Trump Raises Tariffs On Canada Over Ad Spat & Nike Wants Motorized Walking

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0:32Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, why the U.S. bailout of Argentina looks a lot better this morning. Ben, Nike wants to make an e-bike for your feet. It's Monday, October 27th. Let's ride.

0:51Happy Monday and welcome back to the week. Now, don't tell your boss, but Toby and I want to help you procrastinate from work. So we're going to give you a puzzle to play over the next few days that could get you a prize when you submit the correct answer. Many of you remember Password from over the summer. This one's a little different. It's called The Ladder. The Ladder, which was created by our puzzle mastermind, Jack Murtaugh, works like this. We're gonna give you five things in a specific order based on one metric. You have to figure out the metric we use to order them. For instance, if I gave you a list of Eiffel Tower, Shaq, Danny DeVito, the metric would be height.

1:28All right, here's the list. And remember, the order matters. Number one, salt. Two, sunscreen. Three, cereal. Four, the Moderna COVID vaccine. And five, avocados. One more time. Salt, sunscreen, cereal, the Moderna COVID vaccine, and avocados. Why are these ranked the way they are? If you figure it out or think you have a guess, head to the Google Forms link in the show notes and enter your answer. You have until Wednesday at midnight to submit. Then we will randomly select someone who got the correct answer to win a prize. Good luck, everyone. And now a word from our sponsor, Disney Campaign Manager.

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2:43Your ads can then appear within Disney +, ESPN, and Hulu's streaming content. The platform blends automation with proactive human guidance so you can get the exact assistance you need. Learn more at DisneyCampaignManager.com. That's DisneyCampaignManager.com. With Trump raising tariffs on Canada over the weekend, we haven't seen tension between neighbors this high since Newman moved in next to Jerry Seinfeld. Trump slapped an additional 10 % duty on imports from Canada on Saturday in retaliation for what he considered a misleading TV ad featuring former President Ronald Reagan criticizing tariffs.

3:19The ad campaign, produced by the Canadian province of Ontario, features audio from a 1987 radio address by Reagan, where he says tariffs may seem patriotic, but warned, over the long run, such trade barriers hurt every American worker and consumer, fueling fierce trade wars and ultimately costing jobs. With the Supreme Court about to hear a challenge to his tariff agenda, Trump considered the ad to be a hostile act and first suspended trade talks with Canada, then announced the additional 10 % tariffs on all Canadian goods. Neil, a lot of subplots here, starting with the economic side of things.

3:52The U.S. is Canada's largest trading partner, and Canada is the second largest for the U.S. with bilateral trade reaching$762 billion last year. But probably less important, but still relevant, the L.A. Dodgers are playing the Toronto Blue Jays, who are located in Ontario in the World Series, and the Adrien during their games on Friday and Saturday. So you can toss in some tension on the diamond as well. No, that's actually a key point, because the ad was intended to run during the World Series because Ontario was actually paid$53 million for a huge TV ad buy to get this message in front of Americans in order to put pressure on Trump to rescind tariffs that are pretty high on Canada right now.

4:33Let's go over the ad specific. So it is from a 1987 radio address delivered by Reagan in which he's actually talking about why he put tariffs on semiconductors from Japan. He said this was just essentially a necessary evil and overall that he was against tariffs. Then on Thursday, the Ronald Reagan Presidential Foundation said on social media that the ad misrepresented Reagan's address. And then Trump hopped on that and said, this misrepresents Reagan. I'm going to put an extra 10 percent tariffs on Canada. Now, when asked about why this ad was misleading, the Reagan Foundation didn't explain what was inaccurate or misleading about the ad.

5:14But the train had already left the station at that point. And if I am Prime Minister Mark Carney right now, I'm a little bit annoyed at Ontario Premier Doug Ford. Remember, Doug Ford has kind of beefed with Trump throughout his tenure. And Mark Carney has tried to distance himself from Doug Ford saying that, hey, we are the only ones actually responsible for negotiating trade with the U.S. Don't actually look into the actions of one Prime Minister or one Premier who has a little bit of beef with Trump going forward. So and you're right, Ford had this very grand plan for it. He wanted to put a lot of money behind it and spark a conversation, which clearly it did.

