Morning Brew Daily - Smartphones Exempt From Tariffs… For Now & Meta vs. FTC in Antitrust Trial

Starting point is 00:00:00 Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, AFLAC plans help with out-of-pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com slash morningbrewerdaily. That's aflac.com slash morning brew daily. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell.

Starting point is 00:00:31 Today, meta heads to court to fight for its right to keep Instagram and WhatsApp. Then at Trump gave the electronics business a welcome reprieve from the most punitive tariffs. On to clarify that psych, it's going to be short-lived. It's Monday, April 14th. Let's ride. Good morning. Welcome back to the week. To kick off the show, we want to give a huge shout-out to our co-workers and incredible business creators, Macy Gilliam and Dan Toomey, who have been nominated for Webby Awards, aka the best of the internet. Dan was nominated for his hilarious good work series,

Starting point is 00:01:08 which explores big questions like, what does Palantir actually do? And is Zinn going to kill me and the boys? Macy was nominated for her incredible video in which she worked as a New York City hot dog cart vendor for the day. You can head to the Webby website to vote or check out the Brew Newsletter this morning for the direct links. We sit next to these people every day

Starting point is 00:01:29 and basically just hear them giggle to themselves as they cook up. of the funniest, but also the most educational business content on the internet. But they also work extremely hard. I mean, Macy literally slept in a van on the street of New York for her hot dog video. So if you're a fan of Morning Brew, go show them some love and help them bring home some hardware. Plus, if they don't win, they're fired. All right. And now let's hear a word from our new sponsor, Planet Oat. Toby, you know how a good soundtrack can make an okay movie feel epic? Don't I ever throw a massive orchestra behind a guy, tiny,

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Starting point is 00:03:16 than a homemade lasagna, Trump hit a major part of the economy with a welcome reprieve late on Friday. The administration issued a notice that carved out exemptions for smartphones, computers, semiconductors, and other consumer electronics that had companies from Apple to Dell,

Starting point is 00:03:31 breathing a little easier over the, the weekend. Still, it's by no means a full exhale. First, because other tariffs, around 30% total, still apply to electronics and smartphones coming into the U.S. from China. And second, because Howard Lutnik, Trump's Commerce Secretary went on TV to explain that these reciprocal tariff exemptions are likely to be short-lived and that separate tariffs are coming soon. On ABC, Letnick clarified that all those products, meaning smartphones, computers, et cetera, will fall under semiconductors and they're going to have a special focus type of tariff to make sure that those products get resured.

Starting point is 00:04:07 And Trump followed up that appearance with the post on True Social, explaining that no tariff exception was announced at all on Friday and that the products are just moving to a different tariff bucket. So the companies that we're celebrating are now left in another uncertain position, once again hanging in limbo as the administration works out sector-specific tariffs. Neil, just another weekend on the tariff beat. Still, this is good news for Apple. I mean, all indications point to the fact that even if they move these tariffs to a separate

Starting point is 00:04:37 bucket right now, you know, those widespread reciprocal tariffs on China are at 145%. The sectoral tariffs that we've seen the Trump administration apply on things like aluminum steel autos, those are at 25%. So it doesn't look like we're getting to the doubling of price that would have happened under the previous tariff regime for these specific electronics products. But yeah, this is, overall very good news for Apple. Its stock is ripping this morning. Since that initial tariff announcement, Apple has lost $640 billion. The cost of an iPhone was projected to go up to as much as $3,500. They were shipping in planes of iPhones. People were panic buying iPhones. Now it looks like

Starting point is 00:05:19 Apple's iPhones and other products are going to be at the same price point. at least for the next few weeks and months. Yeah, the one thing that Apple can definitely hang on to you, I'm using Apple here as kind of a proxy for any company that imports electronics, is that the tariffs are going to be lower. 125% was just kind of astronomical and caused those, you know, shipments of iPhones to come in via plane. But it does look like sector-specific tariffs are going to be probably around that 25% range.

Starting point is 00:05:51 Trump has also said that we're going to be very specific on Monday. So today is Monday. We'll get some of those civics. Don't remind me. Yeah, everyone, it's Monday. But also, these latest exemptions are, were a big deal because it covered $390 billion worth of U.S. imports, including more than $100 billion from China. So that is why I use the term breathe the size of relief because everyone's like, oh, thank goodness.

