Morning Brew Daily - Trump’s Universal Tariffs Begin & Apple Reports Best Revenue Since 2021

Episode Date: August 1, 2025

Episode 639: Neal and Toby cover Trump’s tariff deadline that ends today that may impose new ‘baseline’ tariffs with America’s biggest trading partners. Then, Apple reports earnings that beat expectations. Also, a law banning lawmakers from investing in individual stocks is picking up steam in Congress. Plus, Figma’s eye-popping IPO makes it the Stock of the Week. And Musk’s Boring Company is failing to meet expectations, making it the Dog of the Week.  Build your Range Rover Sport at RangeRover.com/US/Sport  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 00:00 - Presidential fitness test is back 3:00 - Tariffs 2.0 are here 8:02 - iPhones keep Apple afloat 12:20 - Stock ban coming to Congress? 17:20 - Stock of the Week: Figma 21:00 - Dog of the Week: The Boring Company 24:10 - Sprint Finish Learn more about your ad choices. Visit megaphone.fm/adchoices

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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, President Trump announced higher tariff rates on 92 countries as the trade deadline struck midnight.

Then U.S. lawmakers are considering banning themselves from trading stocks. It's Friday, August 1st. Let's ride. Limber up, boys and girls. The presidential fitness test is coming back. Flanked by pro athletes at the White House, President Trump signed an order that reinstates a standardized fitness test for school kids, calling it an important step in our mission to make America healthy again.

The fitness challenge had been a requirement in public school since the late 1950s until it was scrapped by Obama in 2013 to focus less on competition and more on healthier lifestyles. We don't know yet what specific exercises will be included, but the most recent version required a mile run, a shuttle run, sit and reach, and some combo of push-ups, pull-ups, and sit-ups. Toby, knowing you, you might go back to elementary school just so you can beat your classmates in the fitness test. It was a big deal for me, Neil. It was a big deal.

But the history behind this test is fascinating. Back in the 1950s, these two rock-climbing fitness gurus administered a fitness test they designed to 4,000 U.S. kids and 3,000 kids across Europe. 58% of U.S. kids failed while just 8% of Europeans did. So they brought those results to eye. Eisenhower who kind of freaked out, which led to the institution of the presidential fitness test. It was different from what the test eventually became because it was heavily influenced by military training. It had pull-ups and softball throws, which is great for hoisting yourself out of a

foxhole or throwing a grenade, but not so great for kids overall fitness. Stuck around for generations. Eventually, Lyndon Johnson added the Physical Fitness Award for the fittest kids. That was reserved for the top 15% of her performers. And I do remember wanting that so badly. My issue was I didn't have flexible hamstrings growing up, so the dang sit and push was brutal. Not a lot of fond memories for kids growing up. And now a new generation is going to have those same nightmare. Stretch your hammies, kids. Stretch your hammies. And now a word from our sponsor, Rangerover. Toby, would you consider your desires elevated? Oh yeah, Neil. Only the best for me. I'm talking bubble bass, moderately priced domestic non-vintage

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dot com slash us slash sport. Last night, the White House screened Liberation Day 2, the return of the tariffs. The White House announced higher import taxes against virtually all the U.S.'s major trading partners, raising America's trade barriers to heights not seen in nearly a century and reshaping trade flows around the world. Tariffs are President Trump's signature economic strategy, which he deploys against foreign economies he feels have been ripping off the United States. While the U.S. already raised tariffs for goods like steel, aluminum, and car,

during Trump's second term. Last night's announcement is the showstopper, tariffs ranging from 10% to 41% on 68 countries and the European Union. The tariffs are, in many ways, a Liberation Day reboot. Back in April, Trump announced so-called reciprocal tariffs on dozens of countries on top of an across-the-board 10% minimum tariff, but after the market freaked out, he paused them a week later, aiming to secure trade deals with 90 different countries in the months ahead. In some cases, there have been deals, including with the UK, the EU, Japan, and South Korea. They'll be hit with tariffs, but perhaps not as high as it would have been otherwise. But many other countries like India haven't yet come to an agreement with the

U.S. And in the case of Mexico, Trump said yesterday he'd extend the tariff deadline by 90 days to allow negotiations to continue. In the eye of this tariff storm are companies, consumers, and the global economy, which are all expected to take a gut punch from higher tariffs, since tariffs are, in the end, a tax. Still, as always, uncertainty reigns because these newly announced tariffs, don't go into effect for another week, leaving the door open for more deals. Yeah, if you look at which country's got some of the highest tariff rates,

it's countries like Laos and Myanmar, which don't seem like massive trading partners, but part of the reason for those high tariff rates is this idea of trans-shipped goods. Trans-shipped goods are ones that are made in one country, usually China, and then finished in the final country and then shipped off to the U.S. It's a tariff-daging mechanism.