5:52But it seemed like throughout the week, it kind of started to escalate. In the beginning of the week, Trump kind of laughed the ad off, saying like, I would run that if I was Canada, too. But then as the week progressed, and as maybe the World Series started to gear up, that's when things started to reach a boiling point. So this is if I am Mark Carney and saying I'm trying to negotiate this deal with Trump right now, this is probably not what we necessarily wanted because it just complicates things further. Now, looking ahead, November 5th is the huge day on the calendar because that's when the Supreme Court is going to hear a case challenging Trump, many of Trump's, quote unquote, reciprocal tariffs.

6:28And if I'm trying if I'm the team trying to challenge Trump's tariffs, then I'm going to use this probably as an example to try to justify why I am right. Because under a 1977 law that Trump has invoked to apply all of these tariffs, he is saying that there is an unusual and extraordinary threat to the United States. And that's why he's justifying these tariffs. Now, if I'm trying to win this case, I'm saying, well, it doesn't add, you know, critique, bringing up Ronald Reagan's hatred of tariff amount to an emergency and an unusual and extraordinary threat against the United States. That is sort of the battle lines that are being drawn ahead of this huge date on November 5th.

7:09Because if these tariffs are revoked, there's going to be a huge amount of reimbursements coming to the American companies that have had to pay tariffs. And it's going to royal market should should these tariffs be struck down by the court. And remember, too, that when we're talking about trade agreements with Canada, a lot of the bilateral trade that happens is covered under the USMCA, which is actually a trade agreement that Trump put in place during his last term. So that covers about$650 billion of the$762 billion in goods that are exchanged between US and Canada. So every time you see like, oh, Trump is slapping an additional 10 percent of tariffs on all Canadian goods, it is goods that are fall outside of that agreement.

7:47So it's just the 20 percent of non-USMCA goods. So it's not necessarily as economically damaging as it may initially sound when you talk about two of the biggest trading partners in the Western hemisphere. Yeah, there are 50 percent tariffs on steel and aluminum from Canada to the United States, which is the center of the trade talks that are ongoing. OK, moving on. Unlike Toby throughout most of college, Javier Mille passed a crucial test. The Argentinian president's party secured a decisive 41 percent of votes in a legislative election that was seen as a key referendum on his free market transformation of the country's economy.

8:23That means Mille's party called Freedom Advances could double its representation in Congress and give him a mandate to continue pursuing his aggressive austerity measures. You're right. Morning Brew Daily doesn't typically cover Argentina's midterm elections. But this vote was headline news across the globe, given its role as a critical litmus test of Miele's makeover experiment, which had taken some serious stumbles lately. Even President Trump last month called it, quote, a very big election being watched by the world. It was certainly being watched closely in the United States. The White House recently unveiled a$40 billion bailout of Argentina to prop up the falling peso, So a controversial move criticizes Trump helping out his friend and ideological ally, Milley, using American taxpayer money.

9:06And this$40 billion was directly tied to the outcome of the election, according to Trump. The president said that if Milley didn't perform well in the vote, quote, we're gone. Well, the bailout looks much better now. Argentinian stocks and bonds are expected to rally when the market opens this morning. As Trump said, this election made a lot of money for the United States. First of all, I was an English major, so I didn't take all that many tests in college. So there weren't even tests to fail. But you are right. Wall Street was looking at this with a bated breath right now. And there was kind of a couple of scenarios that it was prepared for that if Miele's party secured less than 33 % of the vote, that's seen as a full-on rejection of the Miele product.

