Morning Brew Daily - Trump Battles Court’s Tariff Block & Home Sellers Outnumber Buyers?

Episode Date: May 30, 2025

Episode 594: Neal and Toby recap the back-and-forth between the Trump administration and the courts attempting to block his sweeping tariffs. Then, a new study shows the number of home sellers outnumber home buyers by a large margin…but why aren’t prices coming down? Also, Costco reports a positive earnings as it’s able to maintain its low prices amid rising costs.. Meanwhile, a trade theory known as TACO: Trump Always Chickens Out is the Stock of the Week and American policy on international students is the Dog of the Week. Finally, United Airlines is coming back to JFK Airport. 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. LinkedIn will even give you a $100 credit on your next campaign so you can try it yourself. Go to LinkedIn.com/MBD  Terms and conditions apply. Only on LinkedIn Ads. 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

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

pwc.com slash U.S. slash brew AI. That's pwc.com slash us slash brew AI. Good morning Brew Daily show. I'm Neil Freyman. And I'm Toby Howell. Today we'll take you to the hottest club in America, Costco.

Ben Trump's tariff agenda is pinballing through more courts than a Djokovic French Open run. It's Friday, May 30th. Let's ride. If you want to know what people mean when they say aura, watch the highlights of last night's spelling beat. Aizan Zaki, a 13-year-old from Plano, Texas, won the 100th Scripps National Spelling Bee, and he did it with swagger, rattling off impossible-sounding words one after another with his hands in a black hoodie.

Zaki, who was the runner-up last year, won this year's B by spelling the word Eclare C-S-Mond, and he did it without asking a single question before nailing it. Dude is a legend. So how does one spell Eclare-Sisman correctly before you even have your learner's permit? Well, you got to train like a professional athlete. For the past year, after finishing runner-up, Zaki absolutely grinded. He worked with three different coaches. The New York Times set his typical weekday schedule included five to six hours a day of practice

and seven to eight hours on the weekend. That is so many words. But also, Neil, I have to read you some of these quotes from his friends and family after Zaki won. His dad said, he's the goat. I absolutely believe that. And his friend roasted him for missing an easy word. late in the competition saying, I think he cared too much about his aura, but the goat had enough aura left over and took home the dub. Man, I love the spelling bee. And now a word from our

sponsor, LinkedIn. Neil, you ever try to go somewhere using no directions? Well, I kind of pride myself on it. One look at the suggested Google Maps route, then it's all memory from there. I've been in the car when you do that. And while it's impressive, I don't think it's the optimal way. I've seen you make a wrong turn or two. That's a little what B2B marketing can feel like when you're not using LinkedIn. You've got a destination in mind, decision makers, but sometimes your ad ends up in the wrong place entirely. Using LinkedIn ads is like plugging your campaign into ways. Over 1 billion professionals, 130 million decision makers, 10 million C level execs, and you can sort by job title, industry, company, and more.

It's precise, it's efficient, and in the tech space, LinkedIn ads drives two to five times higher return on ads. spend than any other platform. Take the right route. No more detours, no more dead ends, no navigating off vibes alone, just high quality leads. LinkedIn will even give you a $100 credit on your next campaign. Head to LinkedIn.com slash MBD. That's LinkedIn.com slash MBD. Terms and conditions apply. Maybe one day will go 24 hours without tariff news, but yesterday was not that day. If you went to bed at 8.16 p.m. Eastern on Wednesday and woke up at 2.13 p.m. Eastern on Thursday, here's what you would have missed. First, the U.S. Court of International Trade ruled that Trump's usage of a 1997 law to carry out his trade war was not legal. That means the 30% duties on Chinese good, 25% on Mexico and Canada, and all the other reciprocal tariffs sprinkled around the world on Liberation Day were set to be paused.

