Morning Brew Daily: Trump's Tariff Reveal Escalates Trade War & Tesla Sales Drop 13%

Release Date: April 3, 2025

In this episode of Morning Brew Daily, hosts Neal Freyman and Toby Howell delve into significant developments impacting the global economy and major corporations. The episode primarily focuses on President Trump's recent announcement of sweeping tariffs, the consequential escalation of the trade war, and Tesla's notable decline in sales. Additionally, the hosts explore the unveiling of Nintendo's new Switch 2 console and touch upon various other intriguing topics in their "Numbers" segment.

1. President Trump's Tariff Announcement and Escalation of the Trade War

The episode opens with a significant update on the global economic landscape following President Trump's announcement of substantial tariffs on Liberation Day. These tariffs mark a severe escalation in the ongoing trade war, affecting numerous countries and industries.

Key Details:

• Tariff Rates and Affected Countries:
  • Lesotho: 50% tariff
  • Vietnam: 46% tariff
  • Japan: 24% tariff
  • South Korea: 25% tariff
  • European Union (EU): 20% tariff
  • China: 54% tariff, in addition to the existing 20%

Neal Freyman explains the methodology behind these tariffs:

"Lesotho is being hit with a 50% tariff under Trump's trade plan that is the highest of any country... because of the nation's trade deficit with us divided by the nation's exports to us, which seems to be a little bit imprecise." [05:02]

Impact on the Economy:

• Market Reactions:

  • Dow futures plunged over 1,000 points.
  • S&P 500 fell nearly 3%.
  • NASDAQ declined by more than 3%.

• Economic Predictions:

  • JP Morgan analysts forecast that the tariffs could generate nearly $400 billion in revenue, representing the largest tax increase since 1968.
  • Consumer prices are expected to rise by 1 to 1.5% this year.
  • Potential for the economy to tip into a recession due to reduced purchasing power and declining consumer spending.

"These tariffs raised just under $400 billion in revenue... This impact alone could take the economy perilously close to slipping into a recession." [08:53]

2. Impact on Countries and Businesses

The hosts dissect how specific countries and their industries are being affected by the new tariffs.

Lesotho:

• Economic Strain:
  • GDP of $2.4 billion.
  • Half of the population lives on less than $4 a day.
  • Exports to the U.S. amounted to $236 million against imports of $7 million, resulting in a significant trade deficit.

Vietnam:

• Business Consequences:
  • Tariffs have severely impacted companies like Nike (-8% stock), Deckers (-10% stock), and Restoration Hardware (-26% stock).
  • Vietnam previously benefited from Trump's initial trade war on China by becoming a hub for manufacturers seeking lower tariffs.

"Vietnam was a huge winner of Trump's first trade war on China... now they're getting hit with a 46% tariff." [06:35]

Uncertainty for Businesses:

• With the unpredictability surrounding tariffs, companies are hesitant to invest in new manufacturing locations, leading to decreased demand and potential economic downturns.

"The uncertainty that this injects is one of the reasons why economists love to push back on tariffs." [07:57]

3. Tesla's Sales Decline and Brand Crisis

A significant portion of the episode is dedicated to Tesla's disappointing performance in the first quarter.

Sales Performance:

• Q1 Deliveries: Just over 336,000 vehicles, marking a 13% decline year-over-year—the sharpest drop since the pandemic.
• Comparative Analysis:
  • BYD: 60% annual sales increase.
  • General Motors (GM): 17% sales growth.

Stock Market Impact:

• Tesla's stock plummeted following the disappointing sales figures and political tensions with President Trump.

"Tesla delivered just over 336,000 vehicles in Q1, good for a 13% decline from the previous year... it's our brand crisis at Tesla right now." [10:06]

Underlying Issues:

• Brand Damage:

  • Protests and violent acts against Tesla facilities worldwide have severely tarnished the company's reputation.
  • Analysts estimate Tesla lost approximately 80,000 potential deliveries due to brand damage.

• Production Challenges:

  • Delays in launching an affordable Tesla model and the promised robotaxi service.
  • An aging vehicle lineup and slow adaptation to autonomous technology.

Potential Turnarounds:

• Upcoming Announcements:
  • Introduction of a more affordable Tesla model.
  • Launch of the robotaxi service in Austin.

"One is the affordable car. The other is this robotaxi service that Tesla has said it will launch in June in its backyard of Austin." [13:13]

4. Nintendo's Switch 2 Unveiling

Shifting focus to the gaming industry, the hosts discuss Nintendo's latest release—the Switch 2 console.

Product Details:

• Launch Date: Early June
• Price: $450 (a $150 increase from the original Switch)
• New Features:
  • Game chat function with a camera.
  • Enhanced hardware with a bigger screen and increased storage.

