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One of the areas that was certainly impacted by teriffs had been retail, and they import a lot of the stuff we all wear from Asia, from China, from areas of the world that are subject to teriffs. So we can get a sense of how this might change the game.
Here this Supreme Court decision today, we welcome put them Goyle, she covers all the retail companies for Bloomberg Intelligence, put on what's your I guess your initial thought here from the retailer's perspective to the extent that these a lot of these terrifts are going to be rolled back.
Yeah, I think. Look, it's good news for retail because at the end of 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. You know, there's our analysts here on the government side think that while these have been overturned, you don't know what else could be added. So 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 cost drop for these retailers, we should see a pickup in margins in twenty twenty six, 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've mentioned prices going up. Do we know of any companies, any brands that raised prices because of tariffs where they made that linked very explicit.
Yes, Snike was one of the retailer that had explicitly said that it's raising prices not on everything, but on goods that were over one hundred dollars, notably over one fifty. They had taken a mid single digit price increase. So prices did go up across retail from tariffs. They didn't go up twenty thirty percent, but they did go up in the single digits, mid to high single digits.
You know, the New York Fed is out with the report recently saying that about ninety percent of the tariff costs were born somewhere in the US chain, whether it was the importers, the companies themselves, consumers, maybe only ten percent by exporters.
Yeah.
Kevin Hasset disputes that, of course.
Yeah, 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, Punum, how much did do you think, like the Nikes of the world kind of took in their margin versus passing along to consumers.
Yeah, I would say that. I think there was a shared cost across the tariffs between the suppliers and the manufact So it wasn't ninety ten. I don't. I find that hard to believe because if that was the case, a mid single digit 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 a cross payroll, whether it's through technology. You know, we've heard a lot about these AI investments, and they've really helped improve efficiency across the organization,
but 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 moved 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 ten percent, are they going to come down ten percent? That 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 in 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, put them 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.
I 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, set off for 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're the ones who are doing well.
What 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 turffs 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 our manufacturers or sellers, and if the seller wants to make a sale, you know, they can go from one seller who may say the sofa is one thousand dollars and I have a fifty percent margin on it. But then there's seller number two who says, well, you know, I'll take a fifteen percent 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 terraf folds that others that are vertically integrated have to deal with directly.
Put, we heard a lot of companies in re 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 as Nike making shoes in Vietnam and not China or anything like that.
Absolutely, the supply chain shift has been going on since the first round of tariffs actually, and it's only been pronounced since last year. Staff supply chains to continue to be diversified. The only difference with this ruling being overturned is 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.
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As we look through the different sectors that are impacted by this Supreme Court ruling basically determining that President Trump's tariffs under the AIPA provision are legal, Let's take a look at what this means for the auto industry. Steve Man is our global Autos and Industrials research analysts, and Steve I'm looking at the top live block that Bloomberg
makes available to our clients. And one thing that many people may not realize is that the ruling does not pertain to the main US tarffs affecting the auto industry. Walk us through what is affected when it comes to auto tarifs by this ruling.
Yes, Karl it. The bottom line is there's no impact on the auto industry, you know, the auto industry. The terraces on the auto industry is under the Section two thirty two of the Trade Expansion Act of nineteen sixty two, so it's not put on in place by the emergency powers. So the baseline of the twenty five percent tarraf on
auto imports is still there now. Trump did renegotiate with countries like South Korea and Japan to bring it down at fifteen, but for the most part, you know, consumer will still feel the impact of these tariffs of you know, close to one thousand to three thousand dollars per vehicle
on average. The other thing that I want to highlight is it's the steal and alutlum import terraff with fifty that's also not impacted by the Supreme Court ruling today, and that also has a huge impact on, you know, the cost for the automakers.
So, Steve, what have you seen so far for the automakers and how they're dealing with these higher tearf 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 terriff costs.
That's a that's a good question, Paul. I think, you know, I think the reason why Trump went with two thirty two Section two thirty two approaches is that the auto industry, given its hue manufacturing base, is critical to the economy, it's critical to national security. He does want to bring a lot of that manufacturing back into the US. And that's what we've seen with the US automaker For example, GM actually have shifted some of the Silverado production from Oshawa,
Ontario back to the US. And you've seen Honda jun Day from South Korea making huge investments in the US to set up manufacturing base. So I think I think that's still a course for the administration, and I think we'll still continue to hear more probably in the you know, in the next few years, more of that restoring auto manufacturing back into the US.
So how do you see this moving forward?
How does a Ford, how does a GM plan for the next year, for the next four years, the next ten years.
Yeah, I think they're going to have to revisit and they're still doing that, and they have done that already. Revisit the supply chain, right, I think the low hanging fruit was moving some of the auto assembly back to the US. But that's that's that's not enough. You know, if you're if you're if the supply chain is not close to where the cars are made, break costs will go up.