9:47That risks the peso devaluing. A sell-off of Argentina bonds would occur. 35 % to 39 % was sort of seen as the base case. A lot of people were saying this is where we probably think it's going to come in. And that just he keeps veto power, but it doesn't necessarily say that, hey, this big reform reform momentum is underway. But over 40 percent share, which is what we got actually with 99 percent of votes counted. He is at 41 percent of the national vote right now. That is a all all lights are green right now. It does look like he will be able to carry out these reforms and is making this bet that, you know, Trump made on Argentina look a little bit more enticing for investors right now.

10:28So it was we're talking small percentages here, but this was probably the best case scenario if you are bullish on the Argentina trade. So how is Mille's project going? So he came into the presidency in 2023 wielding a chainsaw. And he said, I'm going to give Argentina shock therapy with very drastic free market reforms, because this is a country that has had had soaring inflation and huge amount of debt. And it just hasn't been able to get going in the past few decades. So he's done some drastic things. He he repealed 10 ,000 regulations and essentially cut a lot of public sector jobs. And that really has stabilized their finances and inflation.

11:09The inflation rate a few years ago when he came into office was 200 percent. Now it is just 32 percent. He also generated the first fiscal surplus for Argentina in 16 years. But with all those drastic cuts have have created a semi job crisis. About one in three people still live in poverty. And the average real income for Argentinians is still down 6 % below pre-Mile level. So there's still a lot of economic hardship despite all the cuts. Mile says, I need to move to phase two to get our economy back on track. I've cut a lot of red tape so far. You just need to give me the mandate to do that. And they got that yesterday.

11:48Yeah, a lot of growing anger that the inflation progress hasn't actually led to the improving of daily lives of Argentinian citizens. So that is one thing that was kind of up on the voting block over the past few days. But yeah, this win just buys melee time with some investors. He's got the IMF breathing down his neck. He had Trump breathing down his neck, basically saying like, hey, if you do not win, our support is gone. So this is something that you will see. Just look at Argentina bonds. They're probably doing quite well in these early morning trading hours. Let's move to our winners of the weekend segment where Neil and I pick two things that had a better weekend than tight ends on National Tight End Day yesterday.

12:28I won the pre-show game of Mahjong, so I'm up first. My winner of the weekend is Nike for showing some shades of the old Nike again. The shoe company has been short on innovation recently and got caught doubling and tripling down on older lifestyle models like Jordans and Dunks. But now under new CEO Elliot Hill, it's putting more money into innovation, unveiling a variety of high-tech releases over the past few days that will put a spring in your step, literally. The buzziest new prototype it rolled out is a sneaker with a detachable mechanized arm that wraps around your mid-calf and ever so slightly propels you forward with each step that hits shelves in 2028.

13:07It's designed for 10 to 12-minute milers, anyone who wants to run or walk a little easier, or people who just really like a back-to-the-future aesthetic. The other eye-catching release that should intrigue any sore-footed athletes out there is a new neuroscience-backed shoe, which includes a slipper that has 22 foam nubs on the sole that Nike claims will stimulate the feet and the brain. Neil, some pretty fun innovations for your dogs coming out of Nike these days. Well, I guess this would be cool for everyone who still doesn't have their Heelys. Of course, I'm still zipping around past everyone.

13:40No, Nike is going full Willy Wonka, going back to its roots as an innovation center. And it needs to do that because its business is really not in a good place. The company lost$5 billion in revenue, replaced its CEO last year. Revenue has declined for six straight quarters. Shares are still down 9 % this year. It needs to go back into the lab to release some new buzzy stuff that gets people excited and move from that lifestyle angle that they've really hammered for the past few years into a more innovation angle that's focused more on athletes and where they really cut their teeth in the 80s and 90s.

14:16Yeah, they have a new chief innovation design and product officer who is really emphasizing two things. One is speed. He wants things to get to market quicker. And the other thing is innovation. His new internal mono for the company is create epic, beep, create epic stuff right there. He wants Nike to become the leader in the clubhouse once more when it comes to innovation. and one of the things that they're doing is adopting something from Silicon Valley, which is you should spend 20%, one-fifth of your time working on moonshot ideas. And clearly these two ideas that I put forth were our moonshot ideas.

