What Trump Tariffs Mean for Prices & Fed Cuts Rates, but Mortgages Are Up?

Summary

Morning Brew Daily: What Trump Tariffs Mean for Prices & Fed Cuts Rates, but Mortgages Are Up?

Release Date: November 8, 2024

Hosts: Neal Freyman & Toby Howell
Podcast: Morning Brew Daily
Description: A daily talk show covering the latest news on business, the economy, and more, hosted by Neal Freyman and Toby Howell. Available on all podcasting platforms and YouTube.

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1. Global Incumbent Defeats Amidst Rising Inflation

Neal Freyman opens the discussion by highlighting a historic trend where all incumbent political parties across ten countries—including the UK, France, Japan, and the United States—suffered defeats in recent elections. He attributes this unprecedented outcome primarily to widespread inflation, which has significantly impacted voters' cost of living.

“Every governing party faced an election this year. All 10 from the UK to France to Japan to the United States lost vote share. It’s the first time this has ever happened.”
[00:42]

Toby Howell adds that while macroeconomic indicators might appear stable, the personal financial strain from inflation has driven voters to reject current leadership, emphasizing the disconnect between national economic health and individual financial well-being.

“Voters appear to have said my life has gotten way more expensive. People in charge, you’re fired.”
[01:25]

2. Federal Reserve Cuts Interest Rates Amid Rising Mortgage Rates

The hosts delve into the Federal Reserve's recent decision to cut interest rates for the second time this year, contrasting it with the unexpected rise in mortgage rates.

Neal Freyman explains that the Fed's rate cuts, including a quarter-point decrease following a half-point cut in September, signal confidence in controlling inflation and a focus on maintaining low unemployment. However, despite these monetary policies, the average 30-year fixed mortgage rate has surged by over half a percentage point to 6.97%.

“The Federal Reserve cut interest rates for the second time this year, but mortgage rates have risen more than half a percentage point to reach 6.97% this week.”
[05:00]

Toby Howell points out that this anomaly is perplexing because mortgage rates are typically expected to decrease with Fed rate cuts. He attributes the rise to the influence of the 10-year Treasury yield, which reflects long-term economic expectations and suggests continued economic strength, thus keeping mortgage rates high.

“Mortgage rates follow the 10-year yield and not the Fed’s rate cuts, indicating that investors believe the economy will continue to grow and possibly stoke more inflation in the long term.”
[06:28]

3. Jerome Powell and Donald Trump: A Tenuous Relationship

A significant portion of the episode is dedicated to exploring the strained relationship between Federal Reserve Chair Jerome Powell and former President Donald Trump. Toby Howell outlines how Trump, despite appointing Powell, became critical of him for not lowering interest rates swiftly enough, labeling him an enemy.

Neal Freyman shares a pivotal moment from a recent press conference where Powell firmly responded to a reporter's question about the president's power to fire him.

“Do you believe the president has the power to fire or demote you?”
Reporter: “Not permitted under the law.”
[04:59]

This exchange underscores the Fed's commitment to its independence, a principle established in 1951 to prevent political interference in monetary policy. However, with Trump poised to potentially reappoint or replace Powell in 2026, the future of the Fed's autonomy remains uncertain.

4. Potential Trump Tariffs and Their Global Impact

The discussion shifts to the implications of a possible Trump re-election, particularly focusing on his proposed tariffs and their potential to disrupt global trade.

Neal Freyman highlights Trump's pledge of up to 20% tariffs on all US imports and a staggering 60% tariff on goods from China. These measures, if implemented, would represent the highest tariffs in a century, aiming to protect domestic industries by making foreign products more expensive in the US market.

“Trump’s proposed tariffs would be the highest the US has seen in 100 years, fundamentally reshaping global trade.”
[10:08]

Toby Howell discusses the dual nature of these tariffs—as both actual duties and bargaining tools. Given the US economy's significant growth within the G7, other nations may use the threat of reduced access to the US market as leverage in negotiations, potentially preventing the full implementation of the tariffs.

