Stock Market Flinches From Tariffs & AI Agents Are Everywhere

0:00Tuesday on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, like anyone who's ever tried to change their flight over the phone, the trade war is on hold.

0:40Ben, should the U.S. start a sovereign wealth fund? President Trump seems to think so. It's Tuesday, February 4th. Let's ride.

0:53Good morning. I hope everyone is having an excellent Tuesday. I have some bad news for anyone on a road trip through the South right now. Now, Waffle House is adding a 50 cent per egg surcharge across its 2 ,000 locations as the chain deals with increased egg costs associated with ongoing shortages linked to bird flu. That means your classic all-star breakfast combo that comes with a waffle, bacon, sausage, or ham, hash browns, and two eggs any style will set you back an extra buck. Neil, are you paying extra for a little yolk action or is this something that would make you go egg-free? Looks like we're going to have to start ordering waffles from Waffle House.

1:31This almost feels like Costco increasing its hot dog and soda combo from$1.50. The Waffle House's affordable meals are one of the few things holding our society together. The fact that it's putting a$0.50 surcharge on every egg, I think, indicates a crisis. But to answer your question, I think I'm not ordering eggs. I already thought ordering eggs out for breakfast or brunch was a complete ripoff as it is. So as with prices going up, I think I'm opting for pancakes or waffles. I actually like that take a lot. Have you had Waffle House? I have had Waffle House. Okay, my Waffle House. At 3 a.m. It's not a breakfast thing, though.

2:08Well, yeah, anything could be breakfast if, you know, you flip the script enough. I like putting the chocolate chips on the thin waffles and then adding a little bit of peanut butter as well. So that's my Waffle House hack. No eggs necessary. Let's take a moment to talk about our sponsor, Wise Business, the app for handling payments in multiple currencies. Neil, yesterday I woke up and did the show with two completely different shoes on. How is that even possible? Did you not feel the difference? They were both Nikes, both running shoes. And anyways, you didn't even notice, which is why I bring it up.

2:38Imagine us as international business owners. I often do. Managing payments in different currencies, euros, yen, pesos. It'd be a disaster to say the least. It's why you need wise business. You can pay your vendors or suppliers in multiple currencies. No stress, no hidden fees, and no way to wear two different shoes. If you are a business owner and you have a lot on your plate, take one thing off with Wise Business. Make international payments simple. Head to wise.com slash business. That's wise.com slash business. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks.

3:21And most of those people maintain skin that's still more clear at one year with monthly dosing.

3:51Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with EpGliss. Before starting EpGliss, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about EpGliss and visit epgliss.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Trade war last night was awfully crazy. I wished we taped it. About 36 hours after President Trump announced 25 % tariffs on Canada and Mexico, sending global markets tumbling, he flipped Benson Boone style and delayed those tariffs by 30 days, allowing everyone to take a deep breath.

4:25The pause came after phone calls with the leaders of both Mexico and Canada yesterday, in which they took steps to soothe his concerns about border security and drug trafficking. Mexico President Claudia Scheinbaum said she would reinforce the border with 10 ,000 members of the Mexican National Guard. And Canada's Prime Minister, Justin Trudeau, said he'd continue implementing a plan that had already been announced, a$900 million initiative to deploy drones and helicopters at the border. Investors were pumped to hear the North American trade war was called off, at least for now, because it would have likely pushed inflation higher, lowered economic growth, and caused all sorts of costly headaches for companies.

5:01After suffering heavy losses in morning trading, stocks made up ground by the close and ended up moderately lower, with the S &P 500 finishing down 0.75 percent. Still, this trade war is not completely over. 10 percent tariffs on China went into effect this morning, and China retaliated with tariffs of its own on certain goods. An antitrust investigation into Google and Chinese exports of critical materials will be limited, a pretty moderate response designed to avoid escalating tensions further. Toby, my head is spinning here. What do we make of all this? By kicking the can down the road once again, And Trump is kind of showing the U.S.

5:41to be to, you know, have this reputation for maybe stopping short on actually falling through on some of these promises. So far, I mean, I've seen headlines that it's been more out of the deal than actual tariffs being slapped on these countries. Proponents and supporters of Trump will say, hey, look, we got the concessions that we are after. But then you can look at the concessions and say, wait a minute, they're not as big as potentially that the tariffs that were threatened, you would expect the concessions to be. And I mean, some of the things that Mexico did, they've done in the past before.

6:10They've done this multiple times, pledging 10 ,000 troops to secure the border. They did it in Trump's first term. They did it during Biden's term. And now they're doing it again under the threat of tariffs. The U.S. is developing this reputation for not actually falling through. And President Trump is developing a reputation for not fully falling through on his threats of tariffs. It's also gaining a reputation for being a very uncertain trade partner, which could chill investment anyway, Even if there's no tariffs involved, if we keep threatening our trade partners and pulling back at the last minute, it just creates this level of uncertainty.

