Morning Brew Daily - Tariffs Ineffective Against US Trade Deficit? & Family Feud Over Reese’s Recipe

Episode Date: February 20, 2026

Episode 784: Neal and Toby discuss the swelling trade deficit despite Trump’s aggressive tariffs. Then, the grandson of the Reese’s Peanut Butter Cup inventor is publicly criticizing Hershey’s for skimping out for cheaper ingredients. Also, Etsy sells its secondhand marketplace to eBay, which is a move investors are cheering for, making it the Stock of the Week. Meanwhile, Amazon finally snaps its 9-day losing streak that resulted in losing $450B in market value, making it the Dog of the Week.  Learn more about FlavCity at https://go.shopflavcity.com/mbds  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://www.swap.fm/l/mbd-note⁠⁠⁠  Watch Morning Brew Daily Here:⁠ ⁠⁠https://www.youtube.com/@MorningBrewDailyShow⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning Brue Daily show. I'm Neil Fryman. And I'm Toby Howell. Today, have Reese's peanut buttercups been getting worse? Then has the U.S. trade deficit been getting worse? It's Friday, February 20th.

Let's ride. Good morning and happy Friday. Wow, what a day at the Olympics. Yesterday, the U.S. women's hockey team won the gold medal in an absolute thriller coming from behind to beat Canada in overtime. Elsewhere on the ice, Alyssa Luz Stellar Free Skate helped to become the first American woman

to win figure skating gold in 24 years. And it's even sweeter when you learn that she retired from the sport four years ago after being burnt out, only to return with a plan just to have the most fun possible. And finally, the newest Winter Olympic sport Schemo or Ski Mountaineering debuted yesterday.

And it was total chaos in the best way. Yeah, no disrespect to, you know, these generational hockey teams in figure skating gold medals, but I was very wrapped up in Schemo. What a bizarre in a painful sport. Run up a hill on skis through an obstacle course, take your skis off, then put them on a bunch of times, then ski down again. I do love the difference between the summer in Olympic Games when it comes to admitting

new sports. Oh, you want squash or MMA like sports enjoyed by millions of people in the summer games. Tough luck. Oh, you invented a 37th new way to ski. You are into the Winter Olympics, baby. although the summer games did let breakdancing in, so maybe they're not as discerning as I'm making it out to be. Ski breakdancing. It's coming in 2020, whatever the next Olympics are.

And yes, we're going to be locked in on Saturday for friend of the friend of the pod. Cam Smith goes for ski mountaineering. And now a word from our sponsor, Flav City. Toby, how are you hitting your protein macros these days? Every day, I eat six plain chicken breasts and drink a pint of egg whites. And is that fun for you? No. Hmm, maybe try FlavCities all-in-one protein smoothies instead.

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slash MBDS to try any of their delicious flavors. That's go. dot shopflavcity.com slash MBDS. If the world was a middle school lunch table, the U.S. is getting got. Despite doing its best to offer up its fine gogurts and ritz crackers,

it can't seem to wean itself off the rest of the world's twizzlers and uncrustables. The U.S. trade deficit, calculated as imports minus exports, increase in the last month of the year to reach $901.5 billion annually. Despite efforts to bring that number down via Trump's wide-ranging tariff regime, the deficit was essentially unchanged, falling just 0.2% from 2024. How is it possible that tariffs didn't eat into the deficit more? Isn't that sort of the whole point of tariffs? Well, over the

course of the year, a lot of the bite was taking out of some of the steepest duties as deals were struck with major partners. In the end, the trade deficit for physical products actually grew by almost 6% last year when adjusted for inflation. The only thing tariffs seem to have taken a bite out of is U.S. businesses. According to new research from J.P. Morgan, tariffs paid by mid-sized U.S. businesses tripled over the course of last year. The findings add to a growing body of evidence that show import bills are not being footed by foreign countries like Trump has suggested.

