Good morning. Just after midnight, President Trump’s “reciprocal” tariffs went into effect against 86 countries. Analysts have estimated that the new US average effective tariff rate is north of 20%, the highest in more than 100 years.
Ahead of the tariff deadline, markets swung violently, mostly way down: According to Bloomberg’s Cameron Crise, yesterday was the fourth straight trading day when the S&P 500’s trading range was 5% or more. That’s only happened in 1987, 2008, and 2020.
You are waking up to a whole new economic world…
—Matty Merritt, Molly Liebergall, Sam Klebanov, Adam Epstein, Neal Freyman
Markets: For several hours on Tuesday, it looked like stocks were going to regain some of the ground lost during the market’s Terrible, Horrible, No Good, Very Bad Week. But after the Trump administration made it clear that its increased tariffs on China would go into effect, all three indexes plunged. Apple, which makes most of its iPhones in China, was hit harder than many of its Big Tech peers (more on that below).
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Shoppers are thinking it’s better to have an Apple A18 processor and not need it, than to need it and not have it. Apple customers are scrambling to buy new iPhones out of fear that the company could raise prices to offset President Trump’s tariffs, according to Bloomberg.
Employees at locations throughout the US said they’re being bombarded with questions about potential price hikes and have witnessed customers panic-buying phones. Though Apple declined to comment to Bloomberg, its retail stores reportedly saw higher sales over the last weekend than in previous years.
What’s next for the iPhone
Trump’s new tariffs on Chinese goods mean the cost for Apple to manufacture an iPhone could jump from $580 to $850, according to a report from TechInsights.
Apple will likely hold off on immediately raising the price of its flagship product (which it has kept at $999 since 2017), but the iPhone accounts for 50% of its total revenue. So, unless the company plans to make Mr. Milchick start driving Uber, Apple will have to do something to make up the cost:
The company’s best bet is to get an exemption from the tariffs, like it did during the first Trump administration.
But the White House doesn’t seem keen on giving a reprieve to China, considering it just upped its duties on the country to 104%.
Diversifying the supply chain. Apple announced that it will temporarily source more iPhones from India, which faces a tariff about a quarter of the size of China’s. While the tech giant likely will not completely retool its supply chains, it’s already spent the last few years manufacturing some products in Vietnam, Ireland, Thailand, and Malaysia to reduce its dependence on China.
Bottom line: Despite Trump’s goal to bring manufacturing to the US, don’t expect a stateside Apple factory ribbon-cutting. Not only would moving iPhone production to the US be logically impossible, per Wedbush analyst Dan Ives, but it could also increase the smartphone’s price to $3,500.—MM
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Trump proceeds with 104% tariffs on China. The White House moved forward with the massive tariffs after neither side showed much interest in making a deal. The 104% includes a previous duty on China + Trump’s 34% tariff announced last week + an extra 50% he slapped on if China did not rescind its retaliatory levy on the US (it didn’t). The escalating tensions between the US and China come as Trump says he’s made progress on deals with other countries, including South Korea. Meanwhile, Trump confidante and Tesla CEO Elon Musk publicly broke with the White House on its tariff policy, calling trade advisor Peter Navarro a “moron” and “dumber than a sack of bricks.”
₿ The DOJ scrapped its crypto investigations unit. The National Cryptocurrency Enforcement Team—the primary federal government unit investigating crypto-related crimes—no longer exists, Deputy Attorney General Todd Blanche wrote in a memo Monday night. Instead, the Justice Department is outsourcing crypto prosecution to US attorneys’ offices, refocusing on crimes involving terrorism and human trafficking. The move is the latest in a series of crypto-friendly policies enacted by the Trump administration.
The Supreme Court sided with Trump on fired federal workers. In a 7–2 vote, SCOTUS ruled that the White House is allowed to fire 16,000 probationary employees, arguing that nonprofits who had sued to block the February firings did not have the standing to do so. The court didn’t make a judgment on the legality of the mass firings, only ruling that the nonprofits could not block them. Though seen as a win for Trump in the short term, the decision leaves the door open for more challenges to large-scale government layoffs.—AE
The government’s gimme-money department has shrunk so much that it’s struggling to get up and work. IRS audits are at a record low and could plunge even further following President Trump’s cuts, the New York Times reported yesterday.
