Tariffs Hitting Hollywood? & Air Traffic Control Shortage Delays Newark
28:55 Share

If you're building your portfolio, don't do it alone. On public, you can build a multi-asset investment portfolio of stocks, options, bonds, crypto, you name it. And you can diversify while generating fixed income with public suite of yield accounts, like their high yield cash account, where you can earn an industry leading 4.1% APY. Fund your account in five minutes or less and earn up to $10,000 when you transfer your old investment portfolio. Head to public.com

That's public.com slash morningbrew. Paid for by Public Investing, full disclosures and podcast description.

Good morning Brew Daily Show, I'm Neil Freiman. And I'm Toby Howell. Today, would Before Sunrise have hit the same if they met in Cleveland instead of Vienna? We could find out after Trump proposed tariffs on foreign-made movies. Ben, a Newark airport has been plunged into chaos after a multi-day meltdown of its air traffic control systems. It's Tuesday, May 6th. Let's ride.

The Pulitzer Prizes were handed out yesterday for excellence in journalism, and Toby, we were snubbed again. Just remember, Hitchcock was never given an Oscar for Best Director. Fortunately, all the awardees were more than worthy. The Wall Street Journal won an award for its coverage of Elon Musk's rise to power. The Washington Post won the Breaking News Prize for its reporting on the attempted assassination of Donald Trump.

And ProPublica won the most prestigious prize for public service with its coverage of the impact of state abortion bans across the country. In literature, the book James by Percival Everett, a retelling of the story of Huckleberry Finn from Jim's perspective, won the fiction prize. And I read this book a few months ago. Great book if you're looking for a wreck.

Neil, one of these days our ships will come in. Toby's Trends will be honored for national reporting or Neil's numbers will snag that public service award. We will get there. But seriously, a lot of the research that goes into producing our show, Morning Brew Daily, comes from the on-the-ground reporting that these reporters are doing. So if you've ever learned something new or felt just a little bit smarter after a morning listen, you've got them to thank as well.

And now a word from our sponsor, Planet Oat. Neil, everyone's talking about how this is the age of AI. Smart fridges, smart vacuums, smart-aleck kids who think ChatGPT know the answers to everything. And yes, that tech is cool, but you know what actually made my life better this year? Switching to Planet Oat. Preach. It's just one of those easy upgrades. You don't have to overthink it. One day you pour it in your coffee, and the next thing you know, it's in your smoothies, your baking, your cereal, your everything.

It's rich, creamy, and blends like dairy, but without the dairy or the soy or the gluten. The unsweetened ones, wild, zero grams of sugar and still somehow tastes like a treat. Meanwhile, Barista Lovers was basically built to impress your espresso machine. So yeah, welcome to the future. Less about robots and self-driving cars and more about oat milk that just makes sense. Get your hands on the oat milk that has it all. Visit planetoat.com for more.

Get ready for the fast and the furious Kansas City drift because President Trump floated 100% tariffs on foreign produced movies. In a Sunday Night True social post, Trump said that the tariffs would save the dying American movie industry. Quote,

Other countries are offering all sorts of incentives to draw our filmmakers and studios away from the United States. Hollywood and many other areas within the USA are being devastated. He said he directed the Commerce Department and U.S. trade representative to immediately begin the process of instituting a 100 percent tariff on any and all movies coming into our country that are produced in foreign lands.

This threat sent shockwaves across the global entertainment industry yesterday with blindsided studio heads holding emergency calls to determine what it all means. And really, no one's sure what it means to tariff a movie, which is essentially a digital good distributed virtually that doesn't pass through ports. But by bringing up the decimation of Hollywood, Trump is touching on

the movie industry's least well-kept secret. Many movies aren't made in LA anymore. Lured by tax incentives and lower costs, studios have increasingly shifted production to places like Canada and the UK. Some of their biggest recent blockbusters, Deadpool and Wolverine Wicked, Gladiator 2, a Minecraft movie, were mostly shot abroad.