“Tariffs could either be fully applied or serve as bargaining chips in trade negotiations, leveraging the US economy’s substantial growth.”
[11:25]

5. Impact on Key Economies: Europe and China

Germany and Europe are identified as primary losers if Trump's tariffs come to fruition. With Germany's automotive sector heavily reliant on US exports, a 20% tariff on cars would severely impact manufacturers like Volkswagen, leading to factory closures and economic downturns.

“Germany is seen as a loser in this new paradigm. Volkswagen is set to close factories in Germany for the first time.”
[12:03]

China, already grappling with economic challenges, would face exacerbated issues from the proposed tariffs. The anticipation of increased inflation due to stimulated demand from tariffs could lead the Federal Reserve to adjust its rate-cut strategy. To mitigate economic pain, China has initiated a $1.4 trillion stimulus package to refinance local government debt.

“China announced a $1.4 trillion program to refinance local government debt in preparation for economic challenges under a Trump presidency.”
[14:11]

6. Sector-Specific Consequences: Retail and Shipping

The episode examines how tariffs would unevenly affect sectors like retail and shipping. Retailers importing goods from China, such as American Eagle and Crocs, face increased costs either by absorbing them or passing them onto consumers, potentially leading to higher prices and reduced consumer spending.

Neal Freyman notes that while large retailers like Walmart and Amazon might withstand the cost increases due to their scale, smaller retailers could struggle, resulting in a market where big players gain further dominance.

“Smaller retailers exposed to China are at high risk, whereas giants like Walmart can absorb or pass on the costs, exacerbating market concentration.”
[16:05]

Toby Howell adds that shipping companies are also feeling the pressure. Domestic trucking stocks like JB Hunt and Schneider National have rallied due to increased imports, while ocean carriers like Maersk have seen declines as tariffs disrupt global supply chains.

“Domestic trucking companies are benefiting from increased imports, whereas ocean carriers are experiencing slumps due to disrupted supply routes.”
[20:07]

7. Outlook and Future Implications

The hosts conclude by emphasizing the potential for significant upheaval in the global economic order over the next four years if Trump's tariffs are implemented. Countries and companies must navigate these changes strategically, with some regions like Brazil possibly benefiting from a shift in trade dynamics away from China.

“The next four years could see dramatic reshuffling in the global economy, with nations like Brazil potentially gaining from decreased reliance on China.”
[14:57]

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Notable Quotes:

• “We don’t guess, we don’t speculate, we don’t assume about which campaign plans will be made into reality in the near term.”
  — Jerome Powell, responding to questions about presidential influence on Fed decisions
  [04:59]

• “Mortgage rates follow the 10-year yield and not the Fed’s rate cuts, indicating that investors believe the economy will continue to grow and possibly stoke more inflation in the long term.”
  — Toby Howell
  [06:28]

• “Trump’s proposed tariffs would be the highest the US has seen in 100 years, fundamentally reshaping global trade.”
  — Neal Freyman
  [10:08]

---

Conclusion:

In this episode of Morning Brew Daily, Neal Freyman and Toby Howell navigate the complex interplay between political shifts, economic policies, and their far-reaching consequences. From global election trends driven by inflation to the intricate dynamics between the Federal Reserve and potential Trump tariffs, the hosts provide a comprehensive analysis of the current economic landscape. The unexpected rise in mortgage rates despite Fed rate cuts underscores the unpredictable nature of the economy, while the looming specter of high tariffs threatens to redefine international trade relations. As the world stands on the brink of significant economic transformations, listeners are equipped with insightful perspectives to understand and anticipate the future trajectory of global markets.

Transcript

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[Neal Freyman]

Good morning Brew Daily Show. I'm Neal Freyman.

[Toby Howell]

And I'm Toby Howell.

[Neal Freyman]

Today Jerome Powell cut interest rates for the second so why are mortgage rates going up?

[Toby Howell]

It's Friday, November 8th. Let's ride.

