SCOTUS Strikes Down Tariffs, West Virginia Sues Apple

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1:09Bloomberg Audio Studios, podcasts, radio, news. Welcome to Bloomberg Tech. In the last hour, the U.S. Supreme Court has struck down President Donald Trump's sweeping global tariffs in a six to three decision. CNN is reporting that the president has a backup plan and has labeled the decision a disgrace. If we get official comment from the White House or the president, we'll bring it to you live. Let's get to markets. And to summarize the reaction, when the headlines hit, equity surge, particularly technology stocks. You look at both the Nasdaq 100 and the Philadelphia Semiconductor Index. They've actually continued to push to session highs.

1:49Bonds fell. The dollar fell. particularly duration looking at US 10-year yield up a little more than two basis points at 4.09 % but also in terms of duration 30-year as well on the move. Let's get the key details and go to Bloomberg's Anne-Marie Horden who needs to also talk us through like the what happens next. I'm looking at names like Amazon and Etsy pushing higher because this is about duties paid right and the next question will turn to refunds but they'll start at the beginning. Tell us about the decision. Tell us about the voting on the decision and what we need to know. Well, we see what the decision is 6-3.

2:24That was what the court said. That was the voting about striking down the use of IEPA to enact his tariff policies. Now, IEPA tariffs have been used for about 75 percent of where we are right now with the United States when it comes to tariff policies and negotiations we have seen the entire year this administration take on. Now, Brett Kavanaugh in dissenting was talking about the fact that this court does not outline how the rebates are going to go. And he actually said that probably is going to be a mess. Supreme Court is just deciding whether or not IEPA was legal or not for reciprocal tariffs and for the use of the fentanyl tariffs.

3:00They are not the ones that are going to be deciding how the rebates go. A lot of you already seen a lot of retailers and companies line up at trade courts signing up to sue the administration basically to get those rebates if the Supreme Court came down with this IEPA ruling, which they did today, saying that the president's, which is for him, this was a paramount policy. This was an incredibly important, it was really a key pillar for this administration. They are now saying this is illegal. What comes next, Ed, is we've known this administration has had a plan B. Whether or not it's Ambassador Jameson Greer, Treasury Secretary Besson, Peter Navarro, they have all talked about the other avenues they can use.

3:45So plan B includes also some of the sections we've already seen this administration use and Trump has used also in Trump 1. Section 232s, things that have happened on commodities, copper, aluminum. Also, Section 301, Section 122, and 338. Get used to hearing these names. The issue with a lot of these other avenues is that some of them inquire investigations and some of them have certain limits to how high the tariff rate could be. IEPA really was this blunt, flexible tool that the administration could use. So now this is just going to create some potential hurdles when they are trying to enact the next tariff policy.

4:25So let's be clear. This Supreme Court decision voids the April Liberation Day tariffs, right? They range from 10 % to 50%. Fentanyl-related duties, they impacted Canada, Mexico, and China. Those tariffs did not affect those under the decision. Sorry, does not affect those under separate authorities. And as you know, like that's why in the moment steel, aluminum autos, they're not covered by this. One other piece of breaking news literally in the last 10 minutes or so is we have some details of the president's visit to China. So I wanted to give that context to the audience because actually like China was a big part of this story either way.

5:05Absolutely. So the president will be going to China starting March 31st through April 2nd. That was going to be a visit he's been talking about he's going to China. But how awkward almost in a way that the Supreme Court strikes down his IEPA tariffs when he has been using that authority when it comes to China and the tit-for-tat trade war we've seen between Washington and Beijing. Now, not all the tariffs placed on China will evaporate. As I mentioned, there are 232s and Section 301s that are still being used when it comes to Beijing. But some of those sky-high levels when it comes to fentanyl and the reciprocal rate, well, the Supreme Court says that is illegal.

5:42Although I have been talking to some of my sources abroad, and some of these foreign officials who have been in the room with this trade team are talking about the fact that nothing really changes. Because for them, they understand the administration has been preparing for alternative scenarios under 301. So not quite sure they're saying what happens with specific companies, but when it comes to the bilateral trading relationships, what they've gotten is the same information we've received, which is if the Supreme Court decides to strike down our tariffs, we are going to make sure we enact similar policy using other forms.

6:21And one individual I'm talking about is the fact that they are very well prepared for this administration to come back to them in the negotiating room and say, we're going to do the same sort of tariff scenario. We're just going to use a different avenue. And for them, it's going to be Section 301. We have not yet heard directly from the president. We'll bring that reporting when it comes. But, of course, we have State of the Union Tuesday night that was supposed to be focused on the economy. And I'm sure now we'll look forward to that. Bloomberg's Anne-Marie Horden on the breaking news decision.

