Morning Brew Daily - Trump Bumps China Tariffs to 104% & People Are Panic-Buying iPhones

Episode Date: April 9, 2025

Episode 557: Neal and Toby do another round of trade war updates with President Trump committing to impose another 50% tariff on Chinese goods, bringing the total to 104%. Then, in the midst of the trade war, shoppers are rushing to Apple stores to get their iPhones fearing prices are about to skyrocket. Also, the IRS has been the target of cuts by the federal government, which may bring low audit rates even lower. Meanwhile, retail chains are slowly coming back to SF’s downtown, breathing new life and hope for the once-sprawling district.  00:00 - Worst baseball game ever? 2:40 - Tariffs reach new heights 8:00 - Panic-buying iPhones 12:15 - IRS audits hit new low 15:45 - SF back? 19:30 - Sprint Finish! 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. Checkout TaxAct for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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And I'm Toby Howell. Today, the U.S. hit China with tariffs of 104% and neither side is backing down. Then those 104% tariffs have Americans panic buying iPhones to try and beat the price hikes. It's Wednesday, April 9th. Let's ride. Obviously, a huge day for the global economy. But before we get to that, let's head to Humble T-Neck, New Jersey, where two teams staged what has been called the worst baseball game in history.

Lehman College and Yeshiva University, both D3 schools, met after having lost a combined 141 games in a row, 42 straight losses for Lehman and 100 games for Yeshiva. So when they met, someone was going to snap an epic losing streak. It certainly wasn't pretty to watch, but Lehman College won 7 to 6 in extra innings, their first victory since 2023. But all was not lost for Yeshiva.

these two teams actually played a double header, and Yeshiva beat Lehman in the second game, winning for the first time since 2022. So a fairy tale ending. Both teams got their first dub in years. In the worst baseball game of all time, both teams came out winners. Still though, Yeshiva's 100 straight losses

are not even close to the worst losing streak of all time. That belongs to the Caltech Beavers from 2003 to 2013, lost 228 consecutive games. I'm sure they were busying. designing some world-changing technology so they get a pass. Technically, though, Neil, the NCAA does not keep a record of the most combined losses by two teams meeting in any one game, but an NCAA spokesperson when told of the upcoming tilt between Yeshiva and Lehman said, wow, those are some big numbers.

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Only at Yamava, celebrating its 40th anniversary. UN? Details at yamava.com must be 21-20. Please gamble responsibly. Monopoly is a trademark of Hasbro. Hasbro is not a sponsor of this promotion. ...up to a whole new world, and it's anything but a magic carpet ride. Just after midnight, President Trump's so-called reciprocal tariffs went into effect against 86 countries, including more than 104% tariffs on China, the world's second

largest economy. This brings America's average effective tariff rate well north of 20% the highest in more than 100 years. Trump and his economic advisors argue a trade war is necessary to level scores with bad actors and bring back manufacturing jobs to the U.S., and this is a once-in-a-lifetime opportunity to do that. At a Senate hearing yesterday, Trump's top trade official, Jameson Greer, said the U.S. economy was facing a moment of drastic overdue change. Wall Street leaders have forcefully disagreed, criticizing the size of the tariffs and the bizarre way they were calculated. Banks like J.P. Morgan are now predicting a recession. And financial markets have lost trillions in value in the past week alone. Even as stocks spent most of the yesterday in the green,

they tanked into the close, ending deep into negative territory. The S&P 500 is now at its lowest point in more than a year. So a new economic order has arrived closing an era of free trade and opening a chapter where the U.S., the world's largest economy, has built high walls around its The implications are enormous and will affect an untold number of companies and billions of people around the planet. For just one example, I'm going to cite Mr. Beast of all people. Yesterday, he posted on X that because of the tariffs, it will now be cheaper to make chocolate bars for his Feastables brand, not in America, because other countries don't have a high tariff on his goods. He said, we'll figure it out. I feel for small businesses, though, could really be a nail in the coffin for them.