6:44And uncertainty is terrible for the stock market. It's terrible for a business investment. Mexico has been a huge winner of the past few decades as the U.S. has decoupled a bit from China. A lot of multinational companies have set up factories just south of the border right next to Texas or Arizona so they can easily ship goods into the United States. Even without the tariffs, Mexico could still suffer from all this uncertainty, whether the U.S. is a reliable trading partner going forward. And the same can be said for Canada. A lot of American allies are saying, all right, we're just going to trade amongst ourselves more.

7:18Obviously, you can't ignore the U.S. The U.S. is the biggest consuming nation in the world, so you can't just completely cut them out of trades. But you are seeing more U.S. allies make trade deals that kind of skirt the U.S. The European Union has done three trade deals in the last two months that have not involved the U.S. at all. They did a big one with some South American countries. So obviously, you can't fully ignore the U.S. because of just how big we are. It's not anyone's preference to not trade with the U.S., but if the U.S. does prove to be such, as you put it, an unreliable trade partner, then you are going to see more of these deals.

7:52And we're not done with the trade wars just yet. As I mentioned, 10 % tariffs have went into effect on China. China retaliated. It was a very measured response as a way to kickstart negotiations. So we'll see what happens over there. It is not a full-blown trade war as it happens. Trump has also threatened to levy tariffs on the EU. And I do expect that to happen in the next few months. And there's also this looming cloud of Canada and Mexico. You know, we've kicked the can down 30 days down the road. But we'll see how it plays out. We're just in a new era of uncertainty. You saw stocks go down yesterday, not a whole lot, but they were still down a pretty significant amount, 0.75 % from the S &P 500.

8:36And I'm sure so many people spent all day yesterday, if they were working in a multinational business that does trade with Canada and Mexico or anywhere else, just on the phones figuring out what the hell to do. And then to see this called off again, it just leads to a little more chaos and a little more uncertainty into the U.S. economy. For our next story,$40 billion in U.S. foreign aid has been put on hold after President Trump and Elon Musk agreed that the U.S. Agency for International Development should be shut down. Two U.S. aid directors replaced on administrative leave over the weekend after refusing to turn over sensitive info to Musk and Doge.

9:11And in their place steps in new Secretary of State Marco Rubio, who, as of yesterday, is the acting administrator of the agency that appears to be doomed for closure. Despite strong pushback from Democrats against gutting the agency responsible for everything from humanitarian efforts in Ukraine to health initiatives in sub-Saharan Africa, employees were seen cleaning out their desks yesterday after being told not to report to work anymore. Neil, critics say that Trump lacks constitutional authority to fully shut down USAID without help from Congress. But Trump pushed back on that idea, saying when it comes to fraud, he doesn't need approval.

9:48This has left a lot of international aid efforts in the lurch in the meantime. Yeah, I mean, this agency hands out$40 billion worth of money every single year. That doesn't sound like a lot, and it's not compared to the federal budget. It's less than 1 % of everything the U.S. spends. But in certain areas, it accounts for a large part of their economy. U.S. aid accounts for 7 % of the entire GDP of South Sudan. In Somalia, it's 9 % of GDP. in Kenya. USAID supports 30 ,000 health workers. After all this chaos went down over the weekend, this Bangladesh health clinic that supports cholera and malnutrition laid off 1 ,000 workers.

10:31So$40 billion going all around the world. It's a way for the U.S. to project its soft power. USAID has been around since JFK, who was the first person to institute it, and it was a way to check Soviet aggression. And now it's a very similar way to check China's influence, economic influence all around the world. So critics of dissolving it or at least making it a shell of its former self say that this leaves a wide opening for China to continue exerting its economic power all around the world. It's already Africa's top investor, top trade partner. And in the absence of a U.S. aid influence or a vacuum of U.S.

11:09aid that could lead to China sending its tentacles all around the world. And then meanwhile, too, it does leave a lot of these contract workers just, I called it in the lurch because they don't know what their future entails right now because USAID had 10 ,000 employees, but also numerous contractors working with it, health contractors spread across the globe. So they're saying, all right, what do we do now? So you are correct to that even though USAID as a portion of the federal budget is a lot smaller, I mean,$40 billion is nothing to sneeze that, but when in context of the entire federal budget, it is rather small.

11:42But that soft power, that the fact that the U.S. is, you know, stepping into these places to also fend off China from doing the exact same, it does shake up the geopolitical world in ways that it probably goes above the actual dollar amount. Right. And just to just to say what happened, you know, at the end of last night, it looks like USAID will still continue to exist as a part of the State Department, Marco Rubio, the Secretary of State, said that there are a lot of functions of USAID that are going to continue to be part of American foreign policy, but it has to be aligned with American foreign policy.

