Retail Stocks Jump After Supreme Court Strikes Down US Tariffs

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1:14All investing is subject to risk Vanguard Marketing Corporation Distributor. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. One of the areas that was certainly impacted by tariffs had been retail. They import a lot of the stuff that we all wear from Asia, from China, from areas of the world that are subject to tariffs. So we can get a sense of how this might change the game here, this Supreme Court decision today.

2:01We welcome Poonam Goyal. She covers all the retail companies for Bloomberg Intelligence. Poonam, what's your, I guess, your initial thought here from the retailer's perspective to the extent that a lot of these tariffs are going to be rolled back? Yeah, I think, look, it's good news for retail because at the end of the day, their costs will go down. These tariffs caused unnecessary stress in the supply chains, caused retailers to raise prices. It lowered their margins. So all that is now set to reverse. We still don't know what the magnitude of this will eventually shape out to be. Our analysts here on the government side think that while these have been overturned, you don't know what else could be added.

2:39So I wouldn't say we go to zero. That's probably not happening. But I do think that as these tariffs get overturned and as costs drop for these retailers, we should see a pickup in margins in 2026. and also a pickup in demand because, you know, the consumers for a long time, or at least over the last year, have been very concerned with inflationary pressures and just prices going up. So all that will help hopefully ease demand too. You mentioned prices going up. Do we know of any companies, any brands that raised prices because of tariffs where they made that link very explicit? Yes. Nike was one of the retailers that had explicitly said that it's raising prices, not on everything, but on goods that were over$100, notably over$150.

3:26They had taken a mid-single-digit price increase. So prices did go up across retail from tariffs. They didn't go up 20%, 30%, but they did go up in the single digits, mid to high single digits. You know, the New York Fed is out with a report recently saying that about 90 % of the tariff costs were born somewhere in the U.S. chain, whether it was the importers, the companies themselves, consumers, and maybe only 10 % by exporters. Yeah, Kevin Hassett disputes that, of course. Yeah, of course, of course that he does. But I'll go with the New York Fed. They're pretty solid in their numbers. So from your perspective and the perspective of the retailers, Poonam, how much do you think like the Nikes of the world kind of took in their margin versus passing along to consumers?

4:10Yeah, I would say that I think there was a shared cost across the tariffs between the suppliers and the manufacturers. So it wasn't 90-10. I don't, I find that hard to believe because if that was the case, a mid-single-legit price increase wouldn't be enough to offset the cost pressures. It'd have to be higher. But that said, I do think that, you know, they did see their costs rise and they did try to offset it, not just through price increases, but also through efficiencies within their organization, whether it was across payroll, whether it's through technology. You know, we've heard a lot about these AI investments and that they've really helped improve efficiency across the organization.

4:52But we haven't seen that in the numbers. And my answer to that is it's not in the numbers because it's really just been helping offset these incremental pressures from tariffs. We've seen companies like PepsiCo move to cut prices on some of their products, their snack products. And I'm not comparing snacks with clothing or sneakers, but if a company like Nike raised prices because of the tariffs, is there any world in which it might reduce prices or lower prices because tariffs were removed? So I think the consumer is expecting prices to go down when the tariffs are removed. The big question is if prices went up, let's say 10%, are they going to come down 10 %?

5:35That typically doesn't happen. They don't necessarily drop to the same extent they went up. But yes, would you have some relief from the cost increases? Sure. I think retailers like Walmart that really push the pedal on price much harder and care about offering that incremental value to their customers, that's what they stand for. Those are the retailers that are probably going to push the pedal much harder on price when they get the relief from tariffs. So what's just broadly defined right now? Step back a little bit, Poonam. And what's your view of the consumer here based upon kind of the results you've seen from some of the retail companies you follow?