[Neal Freyman]

Good morning and I hope you all have a better Friday than incumbent political parties this year because they've seen a historic wave of defeats. Here's a wild stat I saw in the Financial Times yesterday that would be enshrined in the Neil's Numbers hall of Fame after the Democrats lost on Tuesday. Every governing party face an election this year. All 10 from the UK to France to Japan to the United States lost. Vote share it's the first time this has ever happened. Truly unprecedented. And while there are absolutely local factors at play, the one thing every country experienced over the past couple of years was inflation. So voters appear to have said my life has gotten way more expensive. People in charge, you're fired.

[Toby Howell]

I mean, it speaks to the viability of just framing yourself as an agent of change when you are going to the polls. And also the odd reality where maybe the macro economic indicators were pretty positive for a lot of countries but on a more individual level people were feeling that pinch of inflation. But Neil, my main takeaway here is I'm really not liking this stat if I am a Chiefs fan or I'm a Boston Celtics fan. Because if the incumbents are losing, that means it could be a rough time for those two powerhouses. Now a word from our sponsor, Yahoo Finance. Neal One of the best parts parts of Yahoo Finance is the buffet of information it provides you.

[Neal Freyman]

When you open up its homepage you are greeted with all the headlines from the news that might affect your portfolio. But you also get quick snapshots of the market like top gainers and losers from the day, top economic events that should be on your radar and how the international markets are doing.

[Toby Howell]

It is this cornucopia of information but not so overwhelming that you miss the important stuff. It's really helpful too for what we do bringing this pod to you guys and I think it will be just as helpful for you and your daily routines.

[Neal Freyman]

But don't take our word for it you can see it for yourself by heading to Yahoo. Finance.com go see our purple prints in action at Yahoo. Finance.com as if this week didn't bring enough hugely consequential events, the Federal Reserve cut interest rates yesterday. It was, as expected, a traditional quarter point decrease, which was smaller than the unusually large half point cut the Fed announced in September. By cutting rates again, the US Central bank is signaling it's satisfied that inflation is coming back to normal levels and is focused more on the job market. Lowering borrowing costs for consumers and businesses, which is what a rate cut does. Hopes to keep unemployment at its currently low levels. So, two rate cuts in the books, but an Agatha Christie level mystery about what lies ahead. The reelection of Donald Trump promises to massively shake up the path of the U.S. economy. And so to the Fed strategy, which must respond to those changes for now. Chair Jerome Powell said it was too early to tell what Trump's economic policies would mean for the Fed because they haven't been implemented yet. At a press conference, Powell told reporters, we don't guess, we don't speculate, we don't assume about which campaign plans will be made into reality in the near term. He said, the election will have no effects on our policy decisions.

[Toby Howell]

Yeah, financial policymakers try to view elections not as these big, huge events, but more as just data points that allow them to feed into their decision making but won't change it. But we do have to talk about the relationship between Trump and Powell, which actually stretches back to Trump's first term. Trump appointed Jerome Powell, but then quickly turned on him as he wasn't doing exactly what he wanted. Didn't lower interest rates quick enough as Trump wanted at the time? Trump has called him an enemy and criticized him in the past. What has frustrated Trump about Powell is that he's pretty powerless over him. The president cannot, on its, on their own, bring down rates. The Fed was granted independence from Congress back in 1951 so that Central bankers kind of do their thing and not have the influence of a politician telling them which way to conduct their rate cuts. And so that is why there's going to be this rocky relationship in the question of Fed. Independence has been a big issue in this Trump presidency. Yeah.

[Neal Freyman]

And a reporter actually asked Powell yesterday whether he believed the president could remove him. And here's the clip.

[Reporter]

Do you believe the president has the power to fire or demote you? And has the Fed determine the legality of a president demoting at will any of the other governors with leadership positions not permitted under the law? Not what? Not permitted under the law.

[Neal Freyman]

That was a mic drop.