6:48Thank you very much. We should talk more about markets. Prior to that headline hitting about the Supreme Court decision on IEPA and tariffs, the Nasdaq 100 was headed for its fourth straight weekly decline, its longest run of weekly declines since March of last year. That has turned around. Equities continue pushing higher. Technology in the moment right now is outperforming at the index level as reaction to this Supreme Court decision on tariffs while bonds and the dollar fell. Let's bring in Scott Ladner for more. CIO at Horizon,$12 billion of assets under management who had planned to come onto the program to talk about the technology sector, what was going on in software.

7:32We need to react to this Supreme Court decision. What does it mean for you? What does it mean for your strategies? What does it mean for the technology sector? Yeah, look, and thanks for having me on. This is always interesting when we get news like this right before we go on. But this is interesting. But this is just, look, this is just like one part of the thing that we need to understand. Like now we have the Supreme Court. This was expected. Let's be clear with that. The market had priced in or sort of like understood that this was the most likely outcome from the Supreme Court. But now we have to understand like what is going to be Trump's reaction because there obviously will be a reaction, not only in the tweet storm that I'm sure is forthcoming, but also from some of the policy actions that you and Marie were just discussing.

8:14On top of that, we need to understand how individual companies are going to react. So this is really just sort of the first inning of how this is going to end up playing out. But I do want to make one point, Ed, and that is if the market was convinced that this was sort of the end game, you wouldn't see technology leading today. You'd see something like small caps and more of the cyclical stuff really sort of leading. And you'd see more of a reaction out of the long end of the yield curve. You see 10 years and 30 years, probably up 10, 15, 20 basis points because of both taking a tax away and sort of the positive growth impulse that that would imply and also sort of the damage that this does to the budget deficit.

8:54So those things together would lead to a larger reaction in the bond market and the small caps than we're frankly seeing right now. So that's the market saying we don't exactly know how this is going to end up just yet. some research and academic institutions have actually crunched numbers on that so i'm going to pose you a question then i'm going to jump into my bloomberg terminal and look up that data for for later on in this conversation we're showing amazon and etsy right both pushing higher think about what those companies do the duties that have been paid a lot of this is logical as amory outlined very clearly a question for a lot of companies including across the technology sector is refunds that will go to the lower courts.

9:34But, you know, does this fundamentally alter the fortunes and projections for growth of some of those names, e-commerce being one, Amazon and Etsy? Look, I think it makes their operations a little bit more simple because, you know, one policy tool that was really just at the whim of one individual person, that policy tool has been taken away, or at least if not taken away, then blunted somewhat. So it does increase the visibility and sort of the understandability of their operating environment. So that is helpful. And that is, you know, part of the reason why you're seeing the reaction in some of those stocks today.

10:06But we do need to see how Trump is going to react to this and how the administration is going to react to this. You know, what is the counter to what the Supreme Court just did? So, you know, these gains make sense. But in order for them to be maintained, you know, that sort of future, you know, sort of the look through in the future about how we're going to operate these companies needs to be a little bit more in cement. That cement needs to be a little more dry than it is right now. So the data I was just referencing in the blog comes from the Yale Budget Lab. And without ER per tariffs, consumers will face an overall average effective tariff of 9.1%.

10:38Had those tariffs been left in place, it would be nearer to 17%. But your point on the budget, in the long run, the US economy will be persistently smaller, but 0.1 % based on this decision and they're talking about the kind of shortfall and impact on growth, economic growth, trying to balance like what the Treasury would have brought in from these tariffs versus basically like in layman's terms, people being put off buying, right, because of higher cost pressures. Just try and cast us forward what you think happens next and any real impact on this market and this economy longer term. So look, I mean, I think there's one thing that is relatively clear, and that is this is a tax cut.

11:23So, you know, the tariffs are taxes. And, you know, at the end of the day, tariffs are going to be lower than they otherwise would have been had this decision not been ruled this way. And so, you know, at the margin, this is a tax cut. Now, what we have to figure out is what is exactly, what does that exactly look like? You know, what sectors are most impacted directly? And how big is this ultimate tax cut going to end up being? You know, so those are the things that are going to have to be played out, you know, not only in the market, but in the courts, obviously. But ultimately, this is a positive thing for U.S.

11:53growth. This is a positive thing for nominal GDP growth. It is a negative thing for the budget deficit. The magnitude, you know, so directionally, we know these things. The magnitude is the thing that we're going to all have to sort of figure out over the coming weeks. And that magnitude will obviously impact, you know, the ultimate impact on markets. All right, Scott Ladner, CEO at Horizon, thank you. And actually, some news crossing the Bloomberg tunnel. or the European Parliament's Trade Committee is going to meet on Monday to discuss a US trade deal. The committee also will assess this trade ruling and its implications.

12:24That's coming from the EU, of course, a key trade partner in the United States. Coming up, the battle for the Bugs Bunny brand continues. We're going to discuss the latest efforts to make a deal for Warner Brothers. This is Bloomberg Tech.