And so Trump opposed an additional 40% tariff, on any goods that have been deemed by U.S. border customs as transship. So that is why you have these countries from Laos to Vietnam who are likely destinations to be for transship goods, getting higher or elevated tariff rates as well. Other countries got either lucky or unluckly depending on what your perspective is. A lot of countries were actually looking more at their tariff rates in conjunction and in comparison to other countries. So like South Korea, for instance, they were shooting for lower than.

than a 15% rate. But if it's a similar rate to Japan, for instance, then they're actually pretty happy because, again, they need their goods to be competitive in the U.S. market, and they can't do that if their tariff rate is much higher than their neighbors. So everyone was kind of shuffling around. I mean, again, this all happened close to midnight last night. We'll be instituted in seven days. So you still have to see how it all shakes out. But there was definitely some winners and losers. Yeah, in the end, imports from about 40 countries will face a 15% rate. About a dozen economies products will get higher duties than that. A few other countries to call out here. Canada will be hit with a 35% tariff, which is up from a 25%

tariff. And these are for goods that don't comply with a North American trade agreement. Trump said this was because the country's failure to cooperate with curbing the flow of fentanyl and Canada's prior tariff retaliation. So Canada, 35%. And then another country that is saying, what the hell happened here is Switzerland. They got hit with a 39% rate. So if you're buying lint chocolate or buying a Rolex or buying really any pharmaceutical because half of all Swiss shipments to the United States are pharmaceutical products, they got a 39% tariff rate.

And once again, you're seeing economists and analysts saying we don't quite understand the logic for Switzerland specifically to get a 39% rate. I remember they got a very high rate during the previous Liberation Day 1.0, you know, back a couple months ago. So it seems like Trump randomly has it out for Switzerland. But zooming out here for a second, it does look like Trump's remaking of global trade has gone, according to plan, at least for him, because he has gotten bilateral deals done with major trading partners, Japan, EU, UK, etc. So tariff revenue is soaring. Effective tariff rates on imports to the U.S. is at the highest level in nearly a century. financial markets have taken most of it in stride as well. Stocks have continued to notch record

highs over the past months. And these predictions of storing inflation haven't come to fruition yet. That's a big yet. The broader U.S. economy has remained resilient through it all so far. So there are some, you know, asterisk next to these as we wait for it to shake out. But now the big question is, are companies going to feel stable enough to put down routes in the United States? Will they commit to, you know, building the factories that take decades to complete? Or do they still think that Trump will continuously change his mind going forward? I think that's the question going forward after this, you know, second liberation day. Moving on, Tim Cook is feeling like Will hunting today because how do you like them apples?

Apple reported its third quarter earnings yesterday, and it turns out that people still like buying iPhones. iPhone sales group 13% year over year, powering overall revenue growth of 10% its biggest jump in. for years. It was a welcome earnings beat for a company that is still facing down all sorts of troubles. Depending on how Google's antitrust lawsuit shakes out, Apple could lose the $20 billion per year agreement that makes Google search the default option on Apple products. Then, of course, there are tariffs. Though currently exempt from some reciprocal tariffs imposed on Chinese imports back in April, Trump has threatened to slap a 25% duty on iPhones if they don't begin producing them in the U.S.

Tim Cook said Apple took a $800 million hit from tariffs in this past quarter with forecast of a $1.1 billion impact in the next quarter if no policy changes. Tariffs might still bite Apple down the road, but for now, they've been more of a tailwind pushing shoppers to stock up ahead of possible price hikes. Investors also welcome the fact that Apple is slowly clawing back market share in China, while its services business chugged along nicely once again crushing Wall Street's forecasts. Neil, Apple has been the laggard of the magnificent 7 this year, down 17% due to its multiple AI stumbles. But its core business of slinging iPhones is looking healthy as ever.