14:49Like who knows if we're gonna be walking around with electric bikes or these things that propel you forward on your feet. It is an interesting concept because we've come through the carbon plate area, which technically is propelling you forward. Now are we gonna get electronics involved? I could see, you know, maybe the world athletics rolling their eyes going, come on, Nike, you keep putting us in these awkward scenarios. What do you mean you're going to start giving people boosts as they run? But you can see that Nike is just kind of planting its back in innovation once more as it's been sort of lapped by competitors like On and Hoka in recent years when it comes to innovation.

15:24Do you think people will go for this? I don't know. I mean, if you are having trouble, you know, running or walking a certain pace, I do think it's for maybe some of those, they're just called back of the pack runners who just want to get out there and start moving. I could see it being adopted by that crowd, which is, you know, a large majority of athletes. So it's intriguing. It's a little maybe too futuristic for early adoption or for like widespread adoption. But I could see it maybe finding a niche audience in those back of the pack runners. All right, we're going to take a quick break and come back with Neil's winner of the weekend.

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17:16So if you're looking to give your clients consistent results year in and year out. Go see the record for yourself at Vanguard.com slash audio. That's Vanguard.com slash audio. All investing is subject to risk Vanguard Marketing Corporation distributor. Welcome back. My winner is Papa Bagel, which is trying to go where few bagel shops have gone before nationwide. Papa Bagel has 16 stores now, seven of them in New York. But as Bloomberg reported, the company has embarked on an ambitious plan to open 300 locations across the country, which would give it more stores than Sweetgreen. It might have the money to pull it off.

17:54Pop-Up Bagel is profitable, valued at$60 million, and majority owned by a private equity firm that's also invested in bougie food names like Erewhon and Levain Bakery. It also has a bunch of celebrity backers, including J.J. Watt, Michael Phelps, and Paul Rudd. If you're unfamiliar with Pop-Up Bagels, congrats on not being addicted to social media. These bagels have become a viral sensation for their grip, rip, and dip approach. You can't get a bagel sandwich there. These bagels come in orders of 3, 6, and 12, and you're supposed to dunk them into a tub of cream cheese, chips and salsa style. But don't call it a flash in the pan.

18:29Pop-Up Bagels likes to say it's, quote, not famous, but known. It's unclear whether being known is enough to conquer the United States. Unlike other food categories, bagel stores face major hurdles in expanding. Maybe the only one that's earned chain status is Einstein Bros with more than 700 locations, while the rest are mostly hyper-local mom-and-pop shops. Toby, does pop-up bagels have staying power? I don't know. I do think they are quite delicious, mainly just because I usually get them when they're warm, and that's the basic elements of a great bagel is if it comes out warm. But yeah, this started out of a Connecticut backyard during the pandemic.

19:06It was self-taught trial and error bagel maker Adam Goldberg, kind of harnessed a lot of grassroots energy and just literally started selling these from his house. And then eventually they had a store in this back alley next to a bike shop. And it did just become a viral sensation. One, because it is different. I mean, the bagels come unsliced. They don't really have a traditional hole in the middle that you see. You tear them and then dip them in the smear. So it just already had a built-in layer of novelty to it. and then it just quickly started to spread from there. The fact that it can break from normal bagel orthodoxy in New York and still attract an audience is one of the reasons why you start to see private equity circling a little bit, start to see maybe this does have staying power outside of the Northeast area.

19:52So I do think too that it is easily franchisable. These stores are small. Their average store size is 700 to 1200 square feet, not big at all. Their opening cost is$300K to$900K, which is a lot cheaper than Einstein Bagels, which can cost you a million bucks. So I do think maybe that can also play a role in making this a franchisable opportunity, the fact that it's just such a small footprint. It's just fascinating to think about why I know very few bagel stores have gone national. And you mentioned Einstein Bros. I don't think anyone would say that's a particularly good bagel. It's just so hard to maintain consistency for your bagel into more than a dozen shops.