The White House immediately clapped back calling it judicial overreach and appealed suggesting it may take the case directly to the Supreme Court if lower courts didn't move fast enough. The message was heard in yesterday a federal appeals court temporarily paused the pause that would have wiped out most of Trump's tariff agenda. That ruling gives the group challenging the original tariff, which includes states and some U.S. businesses, one week to respond to the government's appeal and then gives the government until June 9th to fire back. So in one sentence, Neil, tariffs were paused, appeals court intervened to pause that pause, and now it looks like we're on a collision course towards a higher court. But even if the White House loses its appeal, these tariffs are far from over. Trump has a few other levers he can pull. This is like a seven-layer dip where every layer is uncertainty stacked up on another.

Let's talk about the original statute that Trump used to implement these reciprocal tariffs. That's the international emergency economic. Powers Act of 1977, and in striking it down and in calling it illegal for Trump to use that, the judges said that in the five decades since IEEPA was enacted, no president until now has ever invoked the statute to impose tariffs. The Trump administration said that it was a national emergency what was going on with the United States trade deficits with the rest of the world, so they invoked IEPA, which judges said, actually, you can't use tariffs in this context. of other ways that you can, a number of other measures within the existing U.S. trade law,

that you can enact tariffs. Trump did that during his first term, and he did that during, and to enact other tariffs that we've seen in his second term on things like autos, auto parts, aluminum, and steel. Yeah, let's go through some of those other ways you can enact tariffs. One that you'll hear a lot of is Section 232. These tariffs are actually left in place because they weren't affected by that initial ruling, and those are the ones that are in place on things like foreign steel, aluminums, and autos. Section 232 of the Trade Expansion Act of 1962, there won't be a test on this after.

It's open books, so you can check this out. It requires a big Commerce Department investigation cannot simply be imposed on the president's whim at its own discretion like the other tariffs Trump has been using. So he still has the authority to raise those Section 232 tariffs. It just takes a lot longer because you do have to go through the paper. work. You do have to do this big commerce department investigation. So those are actually a lot more legally sound. They're just not as quick and as nimble as Trump wants them to be. And then the other one is section 122. This allows you to apply 15% tariffs kind of across the board. However, those would require congressional action after 150 days. So they expire. So again, a little bit more legally sound,

but a much shorter term in terms of breath. And so Trump kind of wants to avoid Section 122. So those are some of the ones that you're going to hear a lot of over the coming days. And because of those potential alternatives, even if the existing tariffs are ultimately struck down at this appeals hearing on June 9th, most banks and analysts came out yesterday saying they're going to figure a way to put these tariffs on, whether it's all of these trade sections going through your head right now. Morgan Stanley and Goldman Sachs came out saying really fundamentally things on the ground may not change all that much over the next few weeks because of these alternative mechanisms that the Trump administration can use. It just adds even more fog to any business that's trying to drive through their future right now. And it's no wonder why every single company that we heard report earnings this season say we're pulling our guidance for the year. We have no idea what's going on. Yeah, and it's kind of why we saw a little bit of a muted response from the market yesterday. Futures were up in the morning when we heard that this pause was coming down. Obviously, it was rolled back later in the day.

But overall, the market finished just barely up because it was just a pretty muted response because their investors are not getting too carried away. They know that they have these workarounds available to them that allow them to continue to pursue this trade agenda. So it wasn't this big green day that you might have expected on news of a tariff potentially being paused. One thing that we can pretty much bank on is that the Trump administration will do everything that it can to put these tariffs and make sure that they are happening because they are banking

on the tariffs to bring in a lot of money, $200 billion each year in order to fund this massive tax bill that the GOP is pushing through that's expected to cost $3.8 trillion over the next decade. If there are no tariffs, then you might see that bill get tweaked a lot in the Senate because a lot of GOP senators and lawmakers more broadly are not, you know, they're not accepted. It's not acceptable to them to spend this much money without any of the tariff revenue coming in. So yes, another trade fight we've got going in the courts. And the only people who seem to be happy right now are the lawyers.

