From Nasdaq: 2025-02-18 20:32:00

– The Trump administration plans to impose tariffs on imports from Canada, Mexico, and China, with a de minimus exemption for imports below $800.
– Businesses like Canadian Pacific Kansas City are adjusting to tariffs that could impact the flow of goods.
– OpenAI and Softbank announce a $3 billion enterprise contract and joint venture for AI offerings in Japan.
– The FDA allows nicotine pouch Zyn to remain on the market, affecting big tobacco’s future.
– The Trump administration’s tariffs will have major implications for companies heavily reliant on imports. The impact of tariffs on companies can be complex, with even seemingly unaffected companies feeling the effects. Canadian Pacific, Kansas City Southern, a cross-border railroad company, is feeling the impact of tariffs on their business due to decreased trade volumes. The stock is down about 6% due to slowing business. The company is focusing on long-term investments and surviving the tariffs.

The de minimis rule, allowing duty-free entry for packages below $800, has been targeted by the Trump administration with tariffs. Chinese goods, particularly from online retailers, are affected. The US processed over 1.3 billion shipments under this rule last year, up from 139 million in 2015. The rule impacts business models that rely on flexible manufacturing and advertising trends to make profits. The de minimis rule is being tightened, affecting low-cost overseas competitors and big US businesses. Companies must adjust inventory levels and supply chains due to potential higher costs under the USMCA. SoftBank’s $3 billion annual spend on OpenAI’s tech shows Masayoshi Son’s interest in AI enterprise offerings and partnership with OpenAI. Son’s track record of successful technology investments and partnerships suggests a promising future for the collaboration. Altman’s ability to attract deep-pocketed partners like Microsoft and SoftBank highlights the high costs associated with Cloud computing and AI workloads. By partnering with major players, Altman is positioning OpenAI for success in the tech industry. SoftBank is set to lead the funding round for OpenAI, potentially doubling valuation from late 2024. Sam Altman, with a playbook seen before, seeks partnerships and capital like Steve Jobs and Elon Musk to dominate the industry. ZYN, a nicotine pouch product, approved by FDA pre-Trump inauguration, offers a safer alternative to cigarettes and smokeless tobacco. FDA approval indicates nicotine pouches will remain on the market, providing a safer product for those looking to quit smoking. ZYN’s rise to popularity can be attributed to being the first and best product on the market, with influencers driving virality and high demand. ZYN has seen a 55% increase in sales, selling 460 million cans in the first nine months of 2024. Influencers promote the product for free, but Philip Morris faces challenges from FDA regulations that restrict advertising to adults only. The FDA’s move to postpone a rule to reduce nicotine levels in cigarettes benefits the industry incumbents. Regulatory uncertainty limits new entrants in the market, favoring existing players like ZYN. Altria invested $13 billion in Jewel in 2018, but eventually gave away its minority stake in exchange for intellectual property rights related to inhaled tobacco. They then bought Enjoy as their vaping play, learning the risks of regulatory issues in the nicotine industry from the Jewel experience of advertising to youth.

Philip Morris dominates the smoke-free products market, generating 37% of revenue from them in 2024. With leading products like ZYN and heat-not-burn devices, they plan to get two-thirds of revenue from smoke-free products by 2030. Their stock has surged over 50% in the past five years, while competitors lag behind.

Despite regulatory challenges and declining smoking rates, tobacco companies like Philip Morris and Altria are exploring new ventures like nicotine pouches. Investment in healthcare and potential diversification into other industries are options, but the strong historical performance of nicotine businesses suggests continued success in smokeless ventures.

The Motley Fool analysts may have positions in various stocks mentioned, but the content follows editorial standards and is not influenced by advertisers. Dylan Lewis reminds listeners to not make investment decisions solely based on the program. The Motley Fool only recommends products they personally endorse, maintaining high standards for financial content. The Motley Fool recommends investing in Alibaba Group, British American Tobacco P.l.c., General Motors, and Philip Morris International. Options include long calls on Microsoft and British American Tobacco, as well as short calls and puts on British American Tobacco and Microsoft. Check out their disclosure policy for more information.

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