The Great Debate on Tariffs & Meta Fires Workers Over $25?
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Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Janet Yellen sounds a rare warning about tariffs. Is the world ready for another trade war? Then NASA has gone high fashion, teaming up with Prada to develop its new spacesuit. It's Friday, October 18th. Let's ride. ♪

With Halloween just 13 days away, it's time to actively start thinking about a costume if you haven't already. And if you're striving for originality, I've got a list of costumes to avoid. Google has released its top trending costumes for Halloween, which is a good indication of what you might expect to see at your party. And they are pretty much everything.

any character from Beetlejuice Beetlejuice, pretty much any character from Inside Out 2, Ray Gunn, the breaker from the Olympics with that iconic green and yellow tracksuit, pop star Sabrina Carpenter, and for a duo costume, Wolverine and Deadpool. See, a lot of...

Your take on this was avoid these costumes if you want to be original. My take is do the opposite. Wear Wolverine claws. Do your hair like Sabrina Carpenter. Wear all five colors of the inside out emotions. Go around saying Beetlejuice three times. And, of course, breakdance really poorly like Ray Gunn. You have to be so unoriginal. You actually boomerang back.

to being original. Okay, so when I come up to you at the party and I ask, who are you for Halloween? What do you say? I'm giving the spiel. I'm going to say, I am all of you. I am Google Trends right there. I think it'll work. Now,

Now let's take a moment to talk about Wendy's Breakfast Burrito. Neil, I've noticed that after shows recently, you've been locking in right away. Well, it's easy to focus on work when I'm not stressing over what to eat for breakfast. So you're saying the secret to an efficient morning is an efficient breakfast. Not just an efficient breakfast, an efficient and delicious breakfast like a Wendy's Breakfast Burrito. Fresh cracked eggs, seasoned potatoes, and delicious bacon or sausage are

all wrapped in a convenient and delicious warm tortilla. So not only are you getting to your work faster, you're also eating like a king. Not a king, Toby, a queen. Wendy's is my efficient breakfast queen. All right, your highness, tell the people where they can find one of these burritos. Just download the Wendy's app to find a Wendy's near you.

Treasury Secretary Janet Yellen surprisingly inserted herself into the presidential election yesterday, bashing broad-based tariffs in a speech at the Council of Foreign Relations. Yellen, who rarely wades into politics, said that sweeping untargeted tariffs would raise prices for American families and make our businesses less competitive. She said that treating our closest allies as transactional partners is deeply misguided.

And while she didn't mention him by name, it's clear who this message was about. Former President Trump. Trump has made tariffs the cornerstone of his economic agenda for a second term, proposing an across-the-board tariff of at least 10 percent, applying to all goods imported to the U.S., with tariffs on China rising up to 60 percent. He said that tariffs will lead to more foreign companies creating jobs in America so they can avoid paying those fees.

During his first term as president, Trump placed tariffs on hundreds of billions of dollars of goods coming from China and other countries. But what he said he'd do if elected would go far beyond that. His proposals would be the biggest increase in tariffs in close to 100 years, and they would fundamentally reduce

rework the global trading system. Yellen and most mainstream economists are sounding the alarm that on net tariffs at this kind of scale and without clear targets would slow economic growth and reverse progress we've made on inflation. Yeah, I mean, for some people, it might be unclear who is actually paying the cost of a tariff. Trump insists that foreign countries will bear the brunt of those additional costs, but tariffs are actually paid by the importer, aka American companies in this case.

But while the companies initially bear that extra brunt of the extra costs, those costs are then eventually and usually passed on to consumers via higher prices. You can look at some very specific examples too. Last time Trump was in office, he levied a 50% tariff on washing machine imports, just washing machines.

And U.S. consumers bared an extra one and a half billion dollars per year in costs, according to the BBC. And that is just one item there. So that is how you can see most mainstream economists do push back and say, uh-uh, these tariffs actually end up filtering down through the economy and going towards making things more expensive for the everyday person. Now, on the Democratic side, look, Trump put $300 billion worth of

tariffs on Chinese goods. And what Biden did when he came in was actually keep those tariffs. And Harris, Kamala Harris, Trump's opponent, hasn't really talked that much in detail about what she would do with those tariffs or trade policy in general. But you could accuse the Biden administration of being hypocritical and saying, hey, you're attacking tariffs. But look, you've kept tariffs on Chinese goods and maybe even increased them and done more on these export restrictions when it comes to chips and AI and semiconductors.