[Toby Howell]

It was actually the funniest moment. Rarely do we see these moments from these Fed press conferences go viral, but that one absolutely went viral. The line between the White House and the Fed could become blurry because Trump has the opportunity to appoint a fed chair in 2026. And if he does oust Jerome Powell, which it is looking likely that he might, that line might be a little blurrier because he might put someone in there who he thinks he could have more control over. So Powell is saying right now that no, I cannot be ousted under the current law. He was very explicit about that. But potentially when his term ends in 2026, then we could see a more lenient Fed towards Trump's will.

[Neal Freyman]

Meanwhile, Trump's policies are set to shake up the Fed's moves and its potential path forward for rate cuts. Because Trump's economic policies, if they are implemented, are expected to raise inflation. The tariffs, the tax cuts, those are all going to stimulate demand, which could raise prices. In a recent report, the bank Nomura Forecast inflation would be 75 basis points higher in 2025 under a Trump presidency. That could absolutely shake up the path of Fed rate cuts. The expectation is that under a Trump presidency there would be fewer rate cuts going forward because that would. Because when you lower rates, you stoke inflation, essentially. And so if there's already going to be inflation stoked, then the Fed might pause those rate cuts and lower them at a more gradual pace than they.

[Toby Howell]

Would otherwise, which is such a bummer because right now the Fed's proof preferred inflation member dropped to 2.1% last month. That is just shy of the Fed's 2% goal. So the central bank is trying to ease off the brakes that it has been applying to the economy over once inflation hit that 40 year high. So the road did just get a little bit bumpier ahead. Maybe that the rate cut kind of cadence that we were all expecting is going to be a little different. Moving on. So even though the federal funds rate is falling, would be. Homebuyers are not yet feeling the effects. The central bank lowered its benchmark rate by 25 points, as we just discussed, on top of its 50 point cut in September. And yet the average rate on a 30 year fixed mortgage has gone up since that first cut. It rose more than half a percentage point to reach 6.97% this week, according to data from Freddie Mac release yesterday. And it might keep on climbing higher thanks to a recent Trump inspired rise in the 10 year treasury yield Even though the Fed has its scissors out and is dutifully cutting away to try to push down borrowing costs, mortgage rates are unfortunately outside its control. They are more heavily influenced by treasury yields, which themselves are more influenced by what the general outlook for the economy is. And since the economy looks like it will continue to be strong yields and therefore mortgage rates remain painfully high for homebuyers. Neil, throw a Trump presidency into the mix where his tariffs and tax cuts are expected to reintroduce inflation and put even more pressure on the 10 year. You have a recipe for gravity defying mortgage rates.

[Neal Freyman]

Yeah, this is a shock to a lot of us because we thought, I thought, hey, the Fed's cutting rates, that's supposed to bring down borrowing costs. The mortgage rates have been so high for so long, freezing over the housing market. Finally there's going to be some relief. People will be able to refinance and get those mortgages down around 5% and it's just gone in the complete opposite direction and at an extremely large magnitude as well. In the last five weeks, the rate has risen. The average 30 year fixed rate mortgage has risen 67 basis points, which is the largest increase in two years. So not only has it just stayed level or gone up, it's gone up in a big way and that is going to continue to give problems to people who want to buy houses or refinance or move.

[Toby Howell]

30 year fixed mortgage rates were actually following falling since May. So for a while it looks like the Fed's rate cuts were kind of filtering through the market. But then that trend started reversing in early October, right around the time where prediction markets started indicating that Trump was going to have a great, a good chance of winning the election. So we were seeing a little bit of relief, but then it jumped right back up. Rates are up from right around 4% where they hovered for pretty much a decade going into the pandemic. But that 67 basis point rise is been extremely painful. In the last five weeks. It was a total reversal from what you expected and what maybe the Fed was hoping for.

[Neal Freyman]

Yeah, it's an interesting sign that the mortgage rates follow the 10 year yield and not the Fed's rate cuts or the Fed's federal funds rate, which the Fed controls. That is a short term rate. The 10 year, the 10 year yield is 10 years. It's a long, longer term view of the economy and this is a sign that investors think that the economy is going to hit the gas pedal and cause a little more inflation on over the long term, what One thing that.