12:17That may be an acknowledgment by the Trump administration that they can't just shut this aid down that was approved by Congress without getting similar approval from Congress. Under a new executive order, the United States could look a little bit more like Norway. Yesterday, President Trump greenlit the creation of a sovereign wealth fund, a federally owned investment vehicle that takes stakes in different types of assets, such as stocks, bonds, or in Saudi Arabia's case, entire soccer teams. But getting one set up in the United States will be a tall task. First of all, it's unclear where the funding would come from in many countries with sovereign wealth funds.

12:52They're financed by a budget surplus that typically comes from commodity riches. Norway's sovereign wealth fund, the world's largest, is plugged by the country's vast oil revenues. Second, it would require congressional approval, but it's unclear whether lawmakers will go for it since it would be a way to sidestep their spending authority. If a sovereign wealth fund comes to fruition, which Trump said he hopes will happen in the next 12 months, it could be a way to save TikTok in the United States, he said. Remember, Trump delayed a ban on TikTok and is pushing for a joint venture with ByteDance in which the U.S.

13:23owns a 50 percent stake. Toby, we heard this floated on the campaign trail, a sovereign Wealth Fund to, quote, advance national endeavors. It looks like the gears are in motion. It is easy to understand the allure of a sovereign wealth fund because, in theory, it allows the government to put cash towards strategic aims without having to actually raise taxes on its citizens. In practice, that balance is actually a lot harder to achieve because, in America, it is tough. We do not run a budget surplus right now. $1.3 trillion deficit. Deficit. So where is that money coming from? And then also when you choose to allocate money to a sovereign wealth fund, that means you are also choosing to not allocate it towards something else.

14:05So maybe should that money instead go towards, you know, improving highways or funding public education or something else than just putting it in a fund to invest in strategic things like, you know, TikTok or something like that. But then, you know, Howard Lutnick also is on board with this as well. He said that it could be used to facilitate the sale of TikTok. He also called out, you know, during COVID when they are buying 2 billion vaccines from these companies, shouldn't they also take a stake in those companies as well? He's the Commerce Secretary nominee. The Commerce Secretary nominee, Howard Lutnick.

14:39So you can see where this would fit into some of these deals, but also it's just not something that you immediately think of that would be helpful for a country like America. Finally, the Panama Canal has found itself on the wrong end of a Trump administration ultimatum after Marco Rubio traveled to the critical waterway to try and, quote, change the status quo. The status quo Trump is upset with is the level of Chinese influence over the critical trade route. Rubio was able to win significant concessions on that front, with Panama's president declaring after the meeting that his country won't renew a 2017 infrastructure funding agreement with Beijing.

15:17Trump has threatened to seize control of the canal, but Panama's president, Jose Molino, downplayed the tensions between his country and the U.S., while also reiterating the fact that the canal is not up for negotiation. Neil, most new secretaries of state take a trip over to London or another cushy ally for their first official overseas visit, but not Rubio. The focus on Panama shows the new diplomatic priorities of this administration. All right, let's do a little history lesson here. So the United States built the Panama Canal in the early 20th century. In the 1970s, Jimmy Carter signed a law that allowed Panama to take back control, and that eventually happened in 1999.

15:57But the Panama Canal continues to be a huge unlock for trade, especially for the United States, because it just presents such a shortcut from East Coast ports to Asia. And the United States right now is the canal's biggest user. 40 % of all U.S. container traffic, traverses it annually. It's also a big, it's a key for Panama's economy as well. It accounts for 4 % of its entire GDP. There have been major price hikes recently. They've increased tolls and service fees because the Panama Canal suffered a bunch of droughts that has limited the ships that have been able to go through. It has these big investments that it wants to make on the Panama Canal.

16:37So that's what Trump is bristling out a little bit is these huge price increases that happened over the past few years. Up next, let's put a little pep in your step because Toby's Trends is coming your way. Raise the rudders. Raise the sails. Raise the sails. Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sales solution? Reach sales professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title, and more. Start converting your B2B audience today. Spend$250 on your first campaign and get a free$250 credit for the next one.

17:13Get started today at linkedin.com slash campaign. Terms and conditions apply. The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen. And keep striving. Visit Strayer.edu slash Jack Welch MBA to learn more. Strayer University is certified to operate in Virginia by Shev and as many campuses, including at 2121 15th Street North in Arlington, Virginia. One week ago, OpenAI debuted an AI helper that with little oversight could go buy you some Valentine's Day chocolates online if you asked it to.

17:57And then it dropped another tool that can scour the internet to conduct deep research about any topic of your choosing, maybe how to find a valentine. And today, those so-called AI agents have made it into Toby's Trends, where I want to talk about the rise of AIs roaming the internet. The first tool I mentioned is called Operator, and it can shop for groceries or book a reservation online with minimal human input. A New York Times journalist took it out for a test drive and described how the recursor zoomed around the screen controlled by the AI to go buy some dog food, only stopping to ask for passwords and payment confirmation.