6:10I think the consumer is stretched. I think they're under pressure, but they're making choices. They're being selective. They're shopping at retailers that offer them convenience, that offer them speed, and that offer them something differentiated. And I think that's been the story for a little while now. I think that continues. So retailers like Amazon have been doing well because they offer both value, convenience, free shipping, and they've done well. Walmart, you know, we heard from, they also did well on their value proposition. So I think it's those retailers that really stand out in the crowd, or those that have a fashion element, whether it's Urban Outfitters, you know, with just the right assortments that's attracting these younger shoppers, they are the ones who are doing well.

6:50What does this mean for furniture companies like Wayfair? And I recognize that Wayfair doesn't make a lot of its own furniture necessarily. It's outsourced a lot of that. But have they been explicit in how much tariffs have hurt them because most of their manufacturing is not done in the United States? I'm guessing it's done overseas. It is done overseas. But I think with Wayfair, it's a little tricky because, as you said, they are a marketplace, right? So when you think about Wayfair, they have thousands of suppliers to choose from or manufacturers or sellers. And if the seller wants to make a sale, They can go from one seller who may say, the sofa is$1 ,000 and I have a 50 % margin on it.

7:30But then there's seller number two who says, well, you know what? I'll take a 15 % margin on it because I want to get the sale. So the diversity and just the choice that they have on who they bring on board to offer the compelling prices has helped them offset a lot of these tariff loads that others that are vertically integrated have to deal with directly. Poon, we heard a lot of companies and retailers, but just across the economy, talk about shifting their supply chains to maybe parts of the world that are less encumbered by tariffs. Have you seen that in the retail space? Like, is Nike making shoes in Vietnam and not China or anything like that?

8:10Absolutely. The supply chain shift has been going on since the first round of tariffs, actually, and it's only been pronounced since last year. We expect supply chains to continue to be diversified. The only difference with this ruling being overturned is that the urgency has somewhat been moderated. So you don't have to be as reactive as you would have been last year. You can take your time and be more strategic about where you want to be diversified. But I don't think that just because the tariffs are overturned, now everything will go back to China. I think the diversification step up is here to stay.

8:46Stay with us. More from Bloomberg Intelligence coming up after this.

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10:48You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. As we look through the different sectors that are impacted by this Supreme Court ruling, basically determining that President Trump's tariffs under the IEPA provision are illegal. Let's take a look at what this means for the auto industry. Steve Mann is our global autos and industrials research analyst. And Steve, I'm looking at the top live blog that Bloomberg makes available to our clients.

11:26And one thing that many people may not realize is that the ruling does not pertain to the main U.S. tariffs affecting the auto industry. Walk us through what is affected when it comes to auto tariffs by this ruling. Yes, Karla. The bottom line is there's no impact on the auto industry. The tariffs on the auto industry is under the Section 232 of the Trade Expansion Act of 1962. So it's not put in place by the emergency powers. So the baseline of the 25 % tariff on auto imports is still there. Now, Now, Trump did renegotiate with countries like South Korea and Japan to bring it down to 15. But for the most part, you know, consumer will still feel the impact of these tariffs of, you know, close to$1 ,000 to$3 ,000 per vehicle on average.

12:24The other thing that I want to highlight is it's the steel and aluminum import tariff of 50%. That's also not impacted by the Supreme Court ruling today. And that also has a huge impact on the cost for the automakers. So, Steve, what have you seen so far for the automakers and how they're dealing with these higher tariff levels? Are they moving production? Are they changing maybe some parts of the supply chain? What have they been trying to do to mitigate the tariff costs? That's a good question, Paul. I think, you know, I think the reason why Trump went with the 232, section 232 approaches is that the auto industry, given its huge manufacturing base, is critical to the economy.

13:10It's critical to national security. He does want to bring a lot of that manufacturing back into the U.S. And that's what we've seen with the U.S. automaker. For example, GM actually has shifted some of the Silverado production from Oshawa, Ontario, back to the U.S. And you've seen Honda Hyundai from South Korea making huge investments in the U.S. to set up manufacturing base. So I think that's still the course for the administration. And I think we'll still continue to hear more probably in the next few years, more of that reshoring auto manufacturing back into the U.S. So how do you see this moving forward?