Last year, trade between China and the U.S. reached $585 billion. dollars together these two countries represent roughly 43% of global GDP. So it's just a massive, massive portion of global trade that we are now essentially layering attacks on. And here's the thing, China is not backing it down either. In fact, they're digging in. They vowed to take, quote, resolute and effective measures after Trump's 104% tariffs went into infect. And they also vowed to fight to the end. So it's very, very clear the message that Beijing is putting out right now that We are not backing down at all. And in fact, they scheduled, you know, these counter tariffs to go into effect exactly

12 hours after Trump's tariffs went into effect. So right around noon today, noon eastern today, their 34% import taxes will kick in as well. So we are seeing the counteractions to Trump's actions. Neither side is blinking on the U.S. side's Treasury Secretary Scott Bassett said that, you know, China is playing a losing hand. Quote, I think it was a big mistake. the Chinese escalation because they're playing with a pair of twos. What do we lose by the Chinese raising tariffs on us? We export one-fifth to them of what they export to us. So that is a losing

hand for them, even as the Trump administration officials have said in recent days that they're holding calls with more than 50 countries they cited, you know, a good call with South Korea. They're trying to throw markets a bone here by saying that these are part of a larger negotiation with China, which is the big Kahuna. It looks like the gloves are absolutely Yeah, but the most difficult part of all this, if you are kind of a global trader right now, is the different soundbites coming out of the Trump camp because the Treasury Secretary Scott Bassent told CNBC Tuesday that 70 countries do want to discuss deals of the White House, but then White House Trade Advisor, Peter Navarro, said tariffs are non-negotiable. So you're kind of hearing opposing things, sometimes even in the same sentence from these officials. And then, of course, you have one very vocal member of the Trump camp, Elon Musk, who is not so happy. whatsoever with the tariffs. He has fully broken away from their supporting this kind of tariff policy. He has said a lot of things about Peter Navarro in particular. He's called them a moron, dangerously dumb and dumber than a sack of bricks. And so if you're the White House,

they've kind of done a little bit of damage control. Their press secretary, Caroline Levitt, when asked for comment on that spat, said, boys will be boys, and we will let their public sparring continue, which again, sure, you can laugh it off and say, boys, will be boys. But in the meantime, the global economy is kind of hanging in the balance. So you are seeing some tensions start to rise when it comes to this tariff policy. Quick check in on the markets as these reciprocal, so-called reciprocal tariffs go into effect. We mentioned China 104%, but they're across 86 countries, 46% on Vietnam, 26% on India. The implications will be huge. Right now, after selling off for four days, The S&P is about flat at 6.15 a.m. Eastern. The other indexes are a little in the red, so we'll have to keep a watch on that. Oil is continuing to sink down to $57, which is a sign that the economy may be weakening because demand will dry out for fuel. And the one thing that we will talk about tomorrow, actually, is the 10-year yield, because this is the biggest story in the markets. The 10-year yield is spiking, and that is not a good sign.

because when things go haywire, like the U.S. and China and a trade word, typically investors go to safe haven assets, like government bonds, like U.S. government bonds. Those have been the biggest safe haven asset ever. And the fact that those are selling off is a really interesting development that we'll dive into tomorrow morning. Let's move on with the threat of tariffs now no longer a threat and instead a chilling reality. Apple is one company racing to brace itself for their impact. Reciprocal tariffs mean the iPhone maker is still.

staring down much higher costs, manufacturing and shipping their phones around the world. That has manifested itself in two ways. First, price hikes could be coming in the future. Trump's new tariffs on Chinese goods mean the costs for Apple to manufacture an iPhone could jump from $580 to $850, according to a report from Tech Insights. As such, Apple has gone into hoarding mode. A report from the Times of India said Apple's strategy to limit tariff impacts is to stockpile inventory in the U.S. According to officials, Apple flew five planes full of iPhones in just three days during the final week of March. On the flip side of things, consumers are also rushing to their nearest Apple stores to try and get an upgrade before prices spiral. Multiple sales associates told the Wall Street Journal

that they had heard customers mentioned the tariffs in recent days as a reason for purchasing new iPhones. Now, of course, Apple could end up eating the costs of the tariffs, moving more production to other countries like India or relying on their stockpile to help offset price changes. But, Neil, this supply chain dodging and weaving and the subsequent consumer reaction is a perfect microcosm of the havoc tariffs can create. It is. And it also is a sign of how companies have tried to diversify their supply chains from over reliance on China to other Southeast Asian countries. But that has essentially backfired as these tariffs go into effect. India, where Apple increasingly makes iPhones and AirPods has a 26% tariff.

Vietnam Apple Mates AirPods, iPads, Apple Watches, and Max there now, 46% tariff. Malaysia, where Apple makes max, 24% tariff. Thailand, where the company also makes a max, 37% tariffs. So those aren't as bad as the China tariff. The problem is that as Apple has diversified its products across Southeast Asia, they've kind of kept the iPhone in China, 90% of their, of the iPhone. are still made in China, even as some move to India. So that's why they're rushing to get iPhones here and create a stockpile for as many months

as they can and why consumers are rushing to max Apple stores. And still, 50% of Apple's revenue does come from the iPhone. So it is very much exposed to this 104% tariff. Probably the best bet to wriggle its way out of it is do what it did during the first Trump administration, which is try to get an exemption from the tariffs, which never say never on something like that. Obviously, it's a little different climate this time around than it was last time. So they tried to diversify their supply chain, but there's only so much you can do when you make 90% of your iPhones in China. And the stock has just been getting hammered over the past few days.