[Toby Howell]

You have to look at too is if mortgage applications are falling or rising as well, because mortgage rates do filter down to if people are buying houses or not. And mortgage applications have fallen for six straight weeks now. So you call it a frozen housing market. It did Reise over. We're feeling like another mini ice age right now after it looked like things were thawing for just a little bit.

[Neal Freyman]

Yeah. Home sales are on track for their worst year since 1995. Since Wednesday, we've talked a lot about how Trump's reelection will impact the US economy. But unlike Vegas, what happens in America doesn't stay in America. And his victory will have is already having massive consequences for the global economy. The top concern for other countries, both allies and foes alike, is Trump's proposed tariffs. He's pledged up to 20% tariffs on every single import coming into the United States and 60% from everything coming in from China if enacted, and that's a big if. They would be the highest tariffs the US has had in 100 years and fundamentally reshape global trade in a way we've never seen before. Analysts are already projecting a hit to other countries economies should the tariffs get implemented, which is kind of the point. The US puts up trade barriers to protect domestic industries at the expense of foreign companies. Your products become more expensive in the market, ours become more attractive, is the theory. Two regions to watch are Europe and China, two of the US's largest trading partners. Europe exported one fifth of its total goods to America last year, While China exported $500 billion in goods to the US, about 15% of the value of all of its exports. Toby, the next four years could be one of dramatic upheaval for the world economic order.

[Toby Howell]

One thing to think about too. Is our tariffs going to be this real thing that are actually applied to blanket across Europe, across China, across Mexico, or is it going to be more of a bargaining tool? Because remember, right now, the US economy is a heck of a bargaining tool. It is the only place in the world right now, especially among G7 peers, that is growing at a sizable rate right now. So if you were confronted with the possibility of maybe losing access to parts of the US economy, that is a huge bargaining tool because of just how big of a growth engine we are right now. So think of tariffs in two ways. One, they could actually happen or they might just be something that are brought to the table as a bargaining chip.

[Neal Freyman]

Right? So let's run down maybe some countries and regions and talk about whether they are a winner or a potential Loser in the new world order, should these tariffs come to fruition, start in Germany. Germany is seen as a loser in this new paradigm. I mean, cars are Germany's single largest export. The US Is the country's largest export market. So if there are tariffs on cars, and we know German automakers are already feeling the pinch, they're already hurting. Volkswagen is set to close factories in Germany for the first time. So it seems Germany and Europe in general could, could take it an absolute hit if these tariffs come to pass. Goldman Sachs. Already after the election, Goldman Sachs was very quick to downgrade its GDP projection for all the 20 countries that use the euro. They're saying it's going to expand at 0.8% next year, which was down from 1.1% forecast previously.

[Toby Howell]

Yeah, Trump has come out and railed against the EU's 158 billion euro trade surplus with the U.S. he's saying, especially last out at Germany, like you said, for selling it cars while not buying any in return. And then another thing that could make Europe a loser is that they could suffer this kind of added burden of increased defense costs if Trump kind of reduces support for Naito, which is another thing that he has said he'd do.

[Neal Freyman]

And then another country that absolutely is in the crosshairs is China. China was hit with the bulk of tariffs during Trump's last term. It was caught a little bit flat footed. But right now the Chinese economy is hurting. The only area that is booming or growing for them is those exports. It's making, you know, all these goods, especially clean energy products in its factories and shipping them abroad. The domestic consumption people buying stuff in there is down. So China will likely have to flood its economy with stimulus if these tariffs happen. And it already is doing that. I mean, just overnight I woke up to the headline that China announced a $1.4 trillion program to refinance local government debt, which is a huge stimulus in preparation for some of the economic pain that might happen in a Trump presidency.

[Toby Howell]

We would see a bit of a reshuffling too, of where Chinese goods are ending up. You probably would see more of them end up in Europe, actually, because if tariffs are applied to China, then less are going towards the United States. Another potential winner from that reshuffling is Brazil, because Brazil already has seen greater trade with China. If you go back to the first Trump administration, we saw that China replaced all of its US Soybean imports with Brazilian soybean imports. So that is something that will happen. Like this is a puzzle piece. Global trade is global. So there are places that if the US isn't trading with you anymore, maybe you go to Brazil or Mexico or another place. So it's not just blanket winners and losers. There will be just kind of a reordering of the world economy. Up next, it is Stock of the Week Dog of the Week time.