This was a must-win game, basketball coach down 3-1 in the series. And Tim Cook staved off elimination were headed back to Cooper Tino for game six. No, this was really a surprisingly good earnings report. The iPhone 16 was quite popular. you know, iPhone revenue did grow 13% year over year, perhaps, as Tim Cook kind of alleged, alluded to in the earnings report. The iPhone 15 wasn't that good and no one bought the iPhone 15. So maybe the year over year increase between the iPhone 16 and the iPhone 15 was magnified a bit because of how poor the iPhone 15 sold. And then speaking of tariffs, there was another reason

for people buying iPhones was that they wanted to get ahead of the tariffs. Overall, iPhones or Apple revenue increased 10%. And Cook said that about 1% of that 10 percentage point increase in revenue growth was people going to Apple stores and buying iPhones and other Apple products to get ahead of whatever tariffs were coming down the line. Still, there are some question marks about Apple's AI approach. That was what a lot of people wanted to see Tim Cook address

because Apple has been poached to death recently. It lost its fourth AI researcher in a month over the past month to meta. Apparently engineers are actively interviewing for jobs elsewhere as well. It needs to figure out its approach because do you still try to cook up a home-going model even after your teams have been decimated even as you're losing talent? Or do you outsource that technology, which could hurt some of the morale of your employees currently working on your models, which might make you lose more talent. But that outsourcing idea did get a little bit of tailwind because Tim Cook did say that

they were open to potentially an acquisition. he says that they're willing to break out the checkbook. They've had conversations with perplexity with mistral, these two buzzy AI startup. So the big question mark here is, are they going to make a spicy acquisition with something Apple doesn't usually do, but maybe they need to to catch up on AI. And they have $133 billion in cash, so they can certainly afford perplexity. That had been a lot of the chatter on Wall Street was whether Apple would go outside of its walled garden in order. to catch up on AI because it is so far behind. And the final thing that stuck out to me in this earnings report is what happened to AirPods and smartwatches. Apple's wearables revenue is in a

downward spiral. It just hit $7.8 billion last quarter. That is down from a peak of $15 billion in 2021. They just haven't released anything new. And people are not shelling out or upgrading their AirPods or their Apple watches. So that division is sinking pretty quickly. A stock trading ban for lawmakers might be back on the menu. On Wednesday, a key Senate committee advanced legislation that would ban representatives of Congress, the president, and the vice president from buying and selling stocks. Since the height of the pandemic, pressure has been building on lawmakers to block themselves from investing in individual stocks as reports emerged of congressional reps making lucrative trades related to the health crisis. Turns out, U.S. citizens don't love it when elected

officials use privileged information to make money in the market. And now more than 80% of voters support banning members of Congress from trading individual stocks. As Democrat Alyssa Slotkin of Michigan said this week, the American people think that all of us, Democrats and Republicans, are using our positions and our access to enrich ourselves. People don't believe that we are here for the right reasons. Still, despite overwhelming public support for a ban, many bipartisan attempts to pass a law have stalled out in recent years. So is this time different? We'll see. In this subcommittee vote on Wednesday, the law's sponsor, Republican Josh Hawley, joined all Democrats in approving a ban, while all the other Republicans on the panel voted against.

It remains to be seen whether the full Senate will take it up for a vote. Toby, it seems like we're going to have to pry Congress's Robin Hood app from their cold dead hands. Yeah, lawmakers, not surprisingly, are very reluctant to regulate themselves when it comes to this. A lot of people who are not for this say that it's just unnecessary. right now, there's already insider trading laws that cover a lot of this. And also they say it would disincentivize rich people from wanting to run for office because if you wanted, if you had to divest all your holdings, then why would you ever try to run for public office? So those two factors, along with the fact that, yeah, probably it's in their best interest to not divest their stockholdings are some of the

reasons why this continually runs into headwinds, despite the fact that most of America, the majority, the vast majority of America does support it. So what would this law do? Let's dig into the details. It would immediately block elected officials, including the president, from buying stocks, and it would ban them from selling stocks for 90 days after it was enacted. And then this next part was one of the key discussion points. It would require elected officials to divest from all of the investments,

individual investments that they have, but not until starting at the beginning of their next term in office. And that was key because remember what I said? at the beginning. This applies to not just representatives of Congress, but also the president and the vice president. So Josh Hawley, who is the sponsor of this bill, said, I don't think Trump would support it if we made himself off as investments. And he needs Trump's signature in order to make this the law. So he said, okay, starting at the next term, that's when you have to divest. And the Democrats on the committee were like, we don't really want to do this,

but we think this is such an important issue that we're willing to shield Trump from having to sell his investments during his second term in order to pass it because we think, you know, there's overwhelming popular support for this. And so it advanced past the committee. Who knows whether the Senate will take it up. We feel like we had the same discussion. It's like the TikTok ban. Like they keep trying to do it. It doesn't actually happen for years now. We'll see if this time is any different. Up next, let's do our stock of the week, dog of the week. It's stock of the week, dog of the week time where Neil and I pick one stock that hammers in short puts with conviction and one stock that has a case of the yips.