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13:41Netflix co-CEO Ted Sarandos says the company's bid to acquire Warner Brothers Discovery will close even after Warner reopened talks with Paramount Skydance. Speaking with Bloomberg, Sarandos accused its rival bidder of spreading misinformation about the offers. What we believe is, and what the Warner Brothers Discovery board agrees with us on as well, is that our deal is a superior deal. We believe it's good for them. We know it's good for us. And we are excited about getting it done. When you talk about clarity and certainty, one of the aspects of the Paramount deal that they have stressed is better.

14:16And I think some of the Warner Brothers shareholders seem to agree or at least entertain it is they're offering to buy the whole company. They will just take it out,$30 a share. Warner Brothers doesn't have to proceed with a spin beforehand. What is your argument for why your more complex deal is better for all those shareholders than just getting the cash tomorrow. This deal is not complicated at all. It is$27.75 plus the value of Discovery Global. By the way, it's the deal that they want. It is the deal that they asked for. These are the assets that were for sale. So the more complex thing is buying the whole company.

14:53When you do that, then you're buying these European sports networks. As you know, sports rights in Europe are incredibly highly regulated, as is the television landscape, which they'd be stepping themselves into. So I would argue that our deal is quite simple. $27.75 per share plus the value of Discovery Global, which I think is an incredible asset. And they do too. That's why they set the offer up this way. That's why when we were bidding, we bid for the assets that were for sale. If Discovery Global is a great asset, I'm just wondering, have you guys talked about just buying the whole company and doing the spin yourself?

15:30As you know, the linear broadcast business is not something that we're interested in, but others are. And I think when I look at the business, particularly those European networks are not in decline the way they are in the U.S. So it is not of our interest, but it's, I'm sure, of interest of many buyers. Ted, you are competing in a politically sensitive media deal. There is reporting and we are in a time where the Ellisons and their relationship to the Trump administration has been discussed. It's also reported, of course, that you met with the president, I think, on November 24th. How are you weighing that and assessing that in this scenario, that relationship between Paramount's leadership and this administration?

16:21Look, I have spoke to the president about the state of the entertainment industry. We've had multiple conversations about how do we protect American jobs? How do we keep the entertainment industry healthy? What are those headwinds? What are those things that we're working on to try to keep production up in the United States? We are investing a billion dollars into a new state-of-the-art production facility at the old Fort Monmouth military base in New Jersey. Obviously, the president is very keenly interested in entertainment. And he's very interested in American industry and American jobs. So those are the conversations that we've had.

16:55I don't know why the Ellisons intimate that they have some direct line to the Department of Justice for a faster path of clearance. But I doubt that they do. This is a process that is being run by the Department of Justice. The president has been very clear on that. We've been very clear on that. The Department of Justice published in 2023 the guidelines for mergers that they are following right now. So that's what's happening here. This is a business deal, not a political deal. That was Netflix co-CEO Ted Sarandos. Let's stick with the media drama and bring in Rich Greenfield. He's a partner, media technology analyst at Light Shed Partners.

17:34There was a lot in that. You know, I think to start, I welcome your thoughts on it. But to be frank, you know, we open that conversation by saying, given the current scenario where there's a waiver until Monday for Warner Brothers to scurry to speak to Paramount, has Netflix got the means and the will to improve its bid if it needs to? And that wasn't really answered. Well, I think you've got to step back. I think one of the points that I think Lucas sort of ignored in asking Ted, he was talking about, isn't the bid for the whole company simpler? And the answer is obviously bidding for one whole company is obviously simpler.

18:14But what he's missing is the Warner board and what really started this entire process was a desire to split the company, right, to separate the studio streaming assets from the linear TV business. That was considered mission critical. And I think the challenge now is Netflix, by buying only the streaming and studio, is not preventing Warner Brothers from affecting the split this summer. Paramount is. They want to stop the split. They need the cash flow from those – they're dying, but those high free cash flow cable network assets to finance this. And so they're trying to stop the split. But the Warner board wants to split because, God forbid, Trump changes his mind.

19:05Like we've seen Tegna, Nexstar, like you have certainly seen Trump change his mind. If for any reason Trump or even a foreign regulator blocks the Paramount Warner Brothers deal, you would not have split the company and you'd be in 2027. And I think that is – there's a lot more value, sort of an intangible, but a real value to that split that I think there's been a tremendous amount of just ignoring in what I've read in sort of the press about this. And so I think that piece is really important. But to answer your very specific question, I do think if Netflix had a raise by 5 % to 10 % their bid, I think they would.

