Trump’s Universal Tariffs Begin & Apple Reports Best Revenue Since 2021

0:28This episode is brought to you by Progressive Insurance. Good morning Brew Daily Show. I'm Neil Freiman. 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.

0:53Limber 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 schools 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.

1:29Toby, 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 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.

2:05It 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 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 nightmares. Stretch your hammies, kids. Stretch your hammies.

2:39And now a word from our sponsor, Range Rover. Toby, would you consider your desires elevated? Oh, yeah, Neil. Only the best for me. I'm talking bubble baths. Moderately priced domestic non-vintage champagne and pizza. Okay, but what if you elevated them even further, say a Range Rover Sport? Because each Range Rover Sport model offers a dynamic, sophisticated take on sporting luxury. With dynamic air suspension, you can achieve agility, control, and composure. Plus, you can take it off-road with adaptive off-road cruise control that monitors ground conditions and acclimates to the present terrain.

3:12The adaptive dynamics reduces unwanted body movements to deliver smooth and composed handling. So elevate your desires and build your Range Rover sport at Range Rover dot com slash U.S. slash sport. That's Range Rover dot com slash U.S. slash sport. Last night, the White House screened Liberation Day to 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.

3:51While the U.S. already raised tariffs for goods like steel, aluminum, and cars 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.

4:27They'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 US. 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.

4:59Yeah, 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 dodging mechanism. And so Trump opposed an additional 40 % tariff on any goods that have been deemed by U.S. border customs as transships. 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.

5:39Other countries got either lucky or unlucky, 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 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 US 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 will be instituted in seven days.

6:15So 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.

6:55They got hit with a 39 % rate. So if you're buying Lindt 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 percent 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.

7:41So tariff revenue is soaring. Effective tariff rates on imports of 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 soaring 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, it's, uh, you know, asterisks 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 roots in the United States?

8:16Will 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 grew 13 % year over year, powering overall revenue growth of 10%, its biggest jump in four years. It was a welcome earnings beat for a company that is still facing down all sorts of troubles.

8:53Depending 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 forecasts 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.

9:33Investors 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 Seven 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. We're headed back to Cupertino for game six. Now, this was really a surprisingly good earnings report. The iPhone 16 was quite popular.

10:13iPhone 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 is that they wanted to get ahead of the tariffs. Overall, iPhones or Apple revenue increased 10 percent. 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.

10:57Still, 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 homegrown 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.

11:31But 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 are willing to break out the checkbook. They've had conversations with Perplexity, with Mistral, these two buzzy AI startups. So the big question mark here is, are they going to make a splashy 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, you know, walled garden in order to catch up on AI because it's so far behind.

12:12And 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.

12:55Since 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 percent 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.

13:27People 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 out from their cold, dead hands. Yeah, lawmakers, not surprisingly, are very reluctant to regulate themselves when it comes to this.

14:01A 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 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 stock holdings, are some of the reasons why this continually runs into headwinds, despite the fact that most of America, the vast majority of America, does support it.

14:38So 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.

15:11So Josh Hawley, who is the sponsor of this bill, said, I don't think Trump would support it if we made him sell off his investments. And he needs Trump's signature in order to make this the law. So he said, OK, starting at the next term, that's when you have to divest. And the Democrats on the committee were like, oh, 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.

15:43Who 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. Not all leaders wear suits. Some could wear sunglasses and drive something with adaptive off-road cruise control. Those leaders take the road less traveled and drive a super sweet ride to do it. And speaking of sweet rides and trailblazing, the Range Rover Sport is refined, powerful, and built to turn heads. It's dramatic in the best way possible.

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17:47It's Stock of the Week, Dog of the Week time, where Neil and I pick one stock that hammers in short putts 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 US tech company since Rivian went public back in 2021.

18:29$60 billion is also noticeably 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 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.

19:09But 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 46 % 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.

19:50Remember, 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 raised. 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 an underpricing from the investment banks that worked on it.

20:26So again, great for their VC backers. Multiple funds returned their entire fund with just this one public debut, which has been a welcome sight after a couple of years of pretty dry IPOs. Yeah, there hadn't been a lot of software IPOs at all. tech company IPOs at all since 2021. But now there certainly is momentum. We had CoreWeave back in June and then back in March. And then we had the stablecoin 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.

21:02And 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.

21:39Almost 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 in 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.

22:17Far 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 Roll, Texas. Toby, it seems Musk is treating the boring company like a sweater you get at Christmas. You wear it a couple of 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've 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.

22:52Of 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 Company's 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, it was clear that 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.

23:27And 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.

24:00SpaceX is 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. its 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.