Neil, I won our pre-show game of Egg Toss, so I'm up first, and my stock of the week is Figma, which just had a truly massive IPO. Initially priced at $33 a share, it opened above 90 and continued upwards from there, eventually gaining more than $250 and closing above $115 a share. After hours trading eventually pushed its market cap to over $80 billion at one point, before settling around $60 billion, making it the largest VC IPO by market cap for a U.S. tech company since Rivian went public back in 2021. $60 billion is also noticely bigger than $20 billion, which was the price that Figma would

have fetched if the agreed to sale with Adobe hadn't fallen apart. Now the two companies will go head to head in the public markets with Adobe's $150 billion market cap suddenly not so far off. Figma ended up being 40x oversubscribed, which was music to the market. the ears of venture capitalists who have been stuck in a liquidity drought for many years. Every single investor who put money into the design company is in the green after that monster debut. Neil Figma is a solid business, a rare profitable tech unicorn that brought in $45 million in

net income last quarter. But man, this thing took off like a rocket ship. Yeah, these two co-founders are now the two most famous Brown alumni since Toby Howell, the CEO's stake is now worth over $5 billion. And you're absolutely right. This is a software company that is growing fast. It's sales and it is also profitable. Revenue grew 56% year over year. And while it was not profitable for the entire year, it did have $45 million in profits in the last quarter. So investors seem absolutely ravenous for Figma. And perhaps one day it will be able to buy Adobe. That would be the funniest of all timelines. But a lot of people were saying that maybe this thing wasn't priced all that well to begin with. It debuted at $33 a share. It opened at $95 a share.

Had they priced it higher, Figma could have raised an extra $2.3 billion, which is double what they actually raise. Now, you can call this market excitement. Everyone was really excited for this company to debut. But a more cynical reading is that it was a deliberate underpricing by investment banks who sold it pretty cheaply to their institutional investors. This has happened multiple times with Airbnb going public, with DoorDash going public. The same massive, massive jumps, which. usually shows a little bit of a underpricing from, you know, the investment banks that worked on it. So, again, great for their VC backers.

Multiple funds returned their entire fund with Just as One public debut, which has been a welcome site after a couple of years of pretty dry IPOs. Yeah, there hadn't been a lot of software IPOs at all, or tech company IPOs at all since 2021. But now there certainly is momentum. We had core weave back in June and then, back in March. And then we have the stable coin company Circle. They are all booming since their IPO price. And maybe the floodgates are open for companies that have been eyeing the public markets, but have been a little bit wary.

I'm thinking of Klarna, which is the buy now, pay later giant. And then Stubhub is also looking at going public. So maybe we'll have a bunch more IPOs to talk about because Figma, you know, just had a very historic day yesterday. It was the largest first day pop for a U.S. traded company, raising more than $1 billion in at least three decades. My dog of the week is The Boring Company, which has become the black hole in Elon Musk's constellation of businesses. This week, the tunneling startup announced plans to build a 10-mile underground loop in Nashville that would connect the airport to the convention center in an eight-minute drive.

But the proposal only highlighted just how short the Boring Company has fallen from achieving its lofty goals. Almost a decade ago, Musk touted the Boring Company as the be-all-end-all solution to suffocating traffic, using never-before-seen tunneling technologies, The startup would create underground hyperloops beneath major cities that would whisk people around at 150 miles per hour and futuristic pods. The Boring Company raised over $900 million from top VC firms like Sequoia and Peter Thiel's Founders Fund and pitched city officials across the U.S. on major tunnel projects. Very few have been convinced. Since its founding, the Boring Company has begun work on just one public project in Las Vegas and only four miles are operational while 68 miles have been approved. far more projects have been abandoned and most of the boring machines at work right now are simply connecting various properties at Musk's other companies like SpaceX and Role, Texas.

Toby, it seems Musk is treating the boring company like a sweater. You get at Christmas. You wear it a couple times, but it ends up in the back of your closet, out of sight, out of mind. It seems like such a good idea. And the pitch seems great too because if you come to a city and say like, hey, I can execute these extremely difficult underground infrastructure projects, I can do it much faster. I can do it much more cheaply with our proprietary machines that we invented. Of course, cities are going to hear them out, and a lot of cities have eventually heard them out,

but a lot of those tunnels haven't come to fruition. Sometimes it's because city officials seem to think that boring companies execs are just in over their head. There was this proposal to dig a tunnel from Manhattan to LaGuardia Airport, but as city officials listened to the proposal, they It was clear that a boring company didn't really know what they were talking about because going under the East River through the bedrock of Manhattan, through the uneven soils of Queens. It's a challenge for even the most established companies. And it became clear that boring company hadn't really thought it through that much. So maybe the pitch is too good to be true. And that's why we haven't seen too much momentum or any tunnels really been dug.