[Neal Freyman]

It's almost time to break out the lights, wreaths and jingling bells.

[Toby Howell]

And with Sonos, you'll be able to hear the crystal clear, highest quality sound for all the festive music and movies this holiday season.

[Neal Freyman]

Sonos is the perfect gif for both yourself and your family and friends. Whether you're in charge of the holiday party or in search of a gift that will really impress the in laws, Sonos has got you covered.

[Toby Howell]

Sonos products look just as beautiful as they sound and you can mix and match their products to build your very own sound system.

[Neal Freyman]

Deck your haul with a Sonos smart speaker and enjoy the cinematic sound right from your couch.

[Toby Howell]

Sonos has great gifts for everyone on your list. Visit sonos.com brew to wrap up your holiday shopping that is sonos.com/brew what does.

[Neal Freyman]

The growth of every business pretty much.

[Toby Howell]

Depend on besides great snacks in the break room? It's got to be innovation.

[Neal Freyman]

Exactly. And innovation relies on business processes that are clear and quick.

[Toby Howell]

Most CEOs understand the importance of innovation, but in truth a majority feel their teams could be better at it with more than eight out of nine innovation projects experiencing stalls and inefficiencies.

[Neal Freyman]

Luckily, that's where Miro's Innovation workplace comes in. It comes loaded with AI enabled tools to help teams get from idea to output faster.

[Toby Howell]

Yep, we're talking text to diagram functions, AI enabled intelligence, widgets, two way sync tech and design capabilities to name a few.

[Neal Freyman]

Whether you work in innovation, product design, engineering, ux, agile or it, bring your teams to Miro's revolutionary Innovation Workspace to be faster. From idea to outcome. Go to miro.com to find out how. That's M I R O.com.

[Toby Howell]

It is stock of the Week Dog of the week time where Neal and I pick one stock from the week's news that promptly reset their oven clocks for daylight savings time and one stock that is just waiting for next year for them to be correct again. Neil I won the pre show game of who can run a marathon faster.

[Neal Freyman]

So I am up or just run a marathon period.

[Toby Howell]

A faster period is faster and my stock of the week is private prison companies. Sifting through some of the market reactions, there were plenty of winners in the Best post election stock rally we've seen in decades. But today we're zeroing in on private prison stocks, which got a huge boost in the wake of Trump's win. GEO Group, a real estate investment trust that specializes in the ownership and management of correctional facilities, is up over 50% this week. And CoreCivic, one of the largest private prison operators, is also up nearly 60%. Why the big jumps? Well, a Trump presidency is likely to increase border security and detain more migrants crossing into the country illegally, which would lead to a jump in demand for detention facilities. Plus, a Republican controlled Congress is likely to push for more funding for Immigration and Customs Enforcement detention centers, leading to more opportunities for a company like GEO and Core Civic. Neal, I would imagine a lot of people don't think about this industry much, but it does stand to benefit from Trump's immigration policies.

[Neal Freyman]

Yeah, one of his core promises on the campaign trail, one that he could enact from day one, is the largest deportation in American history. There are 13 million immigrants in the US illegally, and deporting them would be logistically very difficult and cost a lot of money. So if there is more of a budget set aside for doing this, which Trump and the Republican Congress would likely do, that is going to flow to these places that have detention centers. And the American Immigration Council said that the cost of deporting these immigrants over a little more than a decade would cost nearly $1 trillion.

[Toby Howell]

And so much of that money is flowing into the private sector because Jio did this presentation that said private companies provide 90% of the beds for ice processing. Geo itself provides 42% of those private sector beds. So this is definitely a boon for the private prison sector is not government operated facilities. They do rely on these private operators.