20:32The logistics are very hard. It's very labor intensive, but it's also at the same time low margin business. A lot of people don't really get bagels after 1 or 2 p.m., so the sales window is extremely tight. There's a lot of challenges facing pop-up bagels as it wants to expand. But every time it does expand, there's a new store opening. It's kind of like there's a new Buc-ee's or a new In-N-Out that opens somewhere off the beaten path because there's huge events. They just opened one in Harvard Square in Cambridge, and they threw a huge block party. They're coming to Atlanta, so they're clearly running a pretty successful playbook when they do open a new store.

21:08The trouble and challenge is going to be maintaining consistency when they open a new store. And I think the big question here is, is this a viral social media trend or is this a brand with staying power? because, I mean, go back through the annals of food trends. There are things that peak really high. I mean, the cronut, for instance, this was going to take over the entire world, but then it just kind of slowly fades away from relevance. Is this a gimmick, the fact that you tear it and the fact that it's not a normal bagel, or is this a new paradigm in bagel making that people actually are going to stick with?

21:40I think that is the big question as they try to scale. So I've had one experience with pop-up bagels last year. I went because I just wanted to try it, right? Like it was, it was, people were talking about it. So I went and I was like, can I get a bagel? And they said, no, you need to get three bagels. And that kind of rubbed me the wrong way. So I have a little personal beef with pop-up bagels. Yeah, I guess you just got to bring your friends. But I was just, you know, a normal person wanting to get a bagel. And I had to, you know, pay for three bagels. Plus this huge tub of cream cheese. They say it's to create a social experience.

22:11So I wish them the best. I'm just sharing, you know, the one personal experience that I had where I had to get three bagels when I just wanted one. Okay, it's Monday. So here's what you need to know to stay ahead in the week ahead. President Trump is in Asia for his first trip to the region in his second term, hitting Malaysia, Japan and South Korea before capping things off with a face to face meeting with Chinese President Xi Jinping. Hopes for a trade truce with China rose yesterday after officials from both countries said they agreed to an initial framework that could be finalized when Trump and Xi chat on Tuesday.

22:42Yeah, all this talk about Canada when this Asia tour is probably the news of the week when it comes to trade. No World Series matchup, though, so probably not as a buzzy. But yeah, Mark Carney is actually over in Asia as well. So all the trade worlds are colliding right now. I said Tuesday, but I meant Thursday when they're going to meet. And stock futures are rising this morning on that initial framework that was agreed upon. Two days from now, the Federal Reserve is expected to lower interest rates for the second time this year following a first cut in September. Their decision was signed, sealed and delivered on Friday when a delayed inflation report showed prices grew less than expected last month.

23:18The cool-ish inflation report also raised hopes that the Fed will reduce rates once more this year at its meeting in December. But don't expect Jay Powell to commit to anything in his closely watched press conference on Wednesday. All this gave a huge boost to stocks on Friday, which shot up to record highs and the Dow closed above 47 ,000 points for the first time in history. Yeah, we didn't get to talk about that reflation report, but it did keep the Fed on track. Consumer prices rose 0.3 % for the month, 3 % year over year. That's below what economists expected. But also there were some hot spots that came in.

23:53Coffee and beef prices rose 19 % and 15%. Deli meat saw a record price bump as well. So if you have a particularly meat-based breakfast to go along with your coffee, you're feeling a little bit of the inflation in the pinch right now. Still, inflation remains above the Fed's 2 % annual goal, but relatively speaking, it wasn't a bad report, hence the big jump in the market. Meanwhile, this is it, folks. This is why we wake up in the morning. An earnings feast is in store that rivals Thanksgiving. The entree, as always, is big tech. Meta, Microsoft, and Alphabet will be served on Wednesday, followed by a second course of Amazon and Apple on Thursday.