First, let's dive into all the questions around this proclamation. Would it apply to American productions that are

mostly filmed in the U.S., but have some scenes shot over in other countries? Or would it apply to movies where post-production work, like editing and that visual effects, if those are handled outside the U.S., does that count as well? And then also, does it apply to just American-owned movies, or does it apply to all movies across the world? So a lot of people kind of went down some of these rabbit holes and found nothing at the end of them, which is why maybe we saw a little bit of the walking back. So probably the

broader conversation to have here is just the flight from the U.S. to other countries when it comes to making movies. We were listening to a podcast between Rob Lowe and Adam Scott from Parks and Rec the other day, and they were basically saying how it would have been...

if they were filming Parks and Rec now versus 10 years ago, they probably would be doing it in Budapest because of how many tax incentives and how much more expensive it is to do inside the U.S. versus abroad. So that is a conversation that Trump is dead on, that the movie industry has been fleeing America, specifically California, for far-flung places. Right. I mean, just look at the numbers. The total amount of money spent last year on film and TV productions in the U.S. with budgets of

more than $40 million, fell 26% from two years earlier. And it's very acute in LA, which is the home of Hollywood, has the Hollywood sign, is just the global home of filmmaking and TV production. Their film and TV production has fallen by nearly 40% over the last decade. And that's because, yes,

costs have risen in L.A. and across the United States, and all of these other countries are offering very lucrative tax incentives. And filmmakers say their number one decision-making point for choosing where to film is tax incentives. The United States doesn't have

have as much generous ones as other countries. So that's why you're seeing productions flee. And we did see some movie-related stocks fall yesterday after the news. I mean, Netflix was down as much as 4% at one point. Disney, Warner Brothers, Paramount were all in that 3% to 5% range.

So it wasn't a huge move, but it was definitely some sort of reaction. And a lot of it is because if you just look at Netflix, a lot of their content is produced internationally. 75% of Netflix's entire content slate is internationally. Some of those are literally international films because they have a very widespread audience. But a significant part of its domestic production stuff that you think was made in America was actually made in places like Canada or the United Kingdom. So Netflix is very exposed should this, you know,

undefined tariff kind of apply to entertainment filmed outside of the U.S. So that is why potentially they are a little bit nervous and we're kind of coalescing and saying, what do we do about this thing? Even though maybe nothing is going to come up.

it. Right, because you had movie executives from abroad saying this will devastate our industry from New Zealand, Australia, UK, Canada saying this would be awful for us. But then also American moviemaking heads also said this would be terrible for us because as opposed to other goods where the US runs a trade deficit with other countries, the US is remains the global hub of filmmaking. We have a $15.3 billion trade surplus

in 2023 with the rest of the world. We sell our movies. It's a huge export. We sell our movies to the other parts of the country. We have a positive balance of trade in moviemaking with every major foreign market. If we put tariffs on foreign-made films, then they will certainly reciprocate and put tariffs on Hollywood films. Hollywood makes most of their money in foreign markets, so it could devastate the American industry as well. So that's why Trump was saying yesterday,

kind of walked it back, these tariffs, and said he would talk with movie executives to see a plan forward. Gavin Newsom of California, the governor, introduced a $7.5 billion tax incentive to lure people back. So maybe, I know Trump and Newsom don't really get along, but maybe they'll work on a particular tax incentive instead of tariffs to bring this industry back.

For years, Newark Airport has been the ugly stepchild of New York's three major airports, and it's done nothing to shake that reputation recently. For more than a week, the airport has been gripped by chaos as a cascading series of problems led to hundreds of flight delays and cancellations,

frustrating travelers and sparking calls for an overhaul by the federal government. On Sunday, over one third of inbound and outbound flights at Newark were delayed and more than 10% were canceled. The crisis continued yesterday when more than 150 flights were canceled and over 250 delayed.

United Airlines, which dominates this airport, has even taken the step of canceling 35 daily roundtrip flights from Newark, with the CEO saying he had no choice. The airport, quote, cannot handle the number of planes that are scheduled to operate there in the weeks and months ahead. That's because of a number of intertwined crises, including construction on a runway, chronic air traffic controller shortages and technology failures from antique acquirers.

equipment. Things have gotten so dire at the Nathan at the nation's 14th busiest airport that one air traffic controller straight up told them as NBC don't fly into Newark, avoid Newark at all costs. It is not a safe situation right now for the flying public.

I guess the good news is it's really hard to fly in or out of Newark right now. Yeah, CNN got the transcripts from some of these air traffic controllers trying to talk to planes, these air traffic controllers based out of Philadelphia's Terminal Radar Approach Control Center. And some of them are pretty jarring to hear. One is...

a pilot asking approach, are you there? He tried to contract the controller five times and got dead radio silence, which is very scary for your pilot because you don't know where you are, where other planes are in relation to you. And so as those 30 seconds of silent emerged, it cascaded into this entire sort of emergency situation here on Newark, which resulted in those thousands of delays, hundreds of cancellations. And it really did leave an impact on the flight controllers as well. Um, five,