Okay, let's turn to the real estate market where a major power shift is underway. Buyers are gaining the upper hand while sellers are twiddling their thumbs at empty open houses. According to a new Redfin report out yesterday, there were needs. nearly 500,000 more home sellers than buyers on the market in April, a 34% gap that is the biggest in at least 12 years. It's enough to give your neck whiplash from just two years ago when buyers outnumbered sellers. Redfin didn't mince words with what's going on saying it's a buyer's market. What turned the tables? Why are so many people wanting to offload homes, but so few people wanting to scoop them up? A few things, the buyer ranks have dwindled

because homes and mortgages are so dang expensive. The median home sale price was $432,000 in April, up 1.6% year over year, while mortgage rates are hovering just below 7%. Another dynamic is economic uncertainty unleashed by the tariffs, which has scared off buyers, nearly one in four American scrap plans to make a big purchase because of the tariffs. And finally, on the other side of the marketplace, that lock in effect keeping homeowners put is slowly wearing off.

In the past few years, the number of sellers has been, limited by the fact that so many locked in super low rates during the pandemic and leaving that cushy situation for a more expensive one was simply unbearable. But time passes. Life happens. You get a new job and need to move or you outgrow your house. And eventually you do need to switch spots. So all of these trends have contributed to sellers losing the upper hand. Yeah, I was talking with my sister yesterday who bought a house kind of coming out of the pandemic when those buyers were vastly outnumbering the sellers. And you had to do insane things at that time. write letters, say you'll pay way over asking, pay in all cash, like pledge your firstborn child, it felt like.

And now that narrative has totally flipped, not because, you know, a flood of supplies is hitting the market. It's just like a lot of people are having this apprehensive time. They're grappling with a lot of economic uncertainty. So you see some very, very cautious home shoppers out there. According to a survey release by Bank of America, 75% of prospective home buyers are waiting for home prices and interest rates to, fall. So the housing market is frozen, but it's frozen in kind of like a different way just from people saying, I can't really afford a house right now, nor do I necessarily even want to take that expense on with these higher mortgage rates. And what consequence of this, which may be good

in your book, is that prices are probably going to fall. Redfin says whenever it's a buyer's market, it might lead to, or it does typically lead to sellers cutting their prices. So we've had 22 consecutive months of home price growth. That's expected to stop later this year. when prices are expected to fall 1%. And it's already happening about one in five home listings had their prices reduced in April. So sellers are finally saying, I've had this house on the market for so long.

Maybe it's time for me to start cutting my price, even though that doesn't leave the greatest taste in the mouth, but they're going to have to get buyers coming again because that pool has dried up. That issue, though, is that even though you would expect home prices to fall more than 1%, like 1% is not a rise. So I guess technically it's good. but the reason why it's not bigger is sellers can always just say, hey, I don't really like the home prices right now.

I'll just live in my house for another year. There's nothing really pushing people to move right now, especially with elevated mortgage rates. So that is part of the reason why you're not seeing greater price falls where you might expect them. And the regional breakdown is interesting. Where are, where our buyers have the biggest upper hand? That would be in Florida and Texas. Six of the top 10 buyers markets are in Florida. Another one is in Texas. The top buyers market is Miami. and it's followed by West Palm Beach, Fort Lauderdale, Austin, Texas, and then Jacksonville. In the wide world of retail, there's Costco and there's everyone else. As Walmart raises prices and targets sit empty, Costco is keeping calm and sampling on.