But what Yellen is critiquing, I think what most economists point out, is broad-based tariffs. Just applying a blanket 10% tariff on literally every single good coming into your country is going to slow growth and raise prices for consumers. Yeah, let's talk about why Yellen is not pushing back so much about the tariffs that Trump originally put in place and then continued by the Biden administration. She said that those tariffs are targeting specific industries.

issues of unfair competition. There's this part of the Trade Act of 1974 that authorizes the U.S. to take action against foreign trade practices that are deemed unfair. And so one of those things that Yellen deems unfair is actually something we've talked about in the past, which is

overcapacity. She thinks China is just producing way too many of certain goods, flooding the global market with things like steel, aluminum, electric vehicles, green technology, solar panels is one example we talked about. So those tariffs levied on those goods she thinks are okay because they are targeted and strategic, not those 10% across the board tariffs that you spoke about. And then a final wrinkle of what you do when you put tariffs on goods coming from every single country coming into the United States.

is that you invite retaliatory action, which hurts American exporters. According to the deputy U.S. trade representative under President George W. Bush, he said day one, if there's a 10 percent tariff put in place, day two, there's going to be retaliatory tariffs from all of our trading partners. You're actually seeing this happening right now between the EU and China. So the EU announced that it was going to put tariffs on electric vehicles coming from China, which ultimately

the United States has also done. It's one of those strategic sectors that the U.S. wants to protect manufacturing in the United States for. But then China slapped tariffs on brandy. And now France has to go into the brandy industry domestically and say, here's we're going to bail you out, actually, because because of this particular policy, you're getting hit because brandy is huge in China. And now they face a an import tax there. So that's just one example of how

Putting tariffs, whatever your aim is, does invite a cascading effect that leads to domino pieces falling all over the world and retaliatory action that can backfire. When you reach middle age, you start to slow down a bit. No more late night parties, no more hungover mornings. You slip into a more quiet sort of stability as you begin to explore where your priorities actually lie. And judging from Netflix Q3 earnings report,

it too is feeling the stability of middle-aged life. Profits and revenue both increased in the quarter despite a slight slowdown in subscriber growth. It's a sign that the company is prioritizing profitability over customer additions these days. That being said, it is still adding customers.

Netflix reported just over 5 million new subscribers in the third quarter, a slowdown compared with the 8.8 million it brought in in the same quarter last year. Add to your memberships was the big standout once again, accounting for more than 50% of signups

in countries where it is available. But if subscriber growth is slowing and profitability is still rising, that must mean, yep, price hikes are again on the horizon. Netflix recently raised prices in Japan and said yesterday it plans to do the same in Italy and Spain by today. The shares rose after hours yesterday. They are up nearly 50% this year. Netflix is easing into middle age as the king of streamers quite nicely, even if its lower back hurts a little bit.

I mean, Netflix is like Victor Wimbanyama. You're just wondering when it's going to stop growing, but it keeps getting taller, taller and stronger and stronger. It is clearly the king of the castle in terms of any other streamer, but it still added five million subscribers. At some point, investors and analysts expected this to taper off, but it's still making a ton of

cash, and it's still adding subscribers even over a year since it began that password sharing crackdown that was supposed to provide a temporary boost, but it has turned out to be over a year of boosts because of that crackdown. So Netflix is just keep

keeps growing and defies expectations of how, what the ceiling of this company can be. Yeah. I mean, the last time Netflix was showing signs of slowing down was in 2022. That's when it unveiled that password sharing crackdown and it, it,

set off this wave of growth. It's added 45 million new subscribers since last year. It's now at 282 million subscribers. So, but that sort of narrative, the password sharing crackdown growth narrative is slowing down a little bit. There's only so many passwords you can crack down upon. So how do you expand revenue? How do you keep growing, going forwards? One thing that they've been leaning into is these live events. They have the

Mike Tyson, Jake Paul event. I feel like we've been talking about that forever. It's got NFL games. It's broadcasting this year. It can sell ads against that. So potentially live events. It also is making this foray into games. That is a growth vector for them. So they are having to shift their growth narrative. But actually remember, starting in 2025, Netflix is no longer going to

in update investors on subscriber numbers. So again, that is why I'm saying they are focusing more on profitability because growth is a harder thing for them to continue to do because they've just reached so many corners of the globe at this point. Right. And now, so growth in revenue is probably going to have to come from squeezing their consumers for more cash in the form of

Price hikes. The last time they did in the United States was October 2023. So you're right. There does appear to be price hikes coming down the pipeline. And right now, Netflix is cheaper than its rivals, even if it's bigger. The ad-free version of Hulu, $18.99 a month as of October 17th, and Warner Brothers Max are both cheaper.

more expensive than Netflix's standard plan. So there does seem to be room. I know people don't want to hear this, but there does seem to be room from a business perspective for Netflix to hike prices and still keep its consumers. And if you look at the content slate this past quarter, it's kind of