At least five FAA employees after that day took 45 days of trauma leave afterward because they were just so stressed out, so high strung that their eyes and ears were basically lost for 30 seconds and planes started popping up in places that they didn't expect, which is just a very scary thing. So yes, it is a situation that is affecting Newark, but also the broader conversation here is

just the chronic staffing delays, the technology, the outdated technology that the FAA is still relying on. Yeah. The U S needs more than 3000 new air traffic controllers to reach adequate staffing. They're at 70% levels right now. They have 10,000 professional controllers. They need 3000 more. So you have Sean Duffy who's the secretary of transportation really, uh, has keyed into this problem. And he said, he's going to roll out a modernization, uh,

plan this week. So we'll hear what the FAA or the Transportation Department has in store for the FAA to improve staffing levels, because right now the situation at Newark is pretty dire and things weren't good beforehand. It came in last in the Wall Street Journal rankings of best large airports in terms of reliability, convenience and value. People were already, you know,

not happy with Newark because of its location and it's, you know, there were a lot of delays there before this happened. So yeah, if you're flying out of Newark, I mean,

Maybe look for somewhere else at this point. Unfortunately, I have some bad news for about one in five of you listening who have student loan debt. Check your mailbox because the bills are coming. The Trump administration started its push to resume collections on defaulted student loans yesterday, threatening the financial health of millions of borrowers whose loans have gone belly up.

According to the education department, about 5 million people fall into this category, with most having not made a payment since the pandemic. Millions more sit on the brink of default as well.

Restarting student debt payments has been a major push of the Trump administration in direct contrast to the Biden administration who moved to forgive billions in loans. As to be expected, firing up collections and instituting penalties for not paying is going to be an unwelcome financial burden for lots of Americans, sapping spending at a time when consumer confidence is already at a multi-year low.

Credit scores are also under threat, with a new report from TransUnion saying that borrowers who previously had excellent credit may see their scores deemed by as much as 171 points.

What comes next if you're one of those millions? Borrowers in default should have been notified by an email to contact the education department's default resolution group and take action, like making payments or entering a repayment plan to avoid harsher penalties. If you don't, the government may garnish wages or withhold tax refunds and benefits.

Neil, an ominous Monday announcement for the 42 million Americans with federal student loans. This has been five years coming back when the pandemic started. The Trump administration paused student loan repayments and then Biden came in and delayed it nine times.

So this was going until 2024 at the end of the election. So there was a big break given to people who had student loans for many years now. They maybe forgot about it, as we're seeing with these high delinquency rates. And now, finally, the machinery completely has been turned on here on yesterday. And so a lot of people are getting a rude awakening with how much they owe. Yeah, a student loan borrower enters default...

once they're behind on payments for more than 270 days. So that is kind of the magic number here. That's where that 5 million people come from, but 4 million people are on the brink of reaching that. So as we move into the summer, because the last, you know, kind of on-ramp period for getting rid of or,

for prolonging student loans was back in October, 2024. So if you count forward, you start to realize that the summer is when that 270 day mark starts to hit, which is when you will see another flood of people kind of realizing that they were behind and, or had defaulted on their student loans. So yeah, you, you start looking into the personal finance angle of this. And a lot of people are saying, Hey, I would love to pay it back, but just, I cannot right now. Like I do not make enough

And they're going to start garnishing wages and they're going to start dinging my credit score. So it is a little bit of a moment of panic for millions of Americans out there as they try to figure out how to navigate these murky waters ahead. And if you're listening to this thinking, well, I don't know what's going on with my student loans, you can check a dashboard by logging into your account on the federal website, studentaid.com.

Go to that website, check out, see how much you owe. Hopefully it's not that much. But yeah, check that out, studentaid.gov. That will give you a snapshot of your student loan picture. Let's take a quick break and come back and talk about trucks.

Toby, you ever get served an ad that just makes no sense whatsoever? Yes. One particular platform thinks I'm obsessed with Fabergé eggs. Maybe because we keep talking about egg prices. That also proves that a lot of the time the best B2B marketing gets served to the wrong people. I have purchased over 17 Fabergé eggs in the last two weeks. I, wow.

Okay, point is, LinkedIn has a network of over 1 billion professionals and over 130 million decision makers, which makes it stand out from other ad purchases. You can target buyers by industry, title, company, you name it. Everyone and their mom is on LinkedIn.

So save money and target the right professionals with LinkedIn ads. LinkedIn will even give you a $100 credit on your next campaign, so you can try it yourself. Just go to linkedin.com slash mbd. That's linkedin.com slash mbd. Terms and conditions apply only on LinkedIn ads.