It's down right around 20% over the past three trading days. That's $640 billion in market cap wiped out. And actually, yesterday, Microsoft edged its nose ahead of Apple to once more become the most valuable company in the world. So a lot of headwinds that Apple is facing as the biggest company in the world is all. also turns out to be the most exposed to this trade war. So what could Apple do? What are its options besides getting an exemption, which seems like a Hail Mary? There are probably three things that it will do.

It could squeeze its suppliers to say, hey, you have to eat some of this costs. It can't be on us. So that is one way it could share the burden. Another is to just eat it. Morgan Stanley estimates that Apple could eat $34 billion of these added costs because it does have a typical hardware margin of around 45%. So it is in a position to absorb that. And then the final one is price hikes.

Analysts do expect that we could see iPhone price hikes. It varies depending on which bank you listen to. J.P. Morgan says 6%. Morgan Stanley says 16 to 17%. And Apple has really tried to hold the line on $999 flagship smartphone starting price. And it looks like that will have to go. The final option that Trump administration people want is for Apple to start making iPhone in the United States, but if you actually crunch the numbers, that is economically not feasible.

Yeah, Wedbushes, Dan Ives predicts that an iPhone entirely made in America could cost $3,500. So yes, out of the cards. The deadline to file your taxes is less than a week away. And a new report found that your chances of being audited by the IRS are at their lowest level in at least 75 years. The New York Times' upshot found that the IRS's effective audit rate was below 0.5% between 2020 and 2023. drop of two-thirds since 2010. Just how low is 0.5%. In 1980, the IRS's published audit rate was over 2%, and in 1960, it was over 3%.

The reason for the decline in auditing is perhaps the simplest. There's fewer people to do it. The IRS hemorrhaged workers from 2010 to 2020, cutting its headcount by about 20% over the decade. And in addition to having fewer people, the IRS got an even bigger workload with other programs like the Affordable Care Act and the child tax credit getting foisted onto it. Since the IRS collects 95% of federal revenue each year, fewer audits could mean less tax collections for the government and widen the national deficit.

That already seems to be happening. For 2010 returns, the IRS collected $11 billion in additional revenue through personal income audits. For 2019 returns, which are still not yet finalized, the agency collected just $4.5 billion. Toby, some celebrate fewer audits saying they constitute harassment of taxpayers. others say it's necessary to catch tax dodgers, especially for high-income households and corporations. And it's looking like these audit numbers are not going to go up anytime soon because the current administration is targeting big IRS cuts to the workforce. Roughly 25% cuts are probably in the cards. And a decrease in staffing would inevitably lead to fewer audits.

Most of the audits over the last decade, most of the decline in audits over the last decade is because the loss of IRS workers. Also, the IRS has had a lot more lumped on their plate in recent years, so they can't necessarily focus specifically on audits anymore. Like, they're involved in implementing the Affordable Care Act, other programs like the child tax credit too. These are a couple of forces coming together to just basically remove the auditing ability that the IRS once had and to the benefit of people who don't want to be audited. What's interesting is if you dive into the numbers, you know, Americans maybe have your reputation for being anti- establishment, but we pay our taxes voluntarily. Maybe it's because of the threat of an audit, but Americans pay about 85% of what they owe and direct IRS collections add 2%. These are levels that are way above European countries. So, you know, overall, voluntary tax compliance in the U.S.

is quite high. And they also, there's this one study from Warren that looked into the long-term consequences of an audit, and they found that taxpayers who were randomly audited and owed additional money went on to pay their future tax returns more frequently. Even a decade later, they basically have that memory in the back of their head saying, oh, I was audited at one time. I'm going to continue paying taxes. So they have like these kick-on effects where the money almost compounds later down the road in saying that, hey, whether you're high income or a low-income earner, you end up paying your taxes more because of these audits. Up next, let's talk about a city in the Bay Area that might be making a comeback. It's time to refresh your yard during spring backyard days at the Home Depot.

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Priceline is here to help you make it happen. With millions of deals on flights, hotels, and rental cars, you can go see the game live. Don't just dream about the trip. Book it with Priceline. Download the Priceline app or visit Priceline.com. Actual prices may vary, limited time offer. Turns out that a certain Bay Area City is a little more resistant to doom loops than headlines might have you believe.