You think it's solid? I think it's solid. I was like, you know, because when you grow, when you don't have this all-star content slate, that's a good sign that when you bring Squid Game back, which is coming in the current quarter, then you're going to grow even more because people want to watch those shows. But I don't know what, what,

What stood out to you from this particular Netflix quarter? Emily in Paris? I know you didn't watch that. No, I realized I only watch Nobody Wants This. So I was like, oh, it was a solid show. So that means their entire slate was solid. But I mean, yeah, Emily in Paris, Nobody Wants This, the perfect couple. These were a couple of big ones. But you're right. Squid Game coming down the pipeline. And then also all of these live events in the future.

is going to make Q4 even bigger for Netflix. It is time for Stock of the Week, Dog of the Week now, where Neil and I bring you one stock that does all its easy runs at low heart rates in Zone 2, and one that tries to impress its friends on Strava and ends up running way too fast. Neil, you won the pre-show game of who can name the most wide-body aircrafts, so you're up first.

What is our stock of the week? My stock of the week is the travel booking site Expedia, which jumped nearly 5% yesterday after the Financial Times reported that Uber has considered buying it. It's a bold strategy, Cotton. With a market value of more than $20 billion, Expedia would be Uber's biggest acquisition in its history. But after a year of bulking up, Uber is thinking about hitting homers instead of singles. In the past 12 months, its share price has surged

85% to give it a market cap of nearly $170 billion. And in February, it turned an annual profit for the first time ever. Technically, it could be our stock of the year. So what does it want Expedia for? To get closer to super app status. Uber CEO Dara Khosrowshahi has plans to turn Uber into a super app similar to China's WeChat.

And let's face it, Uber is already much more than just a ride-hailing platform, offering services such as food delivery, freight and logistics, and even yacht rides. Tacking on Expedia, the world's fourth largest online travel company, would add flight and hotel bookings and bring that super app vision even closer. However, the Financial Times said that deal talk is still in the early stages, so Uber could still cancel without paying a fee.

Yeah, Uber has been relatively vocal about its ambitions to become a super app. It has done this through previous acquisitions. Remember, it bought Postmates a few years ago. It bought Transplace. So now you can literally get a plane, a train, a car, a boat ride, a meal on its platform, grocery delivery. So it is trying to really expand there. It's moved into logistics. It's moved into advertising a little bit. So adding in Expedia does seem to make a little bit of sense.

It is a bigger swing. It was funny looking at this acquisition too, because Uber generated $10 billion of revenue last year, $652 million of operating income. Good job, first profit it ever recorded. Expedia generated close to $13 billion of revenue and over $1 billion in operating income. Despite the fact Uber's market cap is $170 billion, Expedia's is just under $20 billion. So clearly, Uber has a better growth case, and that is why the

market is valuing much higher. And I do think that folding in Expedia just feeds into that narrative. So even if the deal doesn't happen, the fact that this is being floated is probably still good for Uber in the long term. And one other interesting wrinkle about this deal is that Dara Khosrowshahi, the CEO of

Uber, it'd be a reunion for him. He knows Expedia very well. In fact, he was the CEO at Expedia from 2005 to 2017, 12 years. So he knows this business. But then in 2017, he left to go to Uber, which was kind of in shambles and a disorganized mess at that point. Travis Kalanick, the founder, had done an amazing job growing this company and building it from scratch. And

But he ran a sort of very disorganized and chaotic ship. So they booted him and then said, Dara, you've run Expedia really well. You're kind of the adult in the room. Come and make this a mature business. And he's absolutely done that. So him buying Expedia at a valuation that is one-tenth of what he built Uber to be would kind of be a feather in the cap for him. Some investors, I know you like this particular acquisition, but some investors are a little worried that Uber is taking its eye off

the ball, and that ball would be autonomous vehicles. Remember, Tesla last week unveiled its RoboTaxi, putting it in quite direct competition with Uber, who's also trying to partner with companies on direct, on autonomous vehicles and trying to obviously get into autonomous self-driving vehicles.

aspect of its ride sharing capabilities. So they're saying, why are you doing flight bookings, which is a nice business, but really why we're valuing you at nearly $120 billion is this. $170 billion. $170 is this autonomous track. Up next, I got your dog of the week right after this.

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What does the growth of every business pretty much depend on? Besides great snacks in the break room, it's got to be innovation. Exactly. And innovation relies on business processes that are clear and quick. 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. Luckily, that's where Miro's Innovation Workplace comes in.

