract with C.K. Hutchinson over its control of the ports. Thanks to the deal, C.K. Hutchinson now has billions of fresh cash in its pockets, an American company is taking over, and maybe everyone can move on with their day. This move definitely aligns with the Trump's administration's concerns about this area of the world with foreign influence over the canal.

So it is shifting, you know, strategic, very strategic ports into American corporate hands. But I will say that BlackRock is happy to play, you know, America's white night here because they have been, you know, investing a lot in infrastructure. They acquired this company, GIP two years ago, which massively expanded, like the firms plunge into infrastructure. structure play. It manages this huge portfolio of energy, transportation, utility assets. They manage London-Gatwick Airport. They manage U.S. natural gas pipelines. So them saying, like, I know you're concerned about Chinese influence here. What if we just came in and, you know, bought these, you know, very lucrative, very strategic port? So I think that Larry Fink and Blackrock are saying, licking their chops, saying, wow, what a great opportunity to step in here while also

getting the blessing of the current administration. Craft Hines is entering the alcohol. market, but not with boozy ketchup, thank goodness. Yesterday, the company announced that it will be introducing crystal light vodka refreshers at certain retailers starting this month. They'll come in at a sprightly 77 calories in zero sugar, which Kraft Heinz touts as the lowest calorie cocktail on the market. The idea behind launching a boozy version of its powdered drink additives was that its customers were already using them for mixed drinks. Nearly one in five crystal light customers make cocktails using the brand's drink mixes already according to the company. Neil, it looks like in this instance, they're just skating where the puck is already going.

It's certainly one of a number of companies who are just scrolling on social media every day and saying, hey, what are people doing with our products and then making that product for them in the hopes of selling it and boosting sales we've seen Chipotle do this, a number of fast food companies, seeing Starbucks, seeing what concoctions that people are making and then posting on TikTok and then creating that product themselves. We'll see if it sells. Crapteins needs this to work because they have declining sales for five consecutive quarters. It's Lunchables brand is not doing well. Its other consumer package brands are not doing so great.

So hopefully Crystal Light, which has been around for many decades, will spur a little growth here. And it's not just that, you know, corporate America is looking at what TikTok consumers are actually creating. It's also specifically beverage companies are seeing how their beverages are being used to make alcoholic drinks because think about we've seen these alcoholic concoctions pop up from companies. Coca-Cola has partnered with Jack Daniels to make a Jack and a Coke in a can. Sunny D. Devied Sunny D. Vodka Seltzer in 2023, which is just messed up to people who grew up drinking Sunny D. And then Vita Coco, you know, the coconut water company, they partnered with Captain Morgan on

premium canned cocktail. So I mean, you know, you're making a face here. I agree with you on that one. And then PepsiCo and Boston Beer launched Hard Mountain Dew. So this is definitely a vein that, you know, these companies are trying to tap. Alcohol plus insert drink here. And now we have the latest one to come our way. Not all heroes wear cap.

Some get poked by a needle thousands of times and save millions of babies' lives in the process. I'm talking about James Harrison, one of the world's most prolific blood donors who died at age 88 last month after being credited with saving the lives of more than two million babies. Known as the man with the golden arm, Harrison has a rare antibody in his blood, anti-D, that is used to make medication given to pregnant mothers whose immune systems may attack their unborn babies. Harrison started giving blood at age 18, and get this, didn't miss a single appointment, which happened every two weeks, until he was 81, getting pricked a total of 1,173 times. An amazing story. In case you're wondering, though, he hated needles.

Yeah, that's the craziest part about this. He has this big aversion to needles, but the backstory to why he even figured out he had this rare antibody is that he had his own major lung surgery when he was 14, which required this big blood transfusion. So after his surgery, his dad told him that you're only alive because people donated blood. So the day he turned 18, the day he was allowed to, he started giving blood. And that's another crazy part. The application of anti-D, this fighting, this newborn disease, fighting antibody was not discovered until the 1960s. He started donating in 1954.

So before he even knew he had, you know, this magic thing in his blood, he, before he knew he had the golden arm, he was donating, which to me is just, I call it fate or call it whatever. But it is pretty amazing that he was on this path before he even knew that this path was going to save so many millions of lives. Finally, a new version of Monopoly is coming out, and it's going to be a lot harder to cheat by volunteering to be the banker. That's because the new edition, Monopoly app banking, includes a mobile app that handles all of the game's transactions for you, eliminating the need for a banker and that famous Monopoly cash.

Hasbro says the goal is to attract a new generation of younger players and speed up the notoriously slow gameplay. But at the same time, it introduces screens to one of the last analog holdouts, board games, and it'll probably make kids even worse at math by not requiring them to do any. Toby, I say throw them straight in jail. do not pass Go. Yeah, I don't like it either because doing a money spread and flaunting your cold, hard Monopoly cash was one of the best parts about playing Monopoly. I do like it

from an anti-cheating perspective because we've all played with someone who is skimming a little off the top when they went to the bank. I do think Monopoly 2 just has this way of evolving to stay current. I mean, they came out with Monopoly deal, which is this card game if you ever played it. It usually leads to the end of relationships

with your family members. It has Monopoly Go, which is this mobile app. stunned $3 billion in revenue. So I wouldn't bet against this latest iteration of this iconic property. Let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Wednesday. For any questions, comments or feedback, send an email to MorningBrewdaily at MorningBrew.com. And if you're enjoying the show, share it with a friend, family member, or coworker. Toby, who should everyone listening share it with today? I want you to share the podcast with your board game friends. We all have them. They're great at explaining rules. Are way

too competitive and could probably use a fun and informative business news podcast to start their day. I've never met a single person who is great at explaining rules of a board game. I'm throwing them a bone because as someone who has explained board game rules, everyone's eyes grays is over, so I'm saying that you guys are doing great board game friends. Let's roll the credits, Emily Milliron is our executive producer. Raymond Lute is our producer. Olivia Graham is our associate producer. Yuchinawa Ogu is our technical director. Garrett Peck is on audio, hair makeup is just visiting.

Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Enjoy more ways to save at Ralph's, like low prices in every aisle. And when you download the Ralph's app, you can clip and save more with digital coupons every week. Plus, you can earn fuel points to save up to $1 per gallon at the pump.

At Ralph's, you can enjoy more ways to save and more rewards every time you shop. So it's always easy to save big every day with savings and rewards. Ralph's SoCal for over 150 years. Savings may vary by state. Fuel restrictions apply. See site for details.