Morning Brew Daily
Trump Bumps China Tariffs to 104% & People Are Panic-Buying iPhones
Wed, 09 Apr 2025
Episode 557: Neal and Toby do another round of trade war updates with President Trump committing to impose another 50% tariff on Chinese goods, bringing the total to 104%. Then, in the midst of the trade war, shoppers are rushing to Apple stores to get their iPhones fearing prices are about to skyrocket. Also, the IRS has been the target of cuts by the federal government, which may bring low audit rates even lower. Meanwhile, retail chains are slowly coming back to SF’s downtown, breathing new life and hope for the once-sprawling district. 00:00 - Worst baseball game ever? 2:40 - Tariffs reach new heights 8:00 - Panic-buying iPhones 12:15 - IRS audits hit new low 15:45 - SF back? 19:30 - Sprint Finish! Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Checkout TaxAct for more! Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What was the 'worst baseball game ever'?
Then those 104% tariffs have Americans panic buying iPhones to try and beat the price hikes. It's Wednesday, April 9th. Let's ride.
Obviously a huge day for the global economy. But before we get to that, let's head to Humboldt Teaneck, New Jersey, where two teams staged what has been called the worst baseball game in history. Lehman College and Yeshiva University, both D3 schools, met after having lost a combined 141 games in a row, 42 straight losses for Lehman and 100 games for Yeshiva.
So when they met, someone was going to snap an epic losing streak. It certainly wasn't pretty to watch, but Lehman College won 7-6 in extra innings, their first victory since 2023. But all was not lost for Yeshiva. These two teams actually played a doubleheader, and Yeshiva beat Lehman in the second game, winning for the first time since 2022. So a fairytale ending.
Both teams got their first dub in years.
In the worst baseball game of all time, both teams came out winners. Still though, Yeshiva's 100 straight losses are not even close to the worst losing streak of all time. That belongs to the Caltech Beavers. From 2003 to 2013, lost 228 consecutive games. I'm sure they were busy designing some world-changing technology so they get a pass.
Technically, though, Neil, the NCAA does not keep a record of the most combined losses by two teams meeting in any one game. But an NCAA spokesperson, when told of the upcoming tilt between Yeshiva and Lehman, said, wow, those are some big numbers. Speaking of numbers, let's hear a word from our sponsor, TaxAct. If you're a sole proprietor business owner, here's a question.
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Chapter 2: Why did Trump increase tariffs on China to 104%?
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Visit TaxAct.com and file before April 15th. Let TaxAct help you find what's yours. You are waking up to a whole new world, and it's anything but a magic carpet ride. Just after midnight, President Trump's so-called reciprocal tariffs went into effect against 86 countries, including more than 104% tariffs on China, the world's second-largest economy.
This brings America's average effective tariff rate well north of 20%, the highest in more than 100 years. Trump and his economic advisors argue a trade war is necessary to level scores with bad actors and bring back manufacturing jobs to the U.S., and this is a once-in-a-lifetime opportunity to do that. At a Senate hearing yesterday, Trump's top trade official, Jameson Greer, said the U.S.
economy was facing a moment of drastic, overdue change. Wall Street leaders have forcefully disagreed, criticizing the size of the tariffs and the bizarre way they were calculated. Banks like JPMorgan are now predicting a recession. and financial markets have lost trillions in value in the past week alone.
Even as stocks spent most of the yesterday in the green, they tanked into the close, ending deep into negative territory. The S&P 500 is now at its lowest point in more than a year. So a new economic order has arrived, closing an era of free trade and opening a chapter where the U.S., the world's largest economy, has built high walls around itself.
The implications are enormous and will affect an untold number of companies and billions of people around the planet. For just one example, I'm going to cite Mr. Beast of all people. Yesterday, he posted on X that because of the tariffs, it will now be cheaper to make chocolate bars for his Feastables brand, not in America, because other countries don't have a high tariff on his goods.
He said, we'll figure it out. I feel for small businesses, though, could really be a nail in the coffin for them.
Last year, trade between China and the U.S. reached $585 billion. Together, these two countries represent roughly 43% of global GDP. So it's just a massive, massive problem. portion of global trade that we are now essentially layering attacks on. And here's the thing. China is not backing it down either. In fact, they're digging in.
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Chapter 3: Why are people panic-buying iPhones?