13:56How does a Ford, how does a GM plan for the next year, for the next four years, the next 10 years? Yeah, I think they're going to have to revisit and they're still doing that. They have done that already. Revisit the supply chain. I think the low-hanging fruit was moving some of the auto assembly back to the U.S., but that's not enough. If the supply chain is not close to where the cars are made, freight costs will go up. There will continue to be potential tariffs in some of the components. So you're starting to see companies, especially from South Korea, automakers from South Korea and Japan, actually asking the supplier to shift some of that production into the U.S.

14:45just to cut some of the freight and potential TerraCross on the auto parts. So we're going to see a whole lot of changes in the supply chain. And, you know, I think one of the things that we also are keeping an eye on is the USMCA, the US-Mexico-Canada Free Trade Agreement. That's up for review this year. That's going to have a huge, a much bigger impact on the auto industry. So we'll see how that plays out. Stay with us. More from Bloomberg Intelligence coming up after this. Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London.

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16:23You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. I do want to bring in Dan Ives. Dan, of course, is the noted analyst, the global head of technology research at Wedbush Securities. to get his take on what we're seeing in tech and whether, Dan, this SCOTUS ruling is kind of just risk on for the market overall. And that means a big lift for the biggest part of the stock market, tech, or whether this is specifically good news for tech companies.

17:02Yeah, this specific good news for tech companies because of the supply chain. Because the biggest worry is that tariffs, what that could do in terms of the data center build out AI, build out chips, everything that we're seeing with China. Look, there's going to be other ways that they're going to try to go around this 232 Section 301. The reality is it's a huge blow to the tariff policy, and it's very bullish for tech coming out of the gates. That's going to be the initial date. So, Dan, it's been, you know, a little more than roughly a year that all companies have been dealing with this tariff uncertainty.

17:37how have the technology companies who do have a global supply chain rely a lot on parts of Asia, how have they kind of adjusted here? Look, I mean, Apple has moved a lot to India. Others have had to make significant investments in the U.S. in order to diversify their supply chain. But as we talk about a lot on the show, the vast majority of the supply chain will continue to be cemented in Asia. And where you had companies starting to look at diversification, increased costs, which is going to potentially impact the supply chain. That's off the table now. And that's something, look, big tech companies, they'll say publicly behind closed doors.

18:24They're a huge sense of relief right now. come to this. Interesting. You know, given that so many of the big tech CEOs have really aligned themselves with the president, what does this mean for the big chip makers that are outside the United States, the TSMC, the Samsung Electronics of the world? I mean, it's extreme positive for them because when you think about each of them, the question there was, how is that going to impact them from a policy perspective, from a tariff in terms of coming into the U.S. And then you start to think about manufacturing. You'll continue to have some manufacturing move to the U.S.

19:04But this is actually going to put the brakes on some of the policies that some of these tech players had. Look, there's going to be Section 232, Section 301. There'll be other areas that go about it. But for big tech, supply chain, chip players, memory players, it's a clear positive. there's no way to really go against that thesis. Dan, your world has been rocked over the last several weeks by AI and the impact some people are speculating and may have on certain parts of the marketplace, including software companies, particularly software as a service companies here. What's the current thinking as you talk to investors these days?

19:44Yeah, I mean, Paul, I'm calling it the AI ghost trade because you're trying to fight a ghost because of the view that this is going to massively disrupt software. It's going to massively disrupt cybersecurity. And I've talked about it. It's the opposite. I think it's the most disconnected trade that I've seen in my career on Wall Street in terms of what's happened to software stocks now. But again, like we talk about, fighting a ghost, there's going to be boxes that are checked, whether it's OpenAI in the$100 billion, whether there's a venture earning next week, whether it's Apple on AI, whether it's circular financing, software companies show monetization, this is going to happen.

20:25But right now you're fighting a ghost and the bears are loving it. But again, that will be short lived, in my opinion. That might be the case in the equity market, but we're seeing private credit leverage loans really come under pressure because of all those loans to a lot of software companies, many of which don't have investment grade ratings. things. Is credit driving the concerns in the equity market? What's leading what, Dan? Dan Kempner Yeah, I mean, look, if you get blew out, right? I mean, obviously, there'll be like some concerns there. But then on the other hand, look at a pile and others.