Starting point is 00:06:17 Like our iPhone isn't going to go up to, you know, a thousand dollars plus. Wow, they are almost. They are 35. Wow. The estimates were like $3,500. That felt like such a big number to me, but you're right. It's closer to $3,500. So that is why you saw kind of this big exhale, but we're still a little apprehensive with the sector-specific tariffs coming down the line. Yeah, they account for nearly a quarter of U.S. imports, this exceptions that were made. And another big exception is this semiconductor equipment made by companies like ASML. We're trying to make semiconductors. here in the United States. Biden tried it through incentives. Trump tried it, is trying it through tariffs. Those semiconductor machines that make semiconductors were under this tariff regime, 125%, 145%. And now those are going to be moved to a different bucket under a different

Starting point is 00:07:12 tariff rate. So yes, markets are exhaling this morning. S&P and NASDAQ are up over 1%. Apple's up 5%. So a, you know, a short-term reprieve, we'll see what comes down the pipe. Just if you're keeping track at home, I just want to give one last run through of what has happened. So reciprocal tariffs from Liberation Day were applied. Then there was a removal of those back down to 10% across the board. Then there was the extra 50% Chinese tariffs. Then 104%, then 125%, then 145%. Then electronics were exempted.

Starting point is 00:07:43 Psych electronics are probably coming down the pipeline. So, Neil, good luck planning on where to locate your supply chain if you are a big electronics company. these days. That was very helpful. Thank you. As all the uncertainty continues to swirl around exemptions that aren't exemptions and tariff rates that change by the hour, an interesting trade has begun to emerge amongst global investors, sell America. For a long time, American capital, currency, and bond markets were the most attractive games in town, but now all three look shakier than Rory Macroy's wedge play down the stretch. Take the U.S. dollar. Its exchange rate with a euro hit a three-year low on Friday, meaning Americans are only getting 88 cents on the euro on their vacations abroad.

Starting point is 00:08:25 The dollar has also seen drops compared to other so-called safe haven currencies like the Japanese yen and the Swiss franc. Demand for U.S. bonds and other treasury notes also largely fell last week, while German bonds gained ground as money flocked outside the USA. So really what we have here is a reckoning. What if the U.S. dollar and government securities are not the global safe haven assets they have been for generations. It's an especially pertinent question coming off a wild week where risk your assets like stocks declined, but so did safer things like U.S. Treasuries. That is something that just doesn't happen, or at least didn't happen under the previous economic world order. But now, Neil, sell America, has totally upended things.

Starting point is 00:09:07 You know that quote, there are decades where nothing happens and there are weeks where decades happen. Certain people on Wall Street were saying last week was that most, where perhaps we're seeing this reordering of the U.S.-led economic system, because you just don't see a simultaneous sell-off in equities, bonds, and the dollar at the same time. That's exactly what happened. Then you have leaders coming out, analysts saying, I think what we're seeing is this massive sea change with enormous consequences, the chief investment officer at J.P. Morgan Asset Management.

Starting point is 00:09:41 There is now a very good case for the end of American dollar exceptionalism. Here's Deutsche Bank strategist George Sarveloos. The market is reassessing the structural attractiveness of the dollar as the world's global reserve currency and is undergoing a process of rapid de-dollarization. And finally, Minneapolis Fed President Neil Kashkari, great name. Normally, when you see big tariff increase, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting. This would be a massive shift. And the reason why we're calling this a shift is because usually a lot of money comes into the U.S. $2 trillion pours into U.S. businesses, banks from investors outside of the country every single year. The U.S. actually receives 41% of all the money in the world that gets invested across national borders. And that has only been rising since the pandemic. The story we've been telling on the show and amongst other news outlets is that the U.S. has bounced back from the pandemic better than any other developed countries. and that it looked like it was only increasing its global dominance when it comes to,

Starting point is 00:10:47 you know, economic inflows. But then the week from craziness happened and that entire narrative is shifting now. Now, I guess the caveat here is, is this an actual structural shift or was it really just a crazy week? And that you'll have to see play out over time. But seriously, some wonky stuff happening that made people say, sell America might actually be a real trade coming down the pipeline. Meanwhile, like the most important thing that happens on the economic calendar,