San Francisco, a place that many were quick to write off in the wake of the pandemic amidst store closers and falling foot traffic, is showing that reports of its demise were greatly exaggerated. Look no further than the gargantuan store fast fashion giant Zara is planning to open in the heart of SF's shopping district next year. Zara had previously announced the closure of its Union Square, location, leading to a bevy of stories about how San Francisco's doom loop was really starting in earnest. But it turns out that Zara had no plans to leave and was actually just moving down the road into a 40,000 square foot store that is nearly twice the size of its old one. Still, some of the negative responses around San Francisco were and still are warranted.

Office vacancy rates remain around 35% well above the national average. And a number of retailers, including Uniclo, H&M, North Face, and Walgreens did X&M. at the area around where Zara is doubling down. Still, Neil, San Francisco, kind of like a cockroach, harder to kill than you think. Yeah, it's funny that Zara is the poster child of San Francisco's perhaps rebirth. There does seem to be a little bit of momentum around San Francisco's downtown comeback right now. There's a business-friendly new mayor who's the Levi Strauss air, who has a lot of connections. There are a lot of wealthy people who live in the Bay Area. So if you round them up into a coalition and get them investing in San Francisco,

you know, some good things could happen. It seems like there have been developments in that arena. David Steeblemans, the co-founder of Sixthry, which is a huge private equity company based in San Francisco. He's just started this new thing called the San Francisco Downtown Development Corporation. He's got people like Meg Whitman, you know, the former CEO of eBay on his board, some real heavy hitters. They're trying to marshal private capital to invest in downtown spaces.

And, you know, I don't think they're, they were responsible for bringing Zara back. but they can probably mobilize a lot of investors to come in and say, like, look, you know, it's all about narratives, right? So if you can say San Francisco is coming back, crime is going down, this is something that we believe is happening. We're long San Francisco invest here, and then it's a self-fulfilling prophecy. Yeah, the mayor Lurie was out yesterday kind of heralding this as the return of San Francisco's shopping district.

And Zara isn't the only one betting on San Francisco. Obviously, you have the entire AI industry that's kind of taken up shop there, but also Nintendo is set to launch its second U.S. location on the same street, on a nearby street, next month. And then also you have some grocery stores that are planning to open in San Francisco City Center in the winter. And then even some luxury brands like watch brands that I can't even pronounce are setting up shop new boutiques in the Union Square shopping district in 2024, which is kind of a narrative violation if you think about the headlines that, honestly, we've talked about a lot of San Francisco's doom loop coming to manifest where retailers leave,

people stop shopping, housing prices become unaffordable and people start leaving the city. That was a real concern from San Francisco, but maybe that concern was a little, you know, overbaked. And yeah, and I think San Francisco's fortunes will ride or die with the tech industry. And during 2021 and 2022, those were some foul years for the tech industry. They were cutting jobs left and right with high interest rates. But then all of a sudden, chat, GPT is released. And this new tech wave is cresting.

And you see companies like OpenAI and Amazon. some of the biggest AI leaders. They are based in downtown San Francisco. New report found that the Bay Area had 11 of the largest U.S. office leases in 2024. Tech companies have committed more than 8 million square feet to office leases. So as you mentioned, the vacancy rate is still high, but they're hoping to ride the AI wave and some continuing momentum into the future. Now let's sprint to the finish with some final headlines. If you were mulling over a plan to commit a little white-collar crypto crime, now would be the time to get your fart coins in a row because the Justice Department is scaling back its pursuit of crypto cases.

The Trump administration has disbanded the national cryptocurrency enforcement team as part of a broader shift in regulatory priorities. The strategy change is all about embracing a more relaxed approach to crypto regulation, focusing on people who commit crimes using crypto like terrorism, fraud, or enabling human trafficking, rather than nitpicking exchanges. Neil, it's all part of this grand plan to shift the U.S. us's image from being a crypto buzzkill to becoming the cool crypto cousin, where cool, in this case, means reducing oversight in the sector. Yeah, they're saying the Justice Department is saying that we shouldn't, we're not a financial regulator. We shouldn't be going over after crypto companies for

things like violating securities, commodities, or banking secrecy laws. That should be left for the financial regulars that we have. We're the DOJ. This is not our purview. And it comes after the SEC has dropped more than a dozen cases that they were pursuing. against crypto firms like Coinbase and Cracken. So you're seeing, yes, a little more relaxing of oversight of crypto with the hopes that it will let this industry flourish. Up next, it seems like the phrase chicken jockey has become a cinematic sleeper word for today's youths, activating a primal urge to throw drinks and popcorn

and turn Minecraft movie experiences into pure chaos. Chicken jockey, of course, refers to the Easter egg in Minecraft where a zombie ends up riding a chicken, which was subsequently translated to the big screen for a Minecraft movie. And the meme within the meme here that has gone viral on TikTok is to go absolutely nuts when Jack Black utters the fateful words. While theaters are happy to finally have a box office hit on their hands, they are not pleased with how hordes of young moviegoers are behaving themselves. One theater in Washington announced over the weekend that unaccompanied groups of boys will not be admitted due to the antics of prior showings.