Yeah, they didn't in that New York project. They didn't have any accommodation for just the most basic things that you need in tunnels like ventilation facilities and fire. exits. And if you just look at the financials, you'll see that boring company is struggling. Its valuation dropped from $8.6 billion in July 2023 to just $6.4 billion. It really stands in such a stark contrast with Elon Musk's other businesses, SpaceX's worth about $400 billion, the largest ever valuation for any private company in U.S. history. XAI is worth $113 billion. So boring company has just been this black sheep in the Elon Musk portfolio. It's CEO, was also brought in to Doge.

So this guy is all this, like he worked at the White House for many months earlier this year. He's not even thinking about boring company. They're not paying their engineers. Well, like very qualified engineers, according to Bloomberg, are only being paid $70,000 a year. And they're toiling away in rural Texas near SpaceX's headquarters down there. So all in all, we'll see what happens with this, with this Nashville project. But the boring company has not been one of Elon Musk's most successful ventures. Finally, let's sprint to the finish with some final headlines, just one headline today,

and that is an Amazon funding company is trying to become the Netflix of AI. Showrunner is a service from the startup fable that lets you type in a few words to create entire scenes or episodes of animated TV shows. You can cook something up completely for scratch or expand on existing stories others have created. If you don't want to deal with character arcs and heroes journeys, you don't have to get your hands dirty. Showrunner is also a normal streaming app where you can consume the content people have created. Fable's CEO, Edward Sachi, thinks that AI shouldn't just be used to enhance special effects, which he calls a little sad. Instead, he sees it as a new entertainment medium that people can play almost like a video game. For instance, if you really loved K-pop Demon Hunters, you could fire up showrunner and create new episodes or scenes rather than rely on Hollywood to crank out a sequel.

Neil, kind of a cool concept. I mean, yes, he thinks Sachi thinks that using AI as a VFX tool is just the lamest thing possible. And he said, let's think bigger with AI. Well, why don't we make entertainment interactive? He calls it two-way entertainment. Hollywood streaming services are going to be about consuming and producing at the same time. Because with AI video generation, you can literally type in a plot and say, hey, make me do something cool in this new Disney Plus episode. and you will be able to see it happened.

You also have this interesting monetization or creator monetization strategy where if someone builds on something that you put out there, you get paid and you have to pay a subscription fee to acquire tokens or credits that you can spend to create something. So they want to empower creators here. Of course, this comes into a maelstrom of Hollywood

and creators broadly worried about their jobs because of AI. And this guy comes in and says, well, why don't we make a ton of? of content from AI. It's sure to, you know, raise a lot of criticism. But perhaps he's right that entertainment is becoming more, more interactive or maybe he's wrong. And he told Variety, maybe nobody wants this and it won't work. I could see it catching on, though, because don't like how Game of Thrones ended. Make a different ending. People already make fan edits. This is already a thing

that happens in the culture. This is just an extension of that culture. That being said, currently showrunner can only generate Amazon animated episodic stories, not these big live action, you know, like Game of Thrones-esque things because of just the technology isn't there yet. So Game of Thrones will have to wake, but like a South Park episode,

you can create pretty dang easily. So I do think that people will want to participate in this because people already have participated in it without having the tools to do so. And the one thing they want to do, they think that this is the big unlock is getting studios on board so they can license

IP like South Park or like any Disney thing. And they said they're actually in talks with Disney, but Disney is famously very guarded about their IP. So it would seem like a stretch for them to license their characters like Mickey or anybody out to this particular platform for people to do. God knows what with. But this, we should mention, this guy has an Emmy under his belt. He used to work at Oculus VR.

And he won an Emmy for one of the content series that he produced there. and they all went, they went viral in 2023 for producing AI South Park episodes. Those those garnered over 80 million views. So people are super interested in AI animation and what it can do. Maybe perhaps one of the ceilings of this is that AI animation is just not as good or compelling as stuff that traditional computers and illustrators can work up. So probably not the last company to introduce this concept of two-way entertainment through AI. And it is quite interesting to think about.

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 have any thoughts or feedback on today's show, send a note to Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer.

Our associate producers are Olivia Graham and Olivia Lake. Hair and makeup is practicing their pull-up form. Devin Emery is our president and our show is a production of Morning Brew. Great. Show today, Neil. I wish you all well.