Starting point is 00:11:13 now is the auction of the 10-year U.S. Treasury bond. Everyone is looking forward to when these happened to see what demand is. It happened last week, and it calms some fears because there did appear to be, you know, a good amount of demand. But that's basically what, you know, everyone as Wall Street is paying attention to is these bond auctions, which, you know, are typically kind of under the radar, I would say. More than a decade ago, the U.S. Federal Trade Commission gave Facebook its blessing to by WhatsApp and Instagram two acquisitions that ultimately cemented Mark Zuckerberg's dominance in the

Starting point is 00:11:46 social media sector. Now it wants a takeback. Starting today, the FDC and meta, as the company's now called, square off in a landmark antitrust trial that could shape the future of social media feeds everywhere. The FDC has accused Facebook of illegally monopolizing the personal social networking market through its purchases of WhatsApp and Instagram to would-be competitors and wants those acquisitions unwound. Regulators say there are no serious alternatives to Meta's apps when it comes to staying up to date and connecting with friends and family and a shared social media space online. Meta has responded, are you for real? To quote a spokesperson, the evidence at trial will show what every 17-year-old in the world knows. Instagram, Facebook, and

Starting point is 00:12:28 WhatsApp compete with Chinese-owned TikTok, YouTube X, IMessage, and many others. Over the next few weeks, both Meta and the government will trot out evidence that supports their claims and the stakes could not be higher. Meta derives billions of dollars in revenue from Instagram and a forced separation could leave it without its cash cow. Plus, it's the rare antitrust trial that involves products billions of people use every day. So the world will be watching how it plays out. Toby, this is an existential threat to meta. It can't lose Instagram. Yeah, and it's also the FDC is swinging for the fences here. I mean, we haven't seen a corporate breakup of this scale since AT&T was broken up 40 years ago. So this is definitely a big cahuna that they're going off of here.

Starting point is 00:13:10 Meta obviously doesn't want to lose Instagram because of the ad revenue it generates. It's going to generate around half of its ad revenue, which is a massive business for meta. But also, they don't want to lose the distribution networks that Meta and WhatsApp and Instagram provide for their AI chat bot. Right now they think that's the next frontier, that's the next big tech war that they're fighting. So obviously losing the 50% of the revenue for their advertising business would be horrible, but losing the distribution channels is just the secondary effect that makes them really, really not happy about this case that the FTC brought against them. Now you might be wondering, like, why is the FTC going after META?

Starting point is 00:13:51 Lena Kahn, who was the chair of the FTC, was known as this big tech critic. She's gone along with the rest of the Biden administration. So is this new guy, Andrew Ferguson, who leads the FDC, really going to go after? after all, Zuck has been trying to cozy up to the Trump administration. He donated a million dollars to the inaugural fund. He's visited three times with Trump. And he has reportedly requested Trump specifically, personally, to drop this case. Ferguson, the FDC chair, has said, you know what? I'm going to just do what the FDC does, which is tried to prevent monopoly. So he's tried to distance himself from the sort of political maneuvering that Zuck and

Starting point is 00:14:32 Trump have seemed to have been doing behind the scenes. And he says, you know, this case was brought originally under the first Trump administration in 2020. Lena Con continued it. And now we're here back and do another Trump administration. It looks like Zuck's lobbying has not been successful so far in this realm. And one thing that Meta is just kind of rolling their eyes out is that saying, hey, FDC, you approved this initially. Like, why are we saying that you can now litigate us all these years later, like we went through the whole regulatory process, but the FTC is saying, like, hey, we still think you're making the market like less competitive, which leads to a worse outcome for consumers. The government are saying that you had this buy or Barry strategy, which is

Starting point is 00:15:16 snapping up competitors to either, you know, make yourself stronger, just eliminate competition on that front. So if you're Mark Zuckerberg, though, you're kind of going through this saying, I thought we went through this whole song and dance. How is this song and dance continuing? and it's just the beginning of it. Now, would we see Trump step in and maybe do something? Sure, but if it doesn't, this is a massive antitrust lawsuit that we haven't seen in over four decades at this point. Up next, it's our winners of the weekend.

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Starting point is 00:16:10 Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. You said this place was steps from the water. We just haven't found the steps yet. How much did we save? Enough. Enough to get lost! Or you could book a stay with Hilton.