According to NYT’s analysis of federal data:
Audit rates for personal income taxes fell from ~1% (about 1 in every 100 tax returns) in 2010 to just 0.36% in 2023 (roughly 1 in 300).
The audit rate fell below 0.5% in 2020 for the first time on record.
The IRS has collected only $4.5 billion from 2019 personal audits so far, down from $11 billion from audits of 2010 returns—and there have been “steep declines” in corporate audits, too.
Why? The IRS cut more than 20% of its 95,000-person workforce between 2010 and 2019, leaving burdened workers with less room for time-consuming high-income audits, which can recoup $100,000+ from a single flawed tax return.
Auditing could get worse: DOGE is planning on cutting 18,000+ IRS workers, which would cost the government $6.8 billion in lost tax revenue next year, according to Yale’s nonpartisan Budget Lab. As many as 5,000 IRS employees have already accepted buyouts.
Also…the White House announced yesterday that the IRS will start sharing undocumented taxpayers’ information with ICE, which reportedly could violate federal privacy laws. DOGE is also seeking to widen access to taxpayer info, Wired reported this weekend.—ML
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In a defeat for tumbleweed, Zara won’t be joining the parade of retailers that have ditched San Francisco’s embattled Union Square shopping district.
The fast-fashion purveyor revealed this week that it plans to replace its current Union Square store, slated to shutter in 2026, with a new flagship location down the street. The move to a nearby building that’s stood empty since 2021 will nearly double its square footage in the area, the San Francisco Chronicle reported.
SF Mayor Daniel Lurie touted Zara digging in as “another vote of confidence” in the city, which has had a few rough years.
SF needs more like Zara
Downtown SF has hemorrhaged businesses since the pandemic as remote work slashed foot traffic, while crime and homelessness increased.
Lurie, a Levi Strauss heir and philanthropist, was elected last fall on his promise to help the city shed its image of a cyberpunk dystopia. Aside from boosting policing in tourist districts, moving to reduce homelessness, and allowing events with outdoor boozing on some streets, the city hall newcomer is leaning on the private sector to revamp downtown.
For instance…yesterday, Lurie allies announced the creation of a downtown revitalization nonprofit seeded by wealthy Friscans and led by Gap heir Bob Fisher, former Hewlett-Packard CEO Meg Whitman, and private equity investor David Stiepleman.—SK
Spies have come a long way from those novelty disguise glasses with the big nose and bushy eyebrows (🥸). As CNBC reported yesterday, fake job seekers—many of whom are agents of foreign governments looking to steal customer data or trade secrets—are exploiting generative AI and deepfake software to appear as the perfect candidates for remote roles.
By 2028, 1 in 4 job candidates will be fake, according to the research firm Gartner. Companies are learning how to fight the scourge of AI-enhanced impostors, but some still slip through the cracks: Per the DOJ, more than 300 companies have accidentally hired fake applicants with ties to North Korea.
“Every time we list a job posting, we get 100 North Korean spies applying to it,” the founder of a Florida-based cybersecurity startup told CNBC.—AE
Meta is blocking teens under 16 from livestreaming on Facebook without a parent’s permission as part of the company’s efforts to protect young users.
NASA is considering consolidating offices and shifting thousands of jobs amid the Trump administration’s cuts to government spending, Politico reported.
China could ban Hollywood movies in response to increased tariffs, according to a blogger with ties to the Chinese government.
Walgreens beat Wall Street’s revenue expectations in its fiscal Q2 as it prepares to go private with the help of Sycamore Partners.
Sen. Cory Booker’s heart rate remained above 109 beats per minute for most of his record-long, 25-hour Senate speech, per data from his Oura Ring.
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Today’s Word of the Day is: scourge, meaning “the cause of a great affliction.” Thanks to Meg from Peekskill, NY, for the suggestion. Submit another Word of the Day here.
Trump proceeds with 104% tariffs on China. The White House moved forward with the 
The Supreme Court sided with Trump on fired federal workers. In a 7–2 vote, SCOTUS ruled that the White House is 
. AAdvantage Business™ is American Airlines’ 
Sit: Your lower back will thank you for this 