The company reported an 8% increase in sales last quarter to $63 billion, topping estimates, and profits also climbed from a year earlier. Costco was essentially concocted in a lab for uncertain economic times like these. its high-quality, low-cost items sold in bulk are exactly what inflation-scarred shoppers are looking for. And as for tariffs, just about one-third of its goods are imported from other countries, with less than half of that coming from China, Mexico, and Canada. Plus, it also sells cheap groceries and discounted gas, which are need-to-haves when Americans are avoiding want to have items. But it's not just Costco. Other warehouse clubs that use a membership model

are also having a moment, and together with BJs and Sam's Club, they are taking over a greater share of the retail sector. Foot traffic data from Q1 shows that U.S. shoppers spent 13% more time inside Costco, Sam's Club, and BJs than they did in conventional supermarkets. Maybe the CEO of Sam's Club, US, said it best. Through good times, we do well, and through times that are tough, we do even better. Yeah, Costco is sort of a canary in the coal mine company, just like Walmart is, where investors look at its earnings very closely to see clues on how shoppers are spending, what they're buying, et cetera, because a lot of other maybe Canary and a coal mine companies like Target, Procter & Gamble, Kraft Heinz have been slashing their annual outlooks. Walmart have been

a little bit of an outlier and it looks like Costco is too, because Costco just has so many levers it can pull to make it more immune to economic volatility. One is customers are paying a fee to shop there, so they kind of have this sunk cost fallacy where they're like, all right, well, I'm already, I got this card, I'm paying for it. I might as well go buy stuff there. And then also just in general, they skew more affluent, so they are a little bit more immune to these economic comings and goings. And then also they just have the Juggernaut Kirkland brand, which we just have to talk about because it has put a lot of effort into growing these things. It has this carrot that it can dangle, say, come in, buy our Kirkland brand. You can find 4,000 of them

in our store. And that is just something that they know comes with quality. It's less pricey. and then they can maybe buy other more expensive stuff once they're in the door. So it's got a lot of carrots that can dangle, a lot of leverage that can pull that makes it just so successful in these times of economic uncertainty. Kirkland's signature celebrating its 30th birthday this year, we started in 1995. Costco at that point had 30 different store brands like many other retailers. They have different in-store brands for various types of products, but they had the insight to just combine them into one single overarching brand called Kirkland's

signature named after the area where they were founded. And now this brand, Kirkland Signature, across so many different product lines, does about $86 billion in annual sales, counting for one-third of Costco's total revenue. It puts it on par in terms of revenue with Lowe's and Proctor and Gamble. And it does more revenue each year than Nike and Netflix. They are now on the move. They're stepping on the gas paddle, being on offense. They're unleashing these new, very adventurous products like Kirkland Sinichaelicure French fries and vodka and soda and the lager. So they're just moving into these new areas where Kirkland hasn't already dominated and you might

expect it to dominate as it has so many others. Let's take a quick break and come back with our Stock of the Week and Dog the Week. It's Stock of the Week, Dog the Week time where Neil and I pick one stock from the week's news that has been upping their creatine intake recently and one stock that is missing out on some gains at the gym. I won the pre-show game of Name That Cloud for me. because Neil didn't recognize high altitude, thin, icy, cirrus clouds, so I am up first. And my stock of the week is the Taco Trade, which has nothing to do with Living Moss at Taco Bell

and everything to do with investors' reaction to President Trump's on-again, off-again, tariff strategy. Taco stands for Trump always chickens out, a phrase coined by the Financial Times journalist Robert Armstrong back in early May. It was recently thrust into the public eye during a White House press conference when a reporter asked Trump's thoughts on the term, to which he responded, it was a nasty question. It's called negotiation, Trump continued. Regardless of how Trump views his tactics, traders have figured out a way to make money off of them. Investors are becoming more comfortable with the idea that most of the White

House's levies get paused or walked back a short time later. That has allowed traders to buy the dip on the initial tariff news, then reap the rewards if the market bounces back later on the rollbacks. For example, on Friday, May 23rd, Trump threatened tariffs. of 50% on the EU, setting the S&P 500 down about 1%. But after you walked back those threats on Sunday, stocks surge with the S&P 500 jumping over 2%, a classic case of the taco trade in action. So now, even if Trump doesn't like tacos, investors are reaping the rewards. They really are.