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you

My dog of the week is Meta. It's not that its stock is getting hammered. It's actually up a healthy 67% on the year, but its handling of employee meal stipends has left a little to be desired. Meta reportedly fired around 20 to 30 people who had been misusing a $25 meal voucher the company grants them by spending it on non-food items like acne pads, toothpaste, and laundry detergent. Like most big tech companies, Meta offers some free food perks to employees working out of its LA office.

Part of those perks includes Uber Eats or Grubhub credits to be used to deliver food to the office. But according to a source the Financial Times spoke to, some employees had been abusing the food credit system, doing things like pooling money together, ordering non-food items, or getting meals sent to their houses instead of work.

And it's not like these were interns just passing through for the summer either. One staffer who was let go wrote on the anonymous messaging platform Blind that they were making $400,000 a year and called it, quote, surreal when they were told why they were being let go. Neil, this whole scenario is a bit surreal. It is a bit surreal, but I think it is indicative of a larger trend, which is big tech companies tightening their belts a little bit and not

allowing this free spending ways of early, early pandemic. And even before to be left to, to employees devices, because at the same time, after they did these layoffs, just 20 to 30 people due to the meal stipend, there was also reports that they did other layoffs, which was completely unrelated to that at,

at some of their biggest businesses, WhatsApp, Instagram, and Reality Labs. This is not those mass layoffs that we saw in 2022 and 2023 where Meta laid off 22% of their entire workforce. But it still appears like Zuck's year of efficiency is applying to its workforce where they're trying to make sure that they keep costs down. And people who are abusing the meal plan, where do you think that's going to affect

the bottom line or not. And for Meta, which is a $1.5 trillion company, it's probably not going to move the needle in any way. But it does show that they're taking a little more of a crackdown mentality on their employees. Yeah, I think you're totally right. I mean, it is potentially a little extreme because it is a $25 meal stipend. These people are making $400,000 a year. But just the general vibe around big tech is exactly what you described. Maybe that year of efficiency is trickling throughout

just the year and is trickling onto subsequent years. I mean, in January of this year, Alphabet CEO Sundar Pichai told staff in an internal memo that part of their layoffs were due to the fact that they need to invest further into emerging technologies, aka AI. So I do think you're seeing these companies sit down and say, wait a second, we are investing so much money into keeping up in this AI arms race right now. We need to start being a little bit more efficient in other areas of the business, which is kind of the general theme you've seen with

all these layoffs, no matter how big or how small. What would you do with a $25 lunch stipend? I mean, first of all, that sounds incredible. I would use that every single day. I'm hungry. So I would just spend it on food. There would be no extraneous spending for me. That is going towards a kava bowl, a little extra pita, and a nice little lemonade on the side. All right.

Moving on, when you go trick-or-treating in two weeks, the only trick is thinking the treat you're getting will be made out of chocolate. Yes, this Halloween, traditional chocolate candies are out and non-chocolate candies are in. According to research firm Cercana, U.S. candy companies are swapping out chocolate for non-chocolate confections

which is a response to a few trends in the marketplace. First, chocolate has gotten expensive. Poor weather conditions in West Africa, where the majority of cocoa is harvested, have driven up prices of the commodity 45% through September of this year. And as a result, prices of seasonal chocolate candy have jumped by about 7.5% from last year. Now that's spooky.

Second, American consumers, especially the younger ones, are showing that they prefer candies like sour gummies over chocolate. And companies are listening and shifting their investments to these higher growth products. Toby, the outlook for chocolate, it's 99% dark. It is 99% dark. I do think it's both of those things.

consumers are being a little bit more choosy, choiceful in what they are spending their money on. And if you see chocolate has risen in price over the past year, you probably aren't going to put that in your Halloween candy assembly. But I also think that chocolate's just not that exciting these days when you look at the entire broad candy landscape. I mean,

my TikTok feed is filled with a couple of big trends right now. One trend is these aftermarket sour candies that I've been seeing. It's where you buy something like Gushers, you coat it in a candy syrup, and then you roll it in some flavored sour dust. So you get something like a blue raspberry coated sour Gushers, and they look really good. So that has been one trend, these aftermarket sour gummies. And then the other big one is freeze-dried candy as well. That's when you

take the moisture out of a candy like Skittles or something. It skips the liquid state, turns straight into gas, and so that usually makes the candy puff up. It maintains its flavor profile, but it's got that whole new texture. So I think people are looking at the broad candy market and saying, all right, people are innovating in this sector. They're not innovating as much in the candy sector, and that is why you're seeing – in the chocolate sector, and that is why you're seeing maybe a shift towards –

candy instead of chocolate. And speaking of innovation, here are some products that are new that you might see this Halloween season in that cool house, the coolest house in your neighborhood that's giving out. There are Twizzlers Ghosts, which I don't exactly know what that means. Sour Patch Kids Apple Harvest. Yeah. Yeah, right? I'm not a Sour Patch Kid. Nerds Candy Corn.