Neil, what is going on here? Seems like there's some middle school lunch trauma you need to unpack. We can do that a little bit later. I kept getting got. But it is confusing, right? Trump increased the average tariff rate from 2.6% the year before that to 13% last year. Wouldn't that lead to importers in the United States not importing as much because that's a lot of money that they need to pay? Well, here are maybe three reasons that the trade deficit has not gone down. One is that importers rerouted to lower tariff places. So we saw that China imports were down 30% last year. But imports from places like Mexico and Vietnam. more than made up the difference. There were no tariffs on some huge items that we import, like pharmaceuticals. We imported a lot of Wagovi from Novo Nordisk in Denmark and electronics from Asia. And then finally, there was a lot of stockpiling going on right after Liberation Day in April.

And even before then, companies were surging imports into the country in order to get ahead of potential tariffs. So maybe those are three reasons why the trade deficit has not gone down. And we should say, many economists say that having a trade deficit is not the worst thing in the world. It's perfectly fine. It just shows that the United States is more of a consumer economy rather than a we make stuff economy. But if the tariff's intention were to bring down the trade deficit, they are not doing it. I do want to drill into the fact that supply chains were rerouted a little bit because that could be pointed out as a win for this tariff regime if we are, in fact, importing less from China and more from other trade partners like Taiwan, Mexico, or Vietnam. That could be a win, although there is rumors out there that a lot of goods that used to come from China are just being rerouted through those places via, you know, under the table deals or something like that, which absolutely is happening on some level.

And you are right about inventories cushioning the blow. That is partially why we saw an elevated trade deficit too. It's just the fact that a lot of people front loaded this thing. So in the early part of the year, maybe we were narrowing that trade gap. but since so many people imported to start the year, it was tough to bring it down too much. That's part of also the reason why inflation maybe hasn't spiked in line with the fact that we are eating a lot of these tariff costs. And consumer prices have cooled from 3% in January to 2.7% in December.

So prices moderated throughout the year, which probably is explained by inventory piles stocking up in really the companies themselves eating a lot of those. price hikes. And you mentioned this in the intro, but there is a growing body of research that show that sort of try, it's trying to explain who is paying the tariffs. Yes, U.S. midsides businesses have jumped their costs because of the tariffs. And there was this big New York Fed study that came out that showed that 90% of the burden for Trump's tariffs did fall on U.S. companies and consumers. The White House did not like this that much. They bashed the research. But most economists in from the right or the left kind of rallied around the New York Fed here and said, no, this is,

This is sound research. This is my conclusions, too. 90% of the tariffs were born by U.S. consumers and businesses. Yeah, that J.P. Morgan study specifically focused on middle market companies. That is revenue between $10 million and $1 billion, which seems like a large middle market, but this is the United States that we're talking about. And then usually around 500 or fewer employees. So it really is small businesses, the exact people that Trump is appealing to and saying we're trying to help you.

those ended up footing the bill the most. Going forward, there's still a lot of questions surrounding this, what I call the tariff regime, because the Supreme Court is expected to rule soon on whether you know, Trump has exceeded his legal authority when it comes to declaring an economic emergency in using these levies. So that's just been hanging over all these conversations. They were supposed to fast track it, but every single time that there's been a potential day that it's come, they haven't released this ruling. The next time that they could possibly do it is this morning. So a lot of analysts are saying, can we get it today? Can we get it today? A lot, you know, trillions of dollars hangs in the

balance. And it's also, you know what else hangs in the balance? Our story selection, because we keep going like, should we cover it? Are they actually going to say anything? What do you think? So think of the podcast. It could be, it could be today. Okay, moving on, the man whose grandfather invented the Reese's peanut butter cup is lashing out at Hershey's for sullying his family's name. This week, 70-year-old Brad Reese made public a letter he wrote to Hershey's leadership, blasting the recipe changes they've made on certain Reese's products. How does the Hershey company continue to position Reese's as its flagship brand, a symbol of trust, quality, and leadership, while quietly replacing the very ingredients,