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Starting point is 00:16:51 better weekend than your CPA friend who sees the light at the end of the dark tax filing tunnel. I won the pre-show Dramatic 1099 reading, so I get to go first. And my winner is thrifting, because if there's anyone that may benefit from tariffs, it's your local thrift store. With 125% tariffs on Chinese imports threatening to drive up prices substantially on clothes and other home goods, consumers may increasingly turn to resellers for their weakened outfits, since those clothes are already in large part in America already and therefore tariff-free.

Starting point is 00:17:23 That's not the only tailwind behind this industry. Trump also closed the so-called de minimis loophole that allowed companies like Sheehan and Tamu, to ship in products for ultra-cheap. Resale has already been booming before these tariffs were applied. The U.S. market for second-hand apparel surged by 14% in 2024, its biggest growth year since 2021, and it's expected to reach $74 billion overall by 2029. Tariffs could push those numbers even higher. A threat-up study found that nearly 60% of consumers and 70% of millennials would seek more

Starting point is 00:17:57 affordable options like second-hand if tariffs make apparel more expensive. Plus, one of the big tailwinds, too, is people like shopping vintage now. It's cool. It's part of the fashion trend de jour right now. So that is another tailwind behind it. I do want to pour a little bit of cold water on this, though, mainly because if we enter into economic recession, that's not good for people buying any discretionary items and vintage clothing might fall into that bucket.

Starting point is 00:18:23 And then secondly, too, you're seeing all these sites like poshmark, like thread up, might see this huge surge of supply because people are looking at their closet and saying like, hey, maybe I can make a little extra buck off from this shirt that I never wear. And so you're going to see this flood of supply coming onto the market right when demand

Starting point is 00:18:41 might be drying up. So that's not a good market force if you are within this secondhand industry. So there's multiple pathways ahead here. One of them being that people want to buy stuff that is not imported and therefore not subjected to tariffs, but then the other might be that supply and demand economics get all wonky,

Starting point is 00:19:01 and it doesn't see the boom that a lot of people are expecting. You're not allowed to yuck my winner. That's not the rules of this game. Sorry for yucking at your yum here. But, yeah, I mean, I guess I'll just end on a positive note for sure here. And the more aggressive the U.S. trade policy becomes maybe the better positioned secondhand sellers actually are, especially in the war against fast fashion sellers like Cheyenne and Timu. My winner of the weekend is Neil and Toby, because we made it this first.

Starting point is 00:19:27 into the show without really talking about what happened at the Masters, but talk about it we must. Rory McElroy finally got the monkey off his back, which thank goodness because my heart could not take his shenanigans anymore. And as he put his arms through the sleeves on one of the most unique prizes in golf, a green jacket, a thought struck us. What is a green jacket actually worth? Luckily, the athletic did a deep dive and their answer was multifaceted. On the one hand, Rory took home a record $4.2 million for winning the Masters, but what if the jacket itself made it to a secondary market? What could it fetch? Thankfully, we have a few data points thanks to an auction house formerly known as Green Jacket Auctions, who was subsequently sued and changed

Starting point is 00:20:08 her name to Golden Age auctions. A green jacket belonging to 1957 champion Doug Ford sold for over $60,000 back in 2010, while a 1959 winner Art Wall's coat fetched a similar price. Those are small potatoes, though, compared to Horton Smith's green jacket from his 34 and 36 wins, which sold for 10x the price of the others, bringing in $6802,000 in 2013. Now, no offense to Horton Smith, but the second priciest auction for a green jacket has a way cooler backstory. Somehow, the most coveted prize in golf ended up in a pile of old blazers at a Toronto thrift store where someone bought it for $5. The name tag inside was cut out, but the so-called thrift store jacket sold for $139 grand in 2017.

Starting point is 00:20:57 So the answer to the question, how much is a green jacket worth? It's somewhere between $5 and $682,000, Neil. I mean, some things are so a part of your life where you don't realize how kind of weird and bizarre they are. And yesterday, as we were thinking about this story, I was like, wow, this person wins a golf tournament and they get a jacket that is green. Like, that's a little weird. But in terms of the secondhand sales,

Starting point is 00:21:22 the Masters does not like that this is happening. So in 2010, they declared ownership over the green jacket. And now you can't, they're clamping down on all these secondhand auctions. Roy McElroy or whoever wins the Masters is the only person who can wear the green jacket outside of the grounds of Augusta National Golf Club over the year. So it's become a system very much like the Oscars where they retain. ownership because they don't want these things being sold on the secondhand market. They want to kind of keep it all in-house. And you can rent it out. And that's kind of how they've played this