That sounds disgusting as well, actually. And Skittles shriekers. Okay, I'm into anything Skittles, but yeah. So that is what is coming down the pike. And you're right, this is at least innovation where chocolate is just too expensive for candy companies to source that cocoa from and do anything interesting with. That being said...

I love chocolate. I'm always going for the chocolate over the fruity and the sour. But I can see where this industry is going, and it's going away from chocolate. Skate where the puck is going. If you have ever wanted to go to space but were scared of not slaying while you were up there, worry no more. Parada has you covered. This week, the luxury brand teamed up with Axiom Space to unveil its designs for the next generation of spacesuits that will be worn by NASA's Artemis III moon mission.

Gone are the old puffy white suits from previous lunar missions. The next generation of spacesuits honestly also look pretty puffy and white, but now they're designed by Prada. The fashion house did make some aesthetic and technological enhancements. The suit rocks a stone gray patches near the joint areas. Red accent lines across the forearms and waist act

as a subtle nod to the Prada brand. It can support spacewalks for at least eight hours a day, will protect you from lunar dust, and most importantly, it's got a lot of mobility upgrades compared to the Apollo 17 days. You won't exactly be able to do the doggie up there, but Prada levered its decades of textile knowledge

to create something with a little bit more wiggle room and room for wiggling. Neil, not the first company you'd think would be helping design a spacesuit, but tapping into the fashion world for a project like this actually makes more sense than you think. Pretty fascinating how this deal came together, actually. So Prada has already

long sponsored an America's Top Cup team, which is this premier sailing competition. And those guys have some sick technical gear that Prada has had to make clothes for. So they were like, okay, I'm looking at this America's team. We put billions of dollars into this 20 years of research. And the chief marketing officer looked at the name of the America's Cup team that they sponsor. It's called Luna Rosa. And that means red moon in Italian. So he's like,

like, huh, maybe moon, maybe we should get into the space industry. He calls up Axiom Space, which is the company that has contracted with NASA to make the spacesuit for this first mission to the Mars, first mission to the moon since the 1970s. And they worked out a deal. So they put 10 full-time Prada employees going back from Milan to Houston, back Italy to Houston, back and forth. And then they created the spacesuit that they unveiled yesterday. And a lot of

other space companies have been leveraging clothing companies to help them as well. Richard Branson worked closely with Under Armour to make their Virgin Galactic uniforms. Elon Musk actually worked with the costume designer who worked on Batman v Superman Avengers on making SpaceX uniforms. So working with Prada makes sense because they do have deep textile knowledge. They are very connected to the culture as well. And if you want to take space to the commercial level, you do need these commercial partners.

But then Prada also is looking at this and saying, this could be a real business line for us going forward because the space economy isn't just going to include people launching rockets. It's going to include every use case that happens in space as we develop a space kind of economy. You need something to wear up there. So out

Like the Space Met Gala. Yeah, there probably will be. I mean, you joke now, but in 100 years or so, there definitely will be something like that. But outfitting people is definitely going to be a big part of this push into space. And so it is a big business. It started out as almost a joke. The product guy was like, wait a second, I think there is something here. But there actually is something here.

here. Yeah, I mean, in the future where more people are going to space, they're probably going to have a couple different spacesuits to choose from. Maybe Prada wants first mover advantage here. They can always say that they outfitted the first return to the Mars or to the moon in 50 years. So you're deciding between, do I want the Prada fit? Do I want the Nike fit? Do I want the Kirkland? Like you can just go up and down and just say, okay, like this spacesuit comes with different specs and maybe you'll choose a spacesuit like you go shopping for clothes at some point. I'm going to do the Gap spacesuit.

That seems right in my wheelhouse. Okay, that is all the time we have. Another week of shows in the books. Thanks so much for starting your morning with us and have a wonderful Friday. For any questions, comments, or feedback on the show, send an email to morningbrewdaily at morningbrew.com. And if you're enjoying Morning Brew Daily, spread the word to your friends, family, and coworkers. Per tradition, Toby is here to give you a specific person to share MBD with today. That specific person...

Okay, let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Olivia Graham is our associate producer. Uchenna Waogu is our technical director. Billy Menino is on audio.

Let's get a hair and makeup couple's costume trending on Google. Devin Emery is our chief content officer, and our show is a production of Morning Brew. Great show today, Neil. I wish you all well.