Malaysia, where Apple makes max, 24% tariff. Thailand, where the company also makes a max, 37% tariffs. So those aren't as bad as the China tariff. The problem is that as Apple has diversified its products across Southeast Asia, they've kind of kept the iPhone in China 90% of their of the iPhones are still made in China, even as some move to India.
So that's why they're rushing to get iPhones here and create a stockpile for as many months as they can and why consumers are rushing to max Apple stores.
And still 50% of Apple's revenue does come from the iPhone. So it is very much exposed to this 104%. Tariff, probably the best bet to wriggle its way out of it is do what it did during the first Trump administration, which is try to get an exemption from the tariffs, which, you know, never say never on something like that.
Obviously, it's a little different climate this time around than it was last time. So they tried to diversify their supply chain, but there's only so much you can do when you make 90% of your iPhones in China. And the stock has just been getting hammered over the past few days. It's down right around 20% over the past three trading days. That's $640 billion in market cap wiped out.
And actually yesterday, Microsoft edged its nose ahead of Apple to once more become the most valuable company in the world. So a lot of headwinds that Apple is facing as the biggest company in the world also turns out to be the most exposed to this trade war.
So what could Apple do? What are its options besides getting an exemption, which seems like a Hail Mary? There are probably three things that it will do. It could squeeze its suppliers to say, hey, you have to eat. Some of this cost can't be on us. So that is one way it could share the burden. Another is to just eat it. Morgan Stanley estimates that Apple has
could eat $34 billion of these added costs because it does have a typical hardware margin of around 45%. So it is in a position to absorb that. And then the final one is price hikes. Analysts do expect that we could see iPhone price hikes. It It varies depending on which bank you listen to. JP Morgan says 6 percent. Morgan Stanley says 16 to 17 percent.
And Apple has really tried to hold the line on $999 flagship smartphone starting price. And it looks like that will have to go. The final option that Trump administration people want is for Apple to start making iPhones in the United States. But if you actually crunch the numbers, that is economically not feasible.
Yeah, Wedbush's Dan Ives predicts that an iPhone entirely made in America could cost $3,500. So yes, out of the cards.
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Chapter 4: How are U.S.-China tariffs affecting the global economy?
In 1980, the IRS's published audit rate was over 2%, and in 1960, it was over 3%. The reason for the decline in auditing is perhaps the simplest. There's fewer people to do it. The IRS hemorrhaged workers from 2010 to 2020, cutting its headcount by about 20% over the decade. And in addition to having fewer people,
the IRS got an even bigger workload with other programs like the Affordable Care Act and the Child Tax Credit getting foisted onto it. Since the IRS collects 95% of federal revenue each year, fewer audits could mean less tax collections for the government and widen the national deficit. That already seems to be happening.
For 2010 returns, the IRS collected $11 billion in additional revenue through personal income audits. For 2019 returns, which are still not yet finalized, the agency collected just $4.5 billion. Toby, some celebrate fewer audits saying they constitute harassment of taxpayers. Others say it's necessary to catch tax dodgers, especially for high income households and corporations.
And it's looking like these audit numbers are not going to go up anytime soon because the current administration is targeting. big IRS cuts to the workforce. Roughly 25% cuts are probably in the cards, and a decrease in staffing would inevitably lead to fewer audits. Most of the decline in audits over the last decade is because of the loss of IRS workers.
Also, the IRS has had a lot more lumped on their plate in recent years, so they can't necessarily focus specifically on audits anymore. They're involved in implementing the Affordable Care Act, other programs like the child tax credit too.
These are a couple of forces coming together to just basically remove the auditing ability that the IRS once had to the benefit of people who don't want to be audited.
What's interesting is if you dive into the numbers, you know, Americans maybe have your reputation for being anti-establishment. But we pay our taxes voluntarily. Maybe it's because of the threat of an audit. But Americans pay about 85 percent of what they owe and direct IRS collections add 2 percent. These are levels that are way above European countries.
So, you know, overall, voluntary tax compliance in the U.S. is quite high.
And also, there's this one study from Wharton that looked into the long-term consequences of an audit, and they found that taxpayers who were randomly audited and owed additional money went on to pay their future tax returns more frequently. Even a decade later, they basically have that memory in the back of their head saying, oh, I was audited that one time. I'm going to continue paying taxes.
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