[Neal Freyman]

You know, I got to admit, it wasn't easy to find a dog this week. I can see why you foisted it on me. It was just incredible week for the stock market. But I think I found a group of companies that didn't go up and to the right like everyone else. Retailers like American Eagle, Crocs and five Below, whose shares all fell modestly this week. And that's because of the threat of tariffs. There's that word again. American retailers that import their goods from China are expected to take a big hit from those tariffs because they're going to be the ones paying for them. So the choice is either eat those higher costs and dent your profits or pass along those costs to the consumer. And given those options, they're probably going to hike prices. And a study on Trump's tariffs released earlier this week, the National Retail Federation projected that they'd lead to dramatic double digit percentage price increases in almost all six of the retail categories the group analyzes, which is apparel, footwear, furniture, household appliances, travel goods and toys. Higher prices mean shoppers already fed up with inflation are going to stay home. The NRF estimated that Americans would lose up to $78 billion in annual spending power due to the tariffs.

[Toby Howell]

Yeah, it's going to hurt consumers, it's going to hurt retailers. And then another thing I was looking at at just the downstream effects is how are shipping companies and in trucking companies actually faring as well? Because a lot of retailers are frontloading their imports right now. So you actually did see a jump in trucking stocks, domestic trucking stocks like JB Hunt, Schneider national, they were in rally mode on Wednesday. One part of this of the supply chain that we saw falling this week was ocean carriers. Maersk got kind of had this big slump because a lot of people think that these tariffs are going to kind of clog up the global supply chain routes. So it was interesting to see how domestic trucking companies were doing well because a lot of these importers are, a lot of these retailers are importing a lot of goods. But on a wider scale, these shipping companies look like they're feeling a little bit of pinched, as are going to feel some pinch going forward with even.

[Neal Freyman]

Within the retail industry, there are going to be winners and losers. Some retailers have gone through this before. There were tariffs on Chinese goods that are still in place that were implemented by Trump in 2018. And what they did was what we talked about earlier in the show was they reshuffled their supply chains away from China. So Steve Madden yesterday, the fashion company said that it was moving 45% of its production out of China to other countries in anticipation for these tariffs. So if you are a company that is highly exposed to China, and that is why I called out five below, Crocs, Skechers, American Eagle, that's what bank of America highlighted. Those as particular retailers that have an especially high risk because they are exposed to China compared to other retailers that have less of an exposure to China, then you're going to start see some winners and losers. And there's also the question of scale. Walmart and Amazon are probably going to be okay because they can eat those profits they're big enough to hit to accept that profit hit, whereas a smaller retailer might not be able to have to pass along those costs to consumers, raise prices, people buy less from you they go back to Walmart and Amazon. So it could lead to a, you know, rich getting richer kind of situation.

[Toby Howell]

Yeah. Analysts have said that companies do try to employ this range of strategies to try to mitigate the effects that these import taxes will have. But unfortunately, the general consensus was that there are no great tariff mitigation strategies. The challenge is to find one that is least bad. So I think that is kind of the approach a lot of these companies are taking to these potential tariffs.

[Neal Freyman]

Think about a dollar store. Those are, those are some of the two worst stocks yesterday. Dollar Tree, Dollar General. You sell something, that's your whole value proposition that you sell something for a dollar. I think it's A$25 now. And you just, you can't raise prices. So your business in your profitability is going to get a hit from tariffs. All right, let's sprint to the finish this Friday with a sweep of some more headlines. Have you ever taken medicine to help out with your cold and found it doesn't work? Well, turns out it actually doesn't work. Yesterday, the FDA proposed removing a common ingredient in over the counter cold medicines after a review found it was not effective. The ingredient, phenylephrine, has long been a staple ingredient of products like Tylenol, Mucinex and Benadryl. But when taken in liquid or pill form, it doesn't do anything for nasal congestion.

