Morning Brew Daily: Southwest Scraps Free Checked Bags & Tariffs Hit Steel and Aluminum

Release Date: March 12, 2025

In this episode of Morning Brew Daily, hosts Neal Freyman and Toby Howell delve into critical developments impacting the aviation and manufacturing industries, explore geopolitical maneuvers surrounding Greenland's rich mineral resources, and touch upon unexpected shifts in the global ski industry. Here’s a comprehensive breakdown of the key discussions, insights, and conclusions from the episode.

1. US Imposes Heavy Tariffs on Steel and Aluminum

The episode begins with a significant focus on the United States' latest move to impose substantial tariffs on steel and aluminum imports.

Neal Freyman: "President Trump ramped up his fight against Canada yesterday, saying he would double plan tariffs on Canadian steel and aluminum from 25% to 50% effective today." (08:02)

This escalation comes in response to Ontario's Premier Doug Ford imposing a 25% surcharge on electricity exported to U.S. states like New York, Michigan, and Minnesota, affecting approximately 1.5 million households and businesses. Although initial negotiations hinted at a potential easing of these tariffs, the episode highlights the ultimate imposition of a staggering 2075% tariff on aluminum and steel against all U.S. trading partners, including Canada.

Toby Howell: "It shows that investors, part of the pun here, don't have nerves of steel." (09:31)

The repercussions of these tariffs are multifaceted:

• Domestic Impact: While U.S. steel producers may benefit from reduced competition, manufacturers reliant on steel and aluminum face increased costs, potentially leading to higher prices for consumers and reduced profitability.

• Market Reaction: The S&P 500 experienced a sharp decline, tumbling another 1.75%, reflecting investor anxiety over the unpredictable trade policies and their broader economic implications.

• Historical Context: The hosts reference the 2018 tariffs, noting a 2% rise in metal prices and a 25% drop in imports, illustrating both the intended protection of domestic industries and the unintended consequences on other sectors.

Neal Freyman: "Prices for both metal, steel and aluminum rose 2% and imports fell by a quarter. That is the intended effect of tariffs." (10:18)

The discussion underscores the delicate balance policymakers must maintain between protecting domestic industries and fostering a competitive, cost-effective manufacturing sector.

2. Southwest Airlines Ends Free Baggage Policy

Transitioning to the aviation sector, Neal and Toby examine Southwest Airlines' bold decision to abandon its longstanding free checked baggage policy.

Neal Freyman: "Last year, Southwest was the last airline standing against the rise of extra fees and nickel and diming, missing out on five and a half billion dollars in baggage fees US Airlines raked in last year." (04:43)

This policy shift is not merely a pricing strategy but a strategic response to intense financial pressures faced by the airline industry. Factors driving Southwest's change include:

• Financial Strain: The airline industry is grappling with reduced consumer demand, economic uncertainties, and a series of aviation incidents that have shaken passenger confidence.

• Investor Pressure: Activist investor Elliott Investment Management has pressured Southwest to enhance revenue streams, leading to the reconsideration of previously held policies.

• Market Differentiation Challenge: By aligning with industry norms on baggage fees, Southwest now faces the challenge of differentiating itself from rivals like Delta and American Airlines, which rely on premium services and diversified fleets to drive profitability.

Toby Howell: "Southwest believes it had little choice but to press the flight attendant call button to try and beef up its bottom line." (05:29)

The hosts discuss the strategic implications of this move, questioning how Southwest will maintain its unique market position without its free baggage hallmark. They also explore the broader industry downturn, noting reduced revenue forecasts across major airlines and the compounded effects of external economic and safety concerns.

3. Greenland's Pivotal Parliamentary Election and Mineral Riches

A significant portion of the episode is dedicated to Greenland's recent parliamentary elections and their implications for global geopolitics, particularly concerning rare earth minerals.

Toby Howell: "Greenland isn't just strategically located between North America, Europe and Asia. It's also sitting on a mother lode of rare earth minerals, lithium, graphite, nickel, and rare earth elements that can help power the global tech industry for the next century." (12:20)

Key points include:

• Election Outcomes: The center-right Democratic Party surged from 9% to 30%, while the pro-independence REC party emerged as the second-largest group, signaling a strong movement towards Greenlandic independence from Denmark.

• Geopolitical Significance: Greenland's estimated 43 of the 50 critical minerals vital to U.S. national security make it a focal point in the strategic maneuverings of global powers. The U.S. aims to secure access to these resources to counter China's dominance in the rare earth supply chain.

• Economic and Environmental Challenges: Despite the abundance of minerals, Greenland faces significant logistical hurdles. Approximately 80% of the island is ice-covered, and the lack of infrastructure necessitates substantial investment to make mining viable.