20:59So I think if you look relative to some of the exposure and what the credit market's telling you, it's still very healthy from a credit perspective. But no different than we saw with banks a few years ago, Silicon Valley Bank and others, There's going to be hypersensitivity to anything that happens here. But the reality is that these companies have more cash than a lot of countries when you actually go through it. The point is they're going to continue to do it. But look, Scar, if there's five people trading CDS instruments for Oracle in their basement, that's going to be extrapolated. And we saw that a few weeks ago.

21:38It's just a reality. We're going through a ghost trade. It's an AI ghost trade and you got to navigate through it. But net net today is positive for tech. And that's one step forward. Hey, Dan, you spent a lot of time in Silicon Valley and it's just a great place to get a sense of kind of where the, you know, the tech investment mindset is here. Has tariffs dialed back kind of the risk profile of some of the good folks on Sand Hill Road as you think about what technologies to fund? Is it tempered a little bit and could today's ruling be a major change? Yeah, I think tempered and maybe put like a little question mark in the back of the mind in terms of what was going to be the next policy, what was going to be the next threat, specifically when it came to supply chain, how companies are positioned.

22:26You can't just have the fingers and change your supply chain. We're talking about things that could take 24, 36 months. this ruling, it does clear the path a little more. And I think that's something that's a positive as you're in a unprecedented build out of a fourth industrial revolution in AI. And for the first time in 30 years, the U.S. is ahead of China when it comes to tech. Stay with us. More from Bloomberg Intelligence coming up after this. I'm Joe Matthew, inviting you to join me for the Balance of Power podcast. Every day we deliver insight and analysis on the latest headlines from the White House and Capitol Hill, including breaking news from Bloomberg's reporters and in-depth conversations with lawmakers and administration officials that you won't hear anywhere else.

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23:58you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube well in the summer of 2025 barry ritholtz spoke with neil katiel the lawyer who argued the case against trump's tariffs in front of the u.s Supreme Court. Here's what he had to say about their legality. The president has an easy fix. If he wants to, he could go to Congress and seek approval for the tariffs that he wants. That's what he did the first time around.

24:33And as we talked about last week, you know, that's something that failed in Congress. And so maybe that's why he doesn't want to do it. Obviously, these tariffs are highly unpopular. But nonetheless, you know, the Congress is controlled by his party. And, you know, that's the place to start. Don't run to the federal courts to do what you can't do in Congress. That was Neil Katyal, the lawyer who argued the case against Trump's tariffs in front of the U.S. Supreme Court. He's speaking with Barry Ritholtz. Barry Ritholtz joins us here. He is the founder of Ritholtz Wealth Management and host of Masters in Business here.

25:04Barry, what do you take away from the Supreme Court's decision here today? Yeah, long overdue, long awaited. I think the market always has a hard time digesting data inputs that are kind of outside of their sweet spot. So when we get an FDA approval or the announcement of a merger or corporate earnings or non-farm payroll, hey, the markets are really good at integrating that into prices. I suspect it's going to take a little while for this to get digested. My personal expectation is there are a lot of winners and losers from this. I think that the winners are going to be obviously the retailers because prices have gone up.

25:51We've seen a ton of different research that says somewhere between 90 and 95 percent of the cost of tariffs falls on consumers, essentially making them a VAT tax. So not only retailers, but manufacturers like Caterpillar and Deere, what aren't affected by the Supreme Court ruling, and we heard one of the prior guests say this is all of the tariffs on U.S. auto manufacturers on steel, on aluminum. That's a whole separate law. That's not the IEPA law. That's a 232 law. And that's still up in the air. There's no resolution from from this case for for GM, Ford, U.S. steel, et cetera. But when we look at companies like Toyota or Costco or Walmart, that Toyota filed a refund because all of the parts that either Toyota proper ships to their U.S.