Buying the dip is at its highest levels on record. Retail investors have poured more than $50 billion into U.S. stocks since the low on April 8th, which was more than the 46 billion that they put into the market between March and June 2020. And the returns are excellent. They're the best in 30 years. The SMP has increased an average of 0.36% in the next trading session following a down day. And that is the highest on records dating back to 1993. So I don't know about institutional investors, but we've talked about retail investors, really driving this 19% surge in the S&P 500 since it's spring. lows and they are totally on to the taco trade and they are buying the dip to great success.

You'll notice too, though, that the bounce back needs to be bigger than the initial drawdown or else the taco trade kind of falls apart, which is kind of what we've seen so far. I mean, remember some of the taco relief rallies early after the initial pauses of Liberation Day tariffs, S&P 500 gain 9.5%. It's third biggest one-day percentage gains since World War II. So clearly these bouncebacks need to be pretty monstrous if the initial drawdowns are big as well. There is some people who haven't fully got their arms around the taco trade, though, because the markets, technically, if this was an efficient market,

it wouldn't do anything on the announcements of the tariffs, but there's a shutter still runs through the market every time a new tariff is announced because there is some concerns that these tariffs might actually stick this time. There always is that concern. And so that is why we are still seeing kind of this roller coaster motion, even though it is flattening out a little bit. My dog of the week is all the future stocks that may never exist because America's startup pipeline is at risk. Economists say the Trump administration's crackdown on international students at U.S. colleges threatens to wipe out the motor that generates billion-dollar startups and maintain America's competitive edge in the world. The United States draws more international students

than any other country, but the numbers show they're starting to look elsewhere. Clicks on American courses have fallen to their lowest level since the pandemic on study portals and online directory for global degree programs with weekly page views dropping by half from January 5th through the end of April. First quarter traffic to American undergrad and master's degrees felt by 20% annually, while PhD courses tumbled by one third. If international students choose to pursue their grad degrees in other countries like England, France, or China, the United States could lose the innovation advantage that helped to become

the richest country in the world because more than half of Americans' billion-dollar startups, those unicorn companies, were founded by at least one immigrant, and one quarter have a founder who came here as a student. Yeah, let's run down through those famous immigrants who have founded famous companies. Elon Musk, born in South Africa, studied at the University of Pennsylvania before founding a million companies. It feels like John and Patrick Collison, they moved from Ireland, went to MIT and Harvard before founding Stripe, one of the most valuable private companies. companies in the world. And then even if you go beyond founders and you go to executives, Satya Nadella got a master's in computer science at the University of Wisconsin, Milwaukee.

We have the leader of the most valuable company, well, I guess second most valuable company now, just ripping cheese curds in Milwaukee. But that's been the beauty of American higher ed for so long. Immigrants come here, get an education, and then often go on to build or lead gigantic companies that have given us this edge in innovation that we've historically held. And other countries are saying, well, hey, you don't want to go to America for college? Well, come here. French business schools yesterday announced that they're fast-tracking or extended application deadlines for foreign students who don't want to be caught in this visa fog that the Trump administration has imposed on American universities while those go through

the more legal procedures. So they're saying, hey, we'll fast-track your application. Come to France and study here. You know, we have had, we've been laughed by the United States in terms of unicorns for the past few decades. Why don't you come here and start your company here? So there is a global tug of war now around these international students who the data shows are just shunning American universities at rates they haven't in many years. Now let's sprint to the finish with some final headlines. Fire up the DeLorean because Apple's operating systems are about to jump forward in time. Starting in September, iOS 18, MacOS 15, and others will instead be called iOS 26, MacOS 26, etc.

Aligning version names with the calendar year. For all you green text truthers out there, yes, rival Samsung has been naming its flagship smartphone releases by their launch year since 2020. So congrats for leading the way, even if you ruin group chats. The rebrand is set to be unveiled at WWDC on June 9th in Ames Unified Design across devices and hopefully reignite some hardware sales after a post-pandemic slump. Tell me what you think, but I think this is unnecessary. It feels like they are trying to solve for a problem that doesn't really exist.