Neal Freyman: "The stage is set for an absolute gold rush onto Greenland right now. It contains an estimated 43 of the 50 critical minerals that the US considers vital to national security." (13:50)

The discussion touches on historical contexts, referencing President Trump's previous tariffs and the ongoing strategic interest in controlling Greenland's mineral wealth. The hosts also highlight the environmental and infrastructural challenges that impede exploitation efforts, despite the high-stakes geopolitical interest.

4. Japan's Ski Industry Surges Amid Record Snowfall

Shifting gears, Neal and Toby explore the unexpected boom in Japan's ski industry, driven by record-breaking snowfall and its growing appeal to international tourists.

Toby Howell: "Light, fluffy and abundant Japan snow has attracted a record number of skiers and snowboarders this winter who marvel at the fresh powder and unique cultural experience offered by Japan's 500 ski resorts." (19:00)

Highlights include:

• Record Snowfall and Its Effects: Despite unprecedented snowfall heights—122 inches on one mountain—leading to temporary resort closures and operational challenges, the overall impact remains positive, attracting more tourists seeking reliable and high-quality skiing experiences.

• Comparison with Western Resorts: Unlike North American and European resorts struggling with inconsistent snowfall and rising costs, Japan offers abundant natural snow, more affordable lift tickets (with the highest being around $75), and a cultural allure that enhances the skiing experience.

• Long-Term Growth and Challenges: While the current surge presents significant opportunities for tourism and economic growth, concerns loom regarding potential over-crowding, increased real estate costs, and labor shortages due to Japan's aging population.

Neal Freyman: "The snow is so abundant. It's just this swirling swirl of climate factors where you have the winds blowing across Siberia mixing with the warmer temperatures above the Sea of Japan, and then it slams into these mountains and creates a really, really abundant snowfall." (19:58)

The hosts conclude that Japan's ski industry is poised to become a global leader, provided it navigates the imminent challenges of infrastructure strain and demographic shifts.

5. Final Headlines: Education Department Downsizing, Manchester United's New Stadium, MLB Merchandise Fiasco, and More

The episode wraps up with a series of brief yet impactful headlines covering diverse topics:

• Education Department Downsizing:

  Neal Freyman: "The Education Department said it plans to shed more than 1,300 of its employees, about half of its staff." (21:41)

  In alignment with President Trump's agenda to dismantle the agency, the downsizing aims to reduce bureaucratic bloat while maintaining essential functions like delivering federal aid and managing student loans. However, concerns persist about the department's capacity to effectively fulfill its duties with a significantly reduced workforce.

• Manchester United's Stadium Transformation:

  Toby Howell: "By ditching Old Trafford, the club announced plans to replace its historic 115-year-old stadium with a brand new 100,000-seat behemoth." (22:20)

  The proposed new stadium, projected to be the largest in the UK at a cost of $2.5 billion, promises to generate jobs and boost local economies. Yet, fans express anxiety over the financial feasibility and the club's on-field performance, as Manchester United currently languishes in 14th place in the Premier League.

• MLB Merchandise Mishaps:

  Neal Freyman: "This year, fans are mocking special edition New Era hats for showing nonsensical and sometimes inappropriate words on the cap." (24:12)

  New Era's attempt to modernize their merchandise design backfired, leading to public ridicule and product discontinuation. This follows last year's issues with jersey designs, highlighting a troubling pattern of failed merchandise launches within Major League Baseball.

• Impact of "Severance" on Pets:

  Toby Howell: "Fans of the hit Apple TV plus show have noticed their pets freaking out, whining, pacing, even hiding whenever the series is playing." (24:57)

  The unsettling sound design and color palette of "Severance" are believed to distress pets, mirroring the anxiety experienced by viewers. Experts suggest that pet owners consider lighter programming alternatives to maintain household harmony.

Conclusion

In this episode, Morning Brew Daily effectively navigates through a spectrum of pressing topics, from hefty tariffs reshaping the steel and aluminum industries to significant strategic shifts in the aviation sector with Southwest Airlines. The geopolitical spotlight on Greenland underscores the intricate interplay between natural resources and global power dynamics, while Japan's burgeoning ski industry exemplifies resilience and strategic opportunity in the face of environmental extremes. Concluding with a rapid-fire roundup of diverse headlines, Neal and Toby provide listeners with an insightful and comprehensive overview of the day's most impactful stories.

Notable Quotes:

• Neal Freyman: "Prices for both metal, steel and aluminum rose 2% and imports fell by a quarter. That is the intended effect of tariffs." (10:18)

• Toby Howell: "Southwest believes it had little choice but to press the flight attendant call button to try and beef up its bottom line." (05:29)

• Neal Freyman: "The stage is set for an absolute gold rush onto Greenland right now." (13:50)

• Neal Freyman: "The snow is so abundant. It's just this swirling swirl of climate factors..." (19:58)

This detailed summary encapsulates the multifaceted discussions from the Morning Brew Daily episode, offering listeners a thorough understanding of the critical issues shaping today's economic and geopolitical landscape.