[Toby Howell]

Yeah, this is making people who constantly have a stuffy nose feel very justified right now. So the history of phenylphrine is very interesting because it got FDA approval back in the 1970s, but it really jumped in popularity in 2005 because this legislation moved a similar decongestant pseudo phedrine, which in large quantities, if you've seen Breaking Bad, people know that it can make methamphetamines that was removed from shell. So then all of a sudden phenylephrine was kind of thrust into the spotlight. Even though for a long time scientists have kind of said we're not really sure if this works. It now looks like finally FDA got its ducks in a row. And so, yeah, if you, if your nose has been stuffy and isn't going away now you know why Chat CBT might be dropping the GPT soon. OpenAI founder Sam Altman tweeted out a link this week that simply reads chat.com that redirects to its company's chat bot chat.com. chat.com is actually one of the oldest domains on the Internet. Registered all the way back in 1996, it is also one of the most expensive. HubSpot's co founder, shout out HubSpot for sponsoring my marathon, actually acquired chat.com for 15 and a half million dollars last year, making it one of the top two publicly reported domain sales of all time. And he confirmed that he sold it to Open Air earlier this year for a price greater than that. Neal, do we think spending over $15 million on a domain is worth it?

[Neal Freyman]

Well, let's remember that OpenAI just raised $6.6 billion. I can't do the math in my head, but $15 million out of 6.6 billion is probably not going to register on the balance sheet. But they didn't even pay cash. It seems the HubSpot guy said that they gave over shares equity in the company in exchange for chat.com instead of actually just writing a check for it. So I don't know, would you have, would you rather have $15 million in the bank or $50 million of equity in open AI?

[Toby Howell]

I have equity in OpenAI for sure. I would not spend either of that, the equity or the 50 million on chat.com though. I don't know. Chatgpt.com is a plenty fine domain name.

[Neal Freyman]

Yesterday, police urged residents of Yemassee, South Carolina to lock their doors and windows after dozens of monkeys escaped from a medical facility. Wednesday night, 43 Reese's Macaque Monkeys escaped from the facility run by the company Alpha Genesis when a new employee failed to fully shut an enclosure. When one bolted out the door, the others followed follow the leader style. The police chief said the monkeys, all young females, did not pose any danger or health risks and that employees, quote, have eyes on the primates and are working to entice them with food. That work on me.

[Toby Howell]

It would work. Authorities have set up these traps. They're using thermal energy imaging to try to locate these monkeys. I think this is the start to Planet of the Apes, at least the James Franco version. Alpha Genesis also is not the first time this has happened to them. Similar incidents have occurred back in 2024, in 2016. These monkeys are just extremely smart and extremely able to escape. And so now we got a lot of them running around South Carolina. Breaking news, Rachel Gunn, AKA Ray Gunn, AKA the Australian breakdancer who danced so badly in the Olympics that she instantly turned into a meme, has retired from breaking. The scrutiny and backlash she received after her unique routine went viral ultimately made it difficult for her to approach future battles, leading to her decision to hang up her tracksuit and retire from competing. Neal, A bit of a sad ending for Ray Gunn to go out like this.

[Neal Freyman]

It was, but she was a star long enough to become a Halloween costume. I saw a lot of ray guns out there, so she can always hang her hat on that. Well, that is a wrap on our shows for the week. What a week it was. Thanks as always for starting your mornings with us. Have a great Friday and an even, even better weekend. For any questions, comments or feedback, send an email to Morning Brew daily at Morning Broadcom. And if this podcast has helped you get a better understanding of the election results this week, don't keep it to yourself. Share it with a friend, family member or coworker who could also benefit. If you're drawing a blank on that, Toby's here with his daily recommendation.

[Toby Howell]

I want you to share the podcast with someone who thought this was a fast week. We had a debate within the MBD crew. Neil and I thought this week flew by, but other people in the office thought otherwise. So share it with the Fast Week people, but also ask around what people thought. Maybe email us Fast week or Slow week?

[Neal Freyman]

Let's roll the credits. Emily Milian is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Eugenia Ogu is our technical director. Billy Menino is on audio, hair and makeup is coming out of retirement. Ray Gun, are you next? Devin Emery is our chief Content officer, and our show is a production of Morning Birth.

[Toby Howell]

Great show today, Neil. I wish you all well.