It's been a rainy spring here in New York, but summer is fast approaching, finally. Speaking of heat, here's a hot take. Overpriced wireless plans shouldn't stand between my wallet and it thriving this summer. Luckily, Mint Mobile's offering premium wireless plans for just $15 a month. Yup, that's all. No more hefty monthly bills or unexpected overages. All Mint Mobile plans come with high-speed data and unlimited talk and text.

delivered on the nation's largest 5G network. Use your own phone with any Mint Mobile plan and bring your phone number along with all your existing contacts. This year, skip breaking a sweat and breaking the bank. Get your summer savings and shop premium wireless plans at mintmobile.com slash morningbrew. That's mintmobile.com slash morningbrew.

Upfront payment of $45 for three-month, five-gigabyte plan required, equivalent to $15 a month. New customer offer for first three months only, then full-price plan options available. Taxes and fees extra. See Mint Mobile for details.

If you're driving on the stretch of road between Dallas and Houston and come across a semi truck, don't do the pull the horn signal because chances are no one will be there to see it. Why might not there be anyone in the driver's seat? I'm going to tell you on this edition of Toby's Trends.

Aurora Innovation is an autonomous trucking company that plans to start testing out totally driverless rides in the next few days. The test drives are part of the company's goal to remake a trucking industry in the U.S. that is plagued by high driver turnover rates and rising costs. Jeff Farah, the CEO of the Autonomous Vehicle Industry Association, told Axios, "...the federal government is saying we have to move 50% more freight by 2050, but there's a shortage of drivers."

How do I solve this puzzle with more freight to move and less drivers to do it? Enter Aurora and at least 10 other companies that are working on developing driverless semi-trucking tech.

Most companies are planning to head to the Lone Star State to test their metal due to its good weather, popular freight routes, and favorable regulatory policies. So seriously, keep your eyes peeled if you frequent I-45. The end goal of driverless trucks is to save some money and offset driver shortages. A McKinsey analysis showed that if you cut out driver salaries, fleet operators could slash operating costs per mile by as much as 42%.

Savings like those have drawn the interest of companies like Uber Freight, who recently conducted a test run with Aurora, albeit with safety drivers present. But now Aurora is going totally solo dolo, representing a big leap forward for the budding industry. Neil, if any industry stands to benefit from the push for autonomous driving, it is long-haul trucking.

Pulitzer worthy trend right there. No, it is true that this is a very attractive industry for automation. And the big question is why didn't it happen faster? I mean, 10 years ago, when you're looking at what would be automated first, uh,

you know, self-driving cars in cities or trucks on long haul routes in rural areas on highways, you would probably pick the trucks first because it's a lot easier. They have point to point, uh, you know exactly where they're going. Uh, and when it comes to cars in cities, if a person comes in and hails a Waymo Uber kind of deal, you don't know where they're going to go. There's a lot more traffic. So the expectation in this industry was that trucking would pull way ahead of the urban, uh,

car apparatus, but it didn't. There was a lot of problems with regulation and the technology is hard, but now it looks like at least Aurora has one truck going on I-45 and they're hoping to ramp that up soon. And it looks like, yeah, 10 other companies are working on this tech and we'll see more autonomous trucks on the road in 2025 and 2026, which could match the hundreds of thousands of rides that are being given by Waymo in cities. And this is closer than we think because Aurora said that the self-driving tech has completed over

1,200 miles, albeit with a human controller sitting in the passenger seat. And the technology on these is a little bit different than self-driving vehicles, mainly because it can see just so much further ahead down the road. These trucks are equipped with sensors that can see the length of over four football fields. So that is a big reason why they're trying to test it on these

kind of long, straight roads that you associate with long-haul destruction because you can see way out into the distance. But yeah, some of the issues that they've run into with unions is even just like safety things where normally when a truck breaks down, a human has to get out and put down these little barriers that show you that, hey, there is a broken down truck here. Aurora was trying to push and other driverless tech companies were trying to push for having those lights be on the actual cab itself because normally

Obviously, if there's no driver, then how could you put out that safety equipment? So that's just a microcosm of some of the regulatory battles that they are fighting and that are getting pushed back against the transport. The Transport Workers Union is pushing back against it because they say, obviously, they want to advocate for drivers. So some regulatory issues to still get over the hurdle, but clearly it looks like there's some good momentum on the autonomous driving trucking front.

Now let's sprint to the finish with some final headlines. Skechers, the shoe company popular with nurses, pickleball players, and middle schoolers, is getting acquired for nearly $10 billion. In a surprise move, the global investment firm 3G Capital swooped in to take the shoe company, which reported over $2.5 billion in sales in the first quarter of the year, private.