I don't find this particularly confusing in terms of what iOS were on. I just downloaded it on my phone. Microsoft used to do this for its operating systems. It had Windows 95, Windows 98, and Windows 2000. But then as we got into the new millennium, they changed those naming conventions to XP, Vista, 7, 8, and 10. No one kind of batted an eye. So I don't know exactly why Apple's. They're basically doing the car thing.

They're saying, we're going to release these things in 25 and we're going to call it 26. It just doesn't seem particularly necessary. But I see what they're getting at by wanting to streamline all of their different operating systems with each other because they do have one for a phone. They have one for their watch. They have one for their computers. And they have one for their Vision Pro. Yeah, it feels like a rather small detail that they're going after when maybe they have some broader issues to deal with. Also, I just look at open.

AI and they have the worst naming conventions of all the time and they are one of the most successful AI company right now. So you can't do worse than them and they're doing all right. So I don't know if Apple's really, you know, solving that big of a problem either. All right. France is working really hard to shed its reputation as a cigarette smokers paradise. Beginning July 1st, the country will ban smoking from all outdoor spaces where children could gather, such as beaches, parks, gardens, bus stops, and sports venues. In announcing the ban, one official said tobacco must disappear, where there are children. You might think of the French as the global smoking champs, but the numbers are actually way down. Twenty-three percent of the French population smokes every

day, the lowest percentage on record and a drop of five percentage points from 2014. Yeah, this was a little bit of a narrative violation because you do associate France with the cigarette by the water and you just think that they're smoking a lot over there, but that's not true. Yeah, less than a quarter of people actually smoke in the country now. And then also smoking in places like restaurants and nightclubs has been banned since 2008. Already 1,500 municipalities have voluntarily banned smoking in most public places. So it is just something that you don't associate with France, but they are cracking down on smoking. They don't want it to be around children, which is understandable.

And a recent report from a French Cancer Association showed that almost 80% of French people are in favor of this ban in public places. so definitely one of those things that you wouldn't necessarily expect from our neighbors across the pond, but they are looking to reduce the amount of smoking going on their country. Finally, Cindy Sweeney is selling her bathwater. No, I'm serious. The actress is partnering with the soap brand Dr. Squatz to sell a limited edition line of soap bars infused with her actual bathwater. The joke stems back to a previous ad campaign Sweeney ran with Dr. Squatch, where she addresses the audience from a bubble bath, which of course prompted

thousands of comments thirsting for her bathwater. You kept asking about my bathwater after the last Ed, so we kept it. She and Dr. Squatch co-posted on Instagram. Neil, this is a real thing, and I'm going to need to delete my search history off my work computer now after researching this story. I mean, this is like the creep economy, but you can see what Cindy Sweeney is doing. She's saying, there's already these jokes flying around. I'm going to sort of take ownership of that and actually make money off of it. And my question is, why didn't Jacob a lot? Lordy do this a couple of years ago with saltburn. I mean, there was a scene where Barry Keoghan literally drinks the bathwater that Jacob Allerty was in. So this market for bathwater

is probably bigger than we expect. I just really hope that Dr. Squatch is paying her a bag because she is doing a lot for this brand. No one's ever heard of them. Also, this soap is affordable. It's only $8 if you did for some reason. We won't tell anyone want to buy the Sydney Sweeney Bathwater Soap Bar Collapse. Well, this is not the first time that this brand has done something maybe a little unconventional. They featured Nick Cannon in an ad who made fun of himself for having 12 kids, and this was an ad for maybe below the belt mail products.

So they're running the playbook back. This is maybe next level weird, creepy, let's end the show right now. That is the time we have. Thanks so much for starting your morning with us. And can you believe it's already Friday? Hope you have a great weekend and take it easy at work today. If you have any other thoughts on today's episode,

send an email with questions, comments, or feedback to Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair and makeup could really go for some tacos. Devin Emery is our president and our shows of production of Morning Brew. Great show today, Neil. I wish you all well.