and multiple reports have service of police being called to deal with disruptive behavior at screens across the country. Neil, I get having fun, but not so much fun that you're destroying theaters by throwing popcorn in drinks. I think the theaters are willing to take the good with the bad here because it opened over 160 million domestically in North America, and it was just a huge savior. And it might be because of these memes.

We saw this happen with the Minions movie, The Rise of Gru, where you had Mr. Beast and all of these hordes of young kids dressing up as suits and creating a whole experience around it. One older person said, I haven't seen anything like this since Rocky Horror. So when you create an experience around a film, you know, that is one reason to not queue up a streaming service and go to a movie because it is this collective experience. Obviously, they're getting a little rowdy, but I think what theaters are going to start to do is, like, have these separate chicken jockey showings.

Like, they had the separate Taylor Swift Erist Tour things where, yeah, you want to along wicked, go over here. If you just want to actually watch the Minecraft movie, which sounds honestly a lot more boring, just go over here. Finally, White Lotus may have wrapped up its divisive third season, but the drama off the set is still piping hot. In an interview with Howard Stern, the HBO show's creator, director, and writer Mike White blasted composer Christobal Tapia DeVier, who left the show and told the New York Times

days before the finale that he had major problems with White. White called it kind of a bleep move, and I knew he wasn't. a team player and that he wanted to do it his way. The subtext here is that Devere was an integral part of the show's identity, composing the famous theme song to the White Lotus, which has become a hit in its own right. He's won three Emmys for White Lotus, and the theme song has been remixed by DJs like Tiesto and Sophie Tucker. I mean, correct me if I'm wrong here, Neil, but this season's theme song was, in fact, way worse than the previous two. So there's a chance that the composer DeVir here kind of knew what he was doing, and maybe Mike White was the person who was

overstepping his bounds. Really, DeVir kind of clarified that, hey, I wasn't actually talking about the specific theme song. There was just a certain part within the show where I wanted to weave in the familiar, you know, war cry melody from the previous two seasons because this season kind of departed from that. And so that was kind of like the basis of this tension there. And I, and I have to say, I queued up the longer version that DeVir wanted to put in the show on YouTube this morning. And it absolutely slapped. So I might be in the mind. minority here, but I am Team Devere, and not as much Team Mike White in this case. Meanwhile, the show has just become an absolute juggernaut for HBO. Sunday season finale

drew 6.2 million viewers. That broke a series record set the week before by 30%. So what started out as this very small pandemic niche show has become, you know, one of the biggest, biggest properties in an HBO stable. Finally, here's a feel-good story about a tourist taking a wrong turn and ending up with the experience of a lifetime. Evan, Johnston, a 21-year-old from Arizona, was in London and boarded a boat near Tower Bridge thinking it was the classic touristy hop-on, hop-off tour of the city. It was not the right boat. Instead, it was a party boat chartered by around 150 supporters of the low-level English

soccer club South End United, who were sailing to attend a high-stakes match against Sutton United. Johnson said he suspected something wasn't quite right. They seemed to know each other and were making chance I didn't understand, he said. but when the South End fans caught wind that they had a lost American stowaway on board, they embraced him and eventually he was drinking and dancing with everyone. He ultimately attended the game, had a blast,

and says, I'm a South End fan till I die now. One of the South End supporters told a UK publication that, hey, I caught wind that a young lad was on the wrong boat, and I just wanted to make sure he was okay. And when he found him, he was already drinking and dancing with the fans. So he was more than okay. I think it's so funny when someone discovers, especially lower league football over in England, because those supporters, they're not in it for the money.

They're not in it for their success. They're in it for just the sheer love of the game. So to have that just concentrated on a boat and then to attend the game and then to say, I'm a South End fan until I die now. Just a really good feel-good story. Taking a boat with a bunch of fans to a game sounds amazing. And I know you can do that up to West Point for an Army game from New York City. So maybe that's something we put on the calendar for the fall.

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 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.

Garrettec is on audio. Hair makeup is team Mike White. Devin Emery is our president and our show is a production of Morning Brew. Great. Saturday, Neil. Let's run it back tomorrow. Thank you.