Despite notching 7% sales growth, Skechers and the footwear industry as a whole has gotten flat-tired by tariffs affecting imports from China and Vietnam where Skechers manufactures most of its products. As such, the company recently withdrew its full-year guidance.

But 3G is betting that the sales momentum Skechers is showing is something that can hold up to macroeconomic pressure, while shareholders are thrilled that someone is buying the company for a nearly 30% premium, sending the stock soaring 25% yesterday.

Looks like a win-win here, Neil. This is one of the biggest acquisitions ever in the footwear industry. Skechers has made some pretty interesting moves recently to get into the performance footwear market. They've signed Joel Embiid. They've signed Harry Kane, two superstar athletes. I was walking in the subway yesterday. I saw a million Skechers ads with Snoop Dogg. So they've

Signed some pretty A-list names here to chart a path forward. But yes, a nice little payout for Skechers executives right there and shareholders. In the staring contest between Sam Altman and Elon Musk, Altman blinked. The OpenAI CEO announced yesterday that the company would scrap its controversial plans to shed its nonprofit status. Instead, OpenAI will restructure as a public benefit corporation, letting the nonprofit keep its control of the AI.

Thank you.

And there is billions of dollars on the line here, obviously, because a lot of the funding that OpenAI has received from investors like SoftRank were contingent upon it ditching its nonprofit structure and going into a for-profit entity. This isn't exactly that, but apparently...

It crosses the T's and dots the I's. It still has to be approved by a variety of different state kind of attorneys generals between Delaware and California. But it does look like the big, you know, red arrow or red X that could have happened if they didn't, you know, change their corporate structure has been averted. So kind of they're breathing a sigh of relief here, even if it's not exactly what you would expect from a corporate kind of rejiggering perspective here.

Up next, President Trump posted on Sunday that he is directing multiple federal agencies to work together to rebuild and reopen the iconic and infamous Alcatraz prison in order to, quote, house America's most ruthless and violent offenders. Alcatraz hasn't been open for 60 years now after shuttering due to high maintenance costs. The island fortress was about three times more expensive to operate than any other federal prison, according to its Web site.

And in the years since, it has welcomed a lot more tourists than criminals, with approximately 1.2 million visitors stopping by every year to see the National Historic Landmark. So the president's plan to reopen the complex might be as hard to pull off as an escape from Alcatraz. Except three people apparently did it.

San Francisco locals are probably not so happy about this because this is the one thing that they can take their family and friends to when they come into town. And I've done it before. It is certainly a big tourist site in San Francisco. I like this plan that others have put forward.

A Lady Liberty of the Pacific. Instead of opening Alcatraz as a supermax prison, you construct this Statue of Liberty-like statue just for the West Coast. You have a beacon lamp in her right hand and a coiled fiber optic cable in her left representing Bay Area technology. So this got a lot of people thinking about what we could possibly do with Alcatraz besides reopen it.

Well, my idea for Alcatraz is the triathlon because leave it to endurance athletes to say, oh, super mass prison, let's start a swimming event from there, which does happen to 2,000 people a year, you know, drive a ferry off, they dive in near Alcatraz, escape via swim, and then do the bike and run afterwards. So it's coming up May 31st on the calendar. So if you're interested, go check that out.

All right, finally, Skype has gone on permanent mute. Yesterday, the service that let you video call anyone in the world for free was officially shut down after a legendary 23-year run. Microsoft, which bought Skype for $8.5 billion in 2011, is encouraging users to migrate to Teams instead, which is kind of like telling everyone at your awesome house party to leave for an underwhelming bar. Skype will hopefully become friends with AIM and Vine in millennial app heaven.

Borrowing out for Skype, it blew a 3-1 lead. It just missed its moment. During the 2020 pandemic, Zoom usage exploded 30x over its 30 times, but Skype didn't see any spike. And actually, the app went from 40 million users in 2020 to 3%.

36 million in 2023. It was, you know, that eponym before Zoom was even a thing. You used to say, I Skype people. Now you say, I Zoom people. So we've already kind of given its laurels before on the show. But, you know, yesterday being its last day was a sad day, especially because we're never going to hear that. Bloop, bloop, bloop, bloop, bloop, bloop, bloop.

Okay, I'll stop. - All right, I'm gonna stop eating. I'm cutting you off right now. Let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Tuesday. If you have any thoughts on the show, you should definitely reach out. Send an email with any questions, comments, or feedback to [email protected]. Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Our associate producers are Olivia Graham and Olivia Lake.

Scoop Stardaris is on audio. Hair and Makeup is taking well-deserved PTO after the Met Gala. Devin Emery is our president and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.