18:34OpenAI's latest tool, Deep Research, accomplishes in 10 minutes what would take a human many hours, according to the company. The company does see the tool as particularly useful for people who work in finance, science, law, or really anywhere else that spends time going deep on certain topics. But the reason I toss this into a Toby's trends is that computers browsing computers is only going to grow more common. Google has quite literally already dropped a tool two months ago called Deep Research that can do the same thing as OpenAI's new release. And I expect we'll see more announcements coming down the pipeline as related to AI agents.

19:10So the so-called self-driving internet, Neil, as you actually framed it to me earlier, is fast arriving. It's fast arriving. It is extremely expensive, too, because this tool will cost you$200 a month for OpenAI. But I think what we're seeing is these companies respond to DeepSeek's cheaper model by releasing very frequently new product updates to create a more sticky product. We all saw that DeepSeek went to the top of the app store right away, which showed that it was very easy to move between chatbots. They're very similar in their capabilities and their scope. It doesn't matter whether you're using Cloud or ChatGPT or DeepSeek.

19:48Whatever you ask, it's going to give something broadly similar, which showed that their products are not sticky. So in response, OpenAI said, hey, we're going to put our foot on the gas pedal. We're going to release a lot of new products that hopefully gets people in our ecosystem paying for this. And it'll create a more sticky experience with OpenAI specifically. But as for the self-driving Internet, I mean, parts of this are very exciting. You can see ways that it would save a lot of time. There are things that I feel like I'm just copy pasting, clicking through. It's very much a headache, like booking a reservation or booking a flight or things like that, that I would love to have an AI agent do if the stakes are low enough, I guess.

20:29You could see how these tools could supercharge productivity. Remember, that's always been the promise of AI is that it will take productivity to another level. Because instead of taking hours to research an obscure scientific topic, you can do that in minutes now. So that is literally saving time. But then also some cold water on these lofty claims is that a lot of researchers have pushed back and say you probably need to spend as much time verifying the AI's research as you would just researching yourself. Because, again, it is prone to hallucinations and it's not great at parsing through what information is actually true online versus what is not true.

21:07And then the other thing too, remember I talked about the New York Times journalist who took it out for a spin and said that it was almost like having the world's least confident assistant because it is constantly asking you, hey, can I do this? Can I do that? Because it doesn't want to overstep its bounds. So it ended up you have to focus on it just as much as if it's not running in the background because you have to put in your credit card info. You have to say, yes, this is OK to do this. So it's not quite fully autonomous yet. So definitely some, you know, it's not quite there if you want to call it that because you still need to, you know, monitor it.

21:45But you see the promise and the idea that these tools could eventually save you a lot of time. Right. I think it'll be important for people to learn to trust them without checking their work. And I think that would be my biggest holdup right now. If it were to generate a research report, I just wouldn't totally trust it because I know that these AIs are prone to hallucinate and make stuff up. So I'd need to check it and then it would be the same amount of work anyway. So this is V1. We'll see what happens in V2 and V3. OK, let's sprint to the finish with some final headlines you should know about.

22:13While the Eaton and Palisades fires in Southern California have been 100 percent contained, the financial fallout is continuing. State Farm, which provides insurance for more than one in five homeowners in the state, has asked California regulators to approve an emergency rate hike in order to avoid, quote, dire situation for our customers and the insurance market in the state. That hike would include a temporary 22 percent increase in homeowners insurance and a 38 percent increase in renters insurance. The desperate tone of the letter raises questions about the financial condition of the insurer, which is being hit with thousands of claims from victims of the fires and has already paid out more than one billion dollars.

22:52It said an interim increase was necessary to preserve its claims paying capacity. Remember, State Farm actually chose not to renew fire insurance for about 1 ,600 customers in the Palisades in 2024. And it did raise questions about, yeah, how is the financial health of this company? One group that does think that State Farm is doing just fine is Consumer Watchdog, which is this L.A.-based advocacy group. They actually are disputing that State Farm is in any sort of financial trouble. They pointed to the fact that insurers made it made underwriting profits of one point four billion dollars between 2020 and 2023.

23:28They say it has one hundred thirty four hundred thirty four billion dollars in the bank right now. So they're saying you could absolutely, you know, cover these costs. But then State Farm is saying this is actually how insurance works. As you know, the risk goes up in a certain area, prices have to go up as well. That is just a foundational way that insurance works. So higher risks should actually lead to, you know, more higher costs as well. So it is just tough, though, to see that headline of 22 % increase for a community that is already, you know, reeling from the fallout of these fires. For our next headline, Neil, it looks like you may be able to go watch your Eagles play in the Super Bowl after all because ticket prices for the big game are plummeting.