"The Switch 2 will launch in early June for $450 bucks, a $150 jump from the first generation model... a camera function that shows your face when you spew those expletives." [14:06]

Market Reception:

• Analysts' Optimism:
  • Prediction of selling 14.7 million units in the first year, surpassing the original Switch's 13 million sales.
  • Success attributed to the inclusion of the new Mario Kart game.

"Nintendo will sell 14.7 million of the new Switch 2 consoles this year, which would easily top the sales of the original Switch for its first year." [15:37]

Challenges Ahead:

• Competitive Landscape:
  • Increased tariffs on Chinese goods affecting production costs.
  • Rise of mobile gaming presenting stiff competition.
• Design Risks:
  • Balancing innovation with consumer expectations to avoid the pitfalls experienced with previous Nintendo consoles like the Wii U.

"There are a lot more challenges this time around though... a lot of competition from mobile games now than when the Switch originally launched." [16:29]

5. Numbers Segment: Fascinating Insights

In the "Numbers" segment, Neal shares intriguing statistics that shed light on consumer behavior and technological advancements.

a. Chipotle's Avocado Sourcing:

• Market Share: Chipotle purchases 5% of all avocados consumed in the U.S., amounting to 143 million pounds annually.
• Diversification Efforts:
  • Reduced reliance on Mexican avocados from 85% to 50% by sourcing from Peru, the Dominican Republic, Brazil, Guatemala, and Colombia.
  • Challenges include maintaining quality and consistency across different avocado species.

"Chipotle has reduced its reliance on Mexican avocados to just 50% from 85%." [20:38]

b. Oshi Katsu in Japan:

• Cultural Phenomenon: 11% of Japan's population engages in "Oshi Katsu," supporting their favorite celebrities, mascots, anime characters, and virtual YouTubers.
• Economic Impact:
  • Average annual spending of $1,700 per participant.
  • Total influx of approximately $23 billion into Japan's economy.

"Oshi Katsu is a force in the Japanese economy... it's an economic force that is here to stay." [21:41]

c. Future Circular Collider at CERN:

• Project Overview:
  • A new particle collider designed to replace the current Large Hadron Collider.
  • Specifications include a 56.5-mile loop beneath Lake Geneva.
• Financial and Scientific Concerns:
  • Estimated cost of $17 billion with an operational timeline set for 2046.
  • Criticism from the scientific community regarding the project's feasibility and cost-effectiveness.

"The future circular collider will cost $17 billion to construct, and even if funding is secured, they won't start smashing atoms until 2046." [24:06]

6. Final Headlines

The episode concludes with a roundup of additional headlines impacting various industries.

a. Amazon's Bid for TikTok:

• Context: Amidst TikTok's looming deadline to divest from Chinese ownership, Amazon has made a last-minute acquisition offer.
• Implications: While TikTok holds significant sway in social commerce, Amazon's bid is not being taken seriously, possibly serving as a strategic maneuver amidst the broader trade negotiations.

"Amazon's interest in TikTok makes a lot of sense... but sources indicate that people on TikTok's side are not really taking Amazon's bid seriously." [26:08]

b. Meta's Partnership with UFC:

• Deal Details: Meta (formerly Facebook) has entered a multi-year partnership to become the official fan technology partner of the UFC.
• Integration: Includes Meta branding across UFC events and the incorporation of Meta products into UFC's digital platforms.

"Zuckerberg, an avid MMA fan, said, 'I love this sport and I'm looking forward to working with UFC to let fans experience it in new ways.'" [27:12]

c. Coastal Carolina Football's Concession Deal:

• Promotion: Introduction of a "Kickoff Meal Deal" allowing ticket holders to obtain up to four concession items per visit for free.
• Economic Impact: Estimated to forgo approximately $250,000 per game in concessions revenue, aiming to boost attendance and long-term fan loyalty.

"This sounds like the best football game ever to go to." [29:50]

Conclusion

Today's episode of Morning Brew Daily highlights the far-reaching consequences of President Trump's tariff announcements on the global economy and specific corporations like Tesla. The escalating trade war introduces significant uncertainty for businesses and poses risks of economic downturns. Concurrently, Tesla grapples with a stark decline in sales amidst brand crises and political tensions. On a brighter note, Nintendo's Switch 2 launch holds promise, albeit with its own set of challenges. The "Numbers" segment provides insightful statistics on consumer behavior and technological projects shaping the future. Finally, the episode wraps up with intriguing headlines that underscore the dynamic interplay between technology, business, and cultural phenomena.

For more detailed discussions and updates, tune in to Morning Brew Daily on your preferred podcast platform or YouTube.