milk, chocolate and peanut butter, that built Reese's trust in the first place? He said he recently threw out a Reese's mini-heart's product released around Valentine's Day, calling it not edible. In response to Reese, Hershey said that it had not changed the recipe for the OG peanut buttercup, but had expanded that brand into due categories to match changing consumer tastes. As we've grown and expanded the Reese's product line, the company wrote, we make product recipe adjustments that allow us to make new shape, sizes, and innovations that Reese's fans have come to love and ask for. That is not likely to quiet the critics, many of whom rallied around

Reese's chocolate, not quite tasting like it used to. Toby, do they have a point? Yeah, they have a point. Here is the brilliance of putting out this LinkedIn post, though, is that chocolate was always going to taste better when you were younger, just because you were younger. So there is a nostalgia built up in this. Then there's also the real point of cocoa prices have risen in recent years. And a lot of companies are reformulating their chocolate mixtures to reflect that because they want to keep their margins at the place that they do. Hershey's stance was that the fact they're eating a different product constitutes a different innovation and a different formula. So maybe it wasn't just the pure milk chocolate and peanut butter that you were used to. So there's a lot of

half-thrus all feeding into this idea that maybe it is changing. One thing that is a fact, though, is that wording matters when it comes to standards when you're labeling your products. Because to qualify as milk chocolate, you need at least 10% chocolate liquor, which is just ground cocoa bean paste, at least 12% milk solids and 3.39% milk fat. Like, they're very precise definitions. So if it says milk chocolate, you can trust that it meets the standards that the FDA requires. It is a fact. If you go to these candies and you look at the ingredient list that Rolo's, Mr. Goodbar, and Almond Joy no longer list milk chocolate like they used to. And Hershey's, no doubt, has been changing their ingredients. And I think a lot of people hopped on this post and said,

yeah, sure, you can take the whole psychology into account saying that these chocolate does taste better when you're when you're younger. But they actually literally have changed the recipe, not necessarily for Reese's peanut butter cups, but for other bars. So a lot of folks were saying, yeah, Mr. Reese, you are right. And he is, just to do some family lore, he is the grandson of H.B. Reese. H.B. Reese worked for Hershey in 1917 before founding his own company where he created the Reese's peanut butter cups. Then his kids in 1963 sold that back to Hershey. So this guy went from Hershey, did his own thing. They sold it back. But yes, this guy named H.B. Reese and Vend to the Reese's Brother Cup.

Give me a succession, but with more chocolate involved. Also, the social media reaction to this was overwhelmingly empathizing with the grandson of Rees because, yes, a lot of people don't think the chocolate tastes the same. I saw one quote tweet of this.

That was, Reesies peanut butter cups tastes like AI right now, which I kind of understand. Like, sometimes you do eat a canning, you're like, that didn't even taste like anything right now, so those are two worlds colliding. Okay, welcome to Stock of the Week. Dog of the Week, the segment where Toby and I pick one stock that rocked and another that rolled. I won the pre-show bobsled race. Toby went way too high into Corner 3, so I get to go first.

And my stock of the week is, well, there are two. Etsy and eBay, who struck a fashion deal that investors think will be a win for both four-letter companies that start with the letter E. Here is that deal. Etsy sold Depop, a secondhand clothing app to eBay for $1.2 billion. By acquiring Deepop, eBay is essentially buying young shoppers. as an online marketplace that's over 30 years old at this point, and you can tell when you go to the website, eBay will use Depop to increase its reach with Gen Z, a group that absolutely loves used clothing. Of the 7 million buyers on Deepop, 90% are younger than 34. eBay stock gained 3% after the deal was announced.