Starting point is 00:21:57 because they don't want, you know, people like Toby come around being like, did you see how like this green jacket was sold for X number of dollars on, on, at this thrift store? So that's kind of what they've been clamping down everything in the Masters is kind of very buttoned up. And so is these jackets. And then finally, one of the greatest stories from green jacket lore that goes even beyond of Horton Smith's $682,000 jacket is Arnold Palmer's master's screen jacket had been discussed in a sale of $3.65 million back in 2022. And the way that that jacket was actually brought to that auction was it was stolen and eventually intercepted by the FBI in a sting operation. There was this master's employee, a Gus employee who'd been stealing merchandise. He filched the Arnold

Starting point is 00:22:43 Palmer jacket, was going to sell it off for nearly $4 million. But then the FBI got involved. So just some crazy lore when it comes to, you know, $5 thrift store jackets all the way up to nearly $4 million honorall Palmer jackets that were busted by the FBI and a sting operation. So the only way to get your hands on one is to, you know, just put better if you're Rory or steal one and try to buy it on the black market. All right, it's Monday. So here's what you need to know about the big events of the upcoming week. Katie Perry will finally realize her goal of living like an extraterrestrial. Later this morning, a Blue Origin Rock will launch from Texas carrying an all-female crew the first time since 1963 that a spacecraft

Starting point is 00:23:22 will launch with only women aboard. The passengers are pop star Katie Perry, TV journalist Gail King, producer Carrie Ann Flynn, former NASA scientist Aisha Bough, civil rights activist Amanda Winn, and Jeff Bezos's girlfriend, Lauren Sanchez. The suborbital mission is set to launch from West Texas at 10 a.m. Eastern Time and will last all of about 11 minutes in the air. I mean, sending your soon-to-be wife, because they are getting married soon, up to space with all our friends. That is some high-stakes space flight right there. And also, I mean, I'm not the first one to make this joke, but saying, hey, honey, you want me to send you to space? That might be inauspicious before, you know, your wedding.

Starting point is 00:24:01 But first, all-female crew to reach the internationally recognized boundary of space. So definitely a trailblazing moment and hope everything goes smoothly. Back here on Earth, earning season gets going in a big way. after other banks like J.P. Morgan topped estimates last week. Goldman Sachs, Citig Group, and Bank of America will hog the spotlight to start this week. And then later on, Taiwan Semiconductor, United Health, Netflix, and American Express will share their Q1 results to a crowd of jittery investors. Elsewhere on the economic calendar, the government will release its monthly retail sales data on Wednesday, offering insight into consumer spending during these uncertain tariff-filled times.

Starting point is 00:24:39 Yeah, I'm definitely looking forward to TSM, ASML, to see how this. the semiconductor industry is affected by all this tariff uncertainty. And then also, yeah, that retail sales data is kind of a very, almost a real-time look into how consumers are feeling. So very curious about that as well. Yesterday, the NBA's regular season wrapped up an 82-game roller coaster defined by shocking trades and coaching changes. And the playing tournament for the playoffs starts tomorrow. The top three seeds in the east are the Cavs, Celtics, NICs, and the West. It's the Thunder, Rockets, and Lakers.

Starting point is 00:25:11 And tonight we got WMBA draft as well, so Paige Becker's lottery is now open, so a lot of good basketball news coming down the pipeline. And in other sports news, don't want to leave out my hockey fans out there. The NHL playoffs start on Saturday. And then finally, it's going to be a short trading week since markets are closed for Good Friday on Friday. And two days later is Easter Sunday, which is also 420. I hope you stockpiled those eggs, everyone, because they're going to be expensive. Let's wrap it up there. Thanks so much for starting your morning with us

Starting point is 00:25:42 and have a wonderful start to the week for any questions, comments, or feedback. Send an email to Morning Brew Daily at MorningBrewD.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Our associate producers are Olivia Graham

Starting point is 00:25:56 and Olivia Lake. Dan Bousa is on audio. Hair and makeup is gone thrifting. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. All.

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Morning Brew Daily - Smartphones Exempt From Tariffs… For Now & Meta vs. FTC in Antitrust Trial

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