Uh.
There will continue to be potential terrorists, uh in some of the components. So you're starting to see you know, companies, especially from South Korea, automakers from South Korea and Japan actually asking the supplier to shift some of that production uh into the US, just to cut you know, some of the freight and potential tear across on the auto auto parts. So we're going to see a whole lot
of changes in the supply chain, uh and UH. You know, I think one of the things that we also are keeping an eye on, uh, it's the U S m c A, the unit US Mexico kind of free trader there 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.
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Do you want to bring in Dan Ives?
Dan, of course, is the noted analyst, the global head of Technology research at web Bush 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.
Yeah, this specific good news for tech companies because of the supply chain is the biggest worries at times what that could do in terms of the data center build out, AI build out ships, everything that we're seeing with China. Look, there's gonna be other ways that they're going to try to go around this two thirty two, Section three oh one. The reality is a huge good the tariff policy, and it's very bullish or tech coming out of the gates. That's going to be an official teach.
So Dan, it's been you know a little more than a roughly a year that all companies have been dealing with this terror fund journey. How 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 at Minnapolis, removed a latta India, others have you know, had to make significant investments in the US and all who look at different spy their supply chain. But you know, as we talked about a lot of the showing the vast majority of the supply chain and will continue to be samodnesia and where you had companies starting to look at diversification. Increased cost was just going to potentially, you know,
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, there are huge sense of relief right now into.
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 tsmcs, 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 there from a policy perspective, from a tower in terms of coming into the US, And then you start to think about manufacturing.
You'll continue to have some manufacturer moved to the US. But 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 two thirty two, Section three or one, there would be other errors go about it. But for big tech supply chain, ship players, memory players. It's a clear positive. There's no way to really go against that thesis.
Dan, your world has been ropped 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 as service companies. Here, what's the current thinking as you talk to investors these days?
Yeah, I mean, Paul, I'm kanna is the AI goost trade because you're trying to fight a goose, because the view that this is going to massively disrupt software, it's going to massively disrupt cybersecurity, and I've talked about 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 talked about fighting a goost, there's going to be
like boxes that are checked. Whether it's open AI and one hundred billion, there's zaven Air earning next week, where there's app on AI, where there's circuit financing software companies showing monetization. This is going to happen, But 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. Is credit driving the concerns in the equity market?
What's leading?
What? Dan?
Yeah?
I mean, look, if you get blue out right, I mean obviously be like some concerns there. But then on the other hand, look at A Powell and others. So 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 the banks a few years ago, a Silver Valley Bank and others. There's going to be hyper sensitivity
to anything that happens here. But the reality is is that these companies have more cash and a lot of countries. When you actually go through it, the point is like they're going to continue to do it. But look, it's like you if there's five people trading CDs instrumental oracle in their basement, that's going to be extrapoid, right, And we saw that like a few weeks ago. It's just a reality like we're going through a ghost trade. It's an AI ghost trade and you got to navigate through it.
But net net today it's positive for tech and that's one step forward.
Hey, Dan, you spend 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 Roads as they think about what technology is the fund is it tempered a little bit? And could today's rule and be a major change?
Yeah, I think temp and maybe have 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 gonna be in next threat, specifically when it came to supply chain, how companies are positioned. You can't just snab the fingers and change your supply chain. Were some about things that could take twenty four thirty six months.
This ruin 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 A fourth industrial revenuetion and AI and for the first time in thirty years, the US is a headed China when it comes attack.
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Well.
In the summer twenty twenty five, Barry Ridholts spoke with Neil Katie, the lawyer who argued the case against Trump's tariffs in front of the US Supreme Court. Here's what he had to say about their legality.
The President has an easy effects 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. And 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 Katiell, the lawyer who argued the case against Trump's terroriffs in front of the US Supreme Court. You're speaking with Barry Ridtholts.
Barry Rudults joins us here.
He is the founder of Erdheltz Wealth Management and host of Masters in Business. Here Barry, what do you take away from the Supreme Court's decision here today?
Yeah, long overdue, long waited. 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 finn 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. We've seen a ton of different research that says somewhere between ninety and ninety five percent of the cost of tariffs falls on consumers, essentially making them a that tax. So not only retailers, but manufacturers like Caterpillar and Deer
what aren't affected by the Supreme Court ruling. And we heard one of the prior guests this is all of the tariffs on US auto manufacturers on steel on aluminum. That's a whole separate law. That's not the IEPA law. That's the two point thirty two law, and that's still up in the air. There's no resolution from this case
for GM Ford, US 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 US manufacturers that have a big price increase, this is going to work to those companies benefits.
So I guess the question is for the