As for Etsy, it's shedding a fast-growing but ultimately distracting part of its portfolio, which is why its stock popped over 9% on the news it was selling Depop. A couple of years ago, at the height of the pandemic e-commerce boom, Etsy went on a side quest to compete with Amazon. It aimed to build a so-called house of brands filled with platforms catering to specific customers. So it went on a shopping spree and bought Deepop, a Brazilian e-commerce company, and a musical instrument marketplace it had scooped up in 2019. Fast forward to today, and it's unwound all three of those acquisitions. Toby, a rare deal that the market actually likes. Yeah, it seems to make sense for everyone involved. It also makes

sense timing-wise right now because resale marketplaces are on the rise once more. Obviously, there's the Gen Z component, but just in general, there's people's household incomes are being squeezed right now. Sustainability concerns are very top of mind in fashion. There's been kind of a growing anti-fast fashion movement as well as, you know, Sheehan and Timo have become more popular. A lot of people are going secondhand and thrifting instead. So it's no longer just a niche part of the market, it's very much an established part of the market. It does make, beg the question, though, because you mentioned the strategic rationale of spinning off Depop from Etsy, but Deepop's U.S. growth was 60% year over year last year. So this is a growing and valuable asset. I think it just

didn't make sense strategically for Etsy, but it is still a great business. It is, but it is curious because they sold it for $1.2 billion, but they paid $1.6 billion for it. So they sold it at a $400 million loss. And that seems to be par for the course for some of these secondhand companies. Poshmark was sold to Navor, which is a South Korean company back in 2023 for $1.6 billion. That was less than half of its IPO price. So for whatever reason, this is a growing industry, but some of these companies maybe just haven't figured out the best way to make money from it. I really do just think the pandemic era of e-commerce clouded a lot of these sales prices because two things can be true at once that Etsy certainly overpriced.

paid for Deepop and Deepop is still a good and growing business. I think those both can be true at the same time. It really just was e-commerce is the future, which is true to a certain extent, but maybe those numbers were inflated by everyone, you know, staying at home, ordering in, which is why, you know, you saw these crazy prices. All right, we're going to take a quick break and come back with our dog of the week. My dog of the week is Amazon because it's been on a losing streak of epic proportions from February 2nd to early this week. week, Amazon finished in the red nine days in a row. It finally snapped that streak on Tuesday, but not before it lost 18% of its value wiping out $450 billion from its market cap in the process.

Just to put that in perspective, there are only 23 companies in the world that have a market cap higher than the $450 billion Amazon lost. Why has the market gone so sour on Amazon? It's got a spending problem. Amazon expects to burn $200 billion on AI infrastructure this year. number took Wall Street by surprise coming in $50 billion higher than expected and showed there is an upper limit to investors' appetite for capital expenditures. Still, Amazon's actual business has been chugging along quite nicely and officially dethroned Walmart as the biggest global company by revenue. Amazon reported 2025 sales of $717 billion, while Walmart reported a measly $713 billion. Despite snagging the crown, Amazon shares are down 10%.

year-to-date, while Walmart is up 14% pushing its market cap across $1 trillion. Neil, a nine-day losing streak. Haven't seen one of those since you and I were playing chess. I was on a heater. Oh, yeah. Okay, so Amazon just became the biggest company in the world by revenue, but it's kind of like when you turn 50 years old. It's like, yay, it's my birthday, but at the same time, there's this foreboding atmosphere around it

because they did have their worst losing streak since 2006. and analysts are calling it a hollow victory. So Amazon leapfrogged Walmart, but at the same time, it's not necessarily an apples-to-apples comparison. Amazon has not necessarily beaten Walmart at the retail game. It just essentially launched a new business that Walmart does not compete in.