19:41And so I think the only way Paramount wins is with a knockout bid, something in the 35 to 40 range, probably 36, 37. I doubt Netflix chases that high. On the Networks linear TV piece, I think we asked him later on why, you know, and Mr. Sarandos' answer is pretty simple. We're not in that business, but he'd already said those are the assets for sale. What we did talk about was the movie business, theaters, right? And Bloomberg had reported that the DOJ is talking to that industry to assess what they think will happen. And the simple argument Mr. Sarandos makes is that Warner Brothers has not just been making the IP for 100 years.

20:18Their distribution at theaters is excellent. That would be an advantage to Netflix. Do you see that? Look, Netflix is not in the theatrical distribution business. I think they certainly have recognized that theatrical can add a marketing power to some of their content. You look at how they put Stranger Things in movie theaters. You know, they put K-pop Demon Hunters a couple of times in movie theaters. So, you know, they actually released a lot of movies with, you know, shorter windows. But there was a lot of movies. I think probably 20 movies released in theaters last year by Netflix. And so, you know, I don't think there's a wholesale aversion.

20:56Do they believe that the movie business needs to change? I think they do. I mean, look, movie theater attendance. Forget about this whole Netflix discussion for a second. Movie theater box office in the last 12 months is 25 percent below where it was pre-pandemic. And that's just box office. Actual butts in seats. Attendance is down 50 percent from pre-pandemic. So the bottom line is the theater business is in a very, very dark, troubled place. The reality is you need people that are investing in the entertainment business. And the reality is Netflix has certainly shown a history of investing very aggressively in content all around the world.

21:42Look, we'll see. Paramount says they're going to make 30 movies, but Disney also said they were going to keep Fox as a fully independent studio. And cost-cutting eventually drove that production right back down. And so there's very few incremental movies from Disney today. And so I don't know. I'm sort of skeptical that anyone would ever try to actually make 30 movies because you can't make 10 or 15 movies profitably, let alone 30. Paramount has until Monday to to do something right, because right now it's just that's sort of a red herring. So go with that. So go with that. Not really. So what happens next?

22:16Well, we don't really know. I mean, look, the board has a fiduciary. If you're the board of Warner Brothers, you have fiduciary responsibility up until the vote. So if Paramount came in the night before with a knockout bid,$35 or$38, all cash, debt guaranteed by the Ellison, so you don't have to worry about solvency and closing and all of that, the board would – I think would have to listen. So like sure, they are definitely trying to force a best and final out of Paramount who has been asking to talk to the board for quite – probably for a couple of months now. But my point just being that even if it doesn't happen on Monday, it theoretically could happen later.

22:57Time is obviously running out. You're down to effectively four weeks from today there's going to be a shareholder vote. And I think without a meaningful increase from Paramount, Netflix is going to win that vote. To your mind, Rich, we just have 30 seconds, but which is most logical? Remind us where you stand. unless if i was paramount i would not dramatically raise my bid they really believe that regulatory wise will fail i would play that out i think overpaying if you're paramount and over levering does not make sense i'd rather lose and invest on my own sort of the way netflix did for a decade than overpay and so i hope paramount doesn't do something quote unquote price stupid but we'll see over the next few weeks.

23:44Rich Greenfield, Light Shed Partners, great to have you back on the show. Thank you very much. Let's go to space. NASA has set March 6th as the target date for its Artemis II lunar mission. The space agency is holding a press conference right now, which we're monitoring, but let's get the latest details of Bloomberg space reporter, Sana Pashanka. Okay, we have a date. You and I will be, it seems, heading to Florida. Remind us how we got to this point. yeah so um they just you know conducted the wet dress rehearsal over the past few days and during that test they practiced loading fuel into the rocket conducting the lunch launch countdown and removing the propellant at kennedy space center to make sure the rocket is ready to take these astronauts to the vicinity of the moon which will be the first time in over half a century So, yeah, now they are successfully targeting the March 6th launch date.

24:39The four astronauts will enter a quarantine period soon so that they can be prepared for the mission. Yeah, I think that 14-day quarantine period kicks off this afternoon. And there are no guarantees. Remember, there are windows. There are dates through March and then another window in April. Big news yesterday. NASA had put Starliner and what happened with Starliner in the same class of mishap as the shuttle tragedies. That was a big red headline on the terminal. What do we need to know? Yeah, so basically, if you might remember, the Boeing Starliner mishap left two NASA astronauts kind of stuck on the International Space Station for months longer than expected.

25:18after the vehicle suffered technical difficulties on the way there that made it too dangerous to bring these astronauts back home. So they initially had a week-long mission planned and it ended up turning into months since they could not come home on the Boeing Starliner vehicle. And so this report, which came out yesterday, essentially classified the whole debacle as a type A mishap. As you mentioned, it's the same level as the Challenger and the Columbia incidents. And Isaacman, the NASA administrator, essentially attributed the debacle and kind of the lack of, you know, clear organization around it as the fault of NASA bureaucracy, faulty engineering, and more.