That business is AWS. It's cloud computing with take AWS out of the equation, and Amazon's revenue in 2025 would have been $58 billion, nowhere close to Walmart. So it's been very interesting to see Walmart and Amazon, encroach on each other's turf. Walmart has been very successful getting into the e-commerce business, and Amazon has been less successful getting into the brick and mortar business where Walmart dominates. But at the same time, Amazon has AWS, which generates very, very high margins and a lot

of revenue. First of all, 50 years old is still young. You got a whole life ahead of you, Neil, but you are right. Heavy is the head that wears the crown because oftentimes if you are the number one company in the world when it comes to revenue, you get increased regulatory attention. you get higher customer expectations. These are all just little small things that feed into being number one. And it's not necessarily a good thing to even reach number one, because if you go back through some historic companies that have held this title, it's ExxonMobil, it's General Motors.

They are nowhere near the peak of their games now because of the myriad of issues that I mentioned before. So it's more reflective of just its operational scale. It's just breadth of a business more so than any. super exciting thing about this business outside of AWS. It is growing pretty fast. Last year, Amazon sales grew 12.4%. Walmart grew at 4.7%.

And over the past decade, Amazon's revenue has increased almost 10 times the pace of Walmart. And I'm just thinking about Jeff Bezos yesterday. When he was building Amazon in the early 90s, I mean, he was studying Sam Walton. That was the guy that he was saying, if as I'm building my online bookseller, I'm focused on what Sam Walton did.

Sam Walton did, and now to have Amazon pass it, it's quite an achievement to make, what, $717 billion a year? How much do you contribute to that? Not that much, actually. You don't buy stuff on Amazon? I'm trying to remember the last thing I bought off Amazon. I think it was a sponge. Not one sponge, a pack of sponge.

I was running low. Well, I bought a lot of cloud computing space from Amazon Web Services. Okay, let's sprint to the finish with some final headline. Oil prices have searched to their highest levels since last. summer as President Trump considers whether to strike Iran, potentially disrupting flows in a region home to about a third of the world's crude. Over the past few days, the U.S. military has moved more assets, tankers, carriers, fighter jets into the Middle East than at any point since the build-up to the Iraq war in 2003. The sheer scale of military hardware in the area suggests that

should Trump decide to go after the regime in Tehran, it'd be an extensive campaign that could last many days. Seems Trump hasn't made up his mind yet. Yesterday morning, he said, maybe we're going to make a deal referring to stalled nuclear talks, you're going to be finding out over the next probably 10 days. Yep, we are all monitoring this situation here. Specifically, I'm monitoring two different commodities markets. Obviously, there is oil. Iran is a major producer and crude prices are already rising with tensions. They hit a six-month high this past few hours. But then there's also the pistachio market. California and Iran, I didn't know this, basically have a duopoly over pistacio production. They control between 70 and 80% of the world's supply. So you can expect

pistachio prices to also jump. However, I looked this up too. There are no pistachios future. So you can't actually trade on this idea unless you physically owned a farm, in which case you probably will see kernel prices rise. Up next, Accenture wants you to use AI so bad that it won't give you a promotion without it. In an industry first, the consulting giant told senior staff that they would have to regularly use the company's AI tools to be considered for promotion to senior roles, according to the Financial Times. CEO Julius Sweet would be the first consulting boss to do this. She is more bullish on AI than Oscar Isaac and Ex Machina, inking deals with OpenAI and Anthropic to leverage their tech across her company. She has also said that all Accenture employees,

and there are nearly 800,000 of them worldwide, would need to retrain and retool to adapt to the AI era or else get laid off. Toby, I don't think there's another CEO with more conviction that AI will revolutionize work than Julia Sweet. But I do wonder how much of this is PR and maybe posturing for her partners and how much is actually going to be carried out internally because I was speaking with my fiance who works for a big consulting. And she was a little dubious about how this would actually be monitored because within consulting, everything is very quantifiable.

Like one of the big stats is utilization. How many hours did you bill for the firm? And then there are more nebulous criteria where you rate your peers on like, would I like to work with this person going forward? So I'm really am curious to see if Accenture makes it a benchmark within their internal processes for promotions. Is it going to be a hard and cut figure? Or is it one of those things that you just hold up and say, look, partners, like we are AI first going forward. Vibe.

Vibe hiring. Yeah. Right. Because in consulting, there is a big difference between their actual metrics because these are run like well-oiled machines and what they are kind of saying to clients. Either way, Accenture employs 780,000 people globally. so whatever happens, it will impact a global workforce. Moving on, we got to talk about what lawyers are charging these days. I want you all listening to take a minute,

and guess what you think an elite lawyer can fetch for their services? $800 an hour? $1,800 an hour? Try $6 grand. The Wall Street Journal collected some data that shows just how absurd it's gotten out there. According to data from the software company Pursuit, senior partners at some top firms are billing about $3,400 per hour. hour, and partner rates across the 50 biggest firms rose about 16% over the last year.

It used to be that $1,500 an hour shocked clients a decade ago, but listen to what Eric Troutman, a partner at a California law firm that consults on compliance issues in telecom regulation is charging. Last year, his rate was $4,200 an hour. This year, he told clients that he's upping that to $6,000, and no one is batting an eye. Neil, I'm taking the bar. As my grandparents would say it, these lawyers have a lot of chutzpah, or as you would say, they would have a lot of chutzpah. But they would say supply and demand, right?

I'm the only guy that knows telecom regulations like this. I am a lawyer that can literally pick up the phone and solve a crisis for you. So this is $6,000 an hour. Hey, it's actually a bargain. If you have something that will take your business down and I can solve it by just picking up the phone, then you have other lawyers saying, actually, this is insane. This is not. This has gone beyond the market. rate pricing. But it's crazy how much it's risen just in the past few years or even last year.

Just last year, the going rate for a very top lawyer, according to the Wall Street Journal, was $2,500. Now it's well over $3,000. And a decade ago, the tippy, tippy, tippy top was $1,500 an hour. So it is just blown past all sort of reasonableness. Finally, are we about to find out once and for all if aliens are real? Yesterday, President Trump posted that he will be directing the second of war and other government agencies to release government records related to alien life and UFOs. This comes on the heels of another presidential nod towards extraterrestrial life. Former President Obama said it on a podcast this week, they're real, but I haven't seen them. He later clarified that when he said aliens were real, he didn't actually mean it and

was instead referring to the statistical likelihood of life existing on another planet. But where there's smoke, there might be fire and aliens, and Trump just added more kindling. Neil, this is going to be a heck of a few months until Will Smith uses a neuralizer on all of us to wipe all our memories. There is one guy who can't believe his luck. He said, I can't believe we're talking about aliens. This is the best thing that's ever happens to me. That is Stephen Spielberg, because he's coming out with an alien UFO movie Disclosure Day on June 12, 2026. So if this news cycle picks up pace, there's going to be a lot of people that were going to see this movie because it's just a summer blockbuster about aliens by Stephen Spielberg.

But if the United States catches alien fever, which it does seems like every six months, then I think, you know, this will be one of the biggest movies ever. What do you think we're going to find out? Like, are there little green people? This happens all the time. We really don't find out much. Give me your thoughts on aliens in general. Like, are we alone?

I agree with Obama. I think that's a reasonable take where there's a huge universe out there. The odds are that there is life out there. Do I think they're the green aliens? So I think the United States has been in contact with them? No. I'm excited for Project Hail Mary, which is another sort of like alien-adjacent blockbuster just coming out soon. Maybe these are all just marketing stunts from big Hollywood Studios.

Okay, that is all the time we have. Thanks so much for starting your morning with us. Have a wonderful Friday and an even better weekend. If you want to get in touch, send an email to Morningbrewdaily at MorningBru.com or DM us on Instagram at MB Daily Show. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lou is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair and makeup wants the old Reese's back. Devin Emery is our president and our show is a production of Morning Brew. Great. So did I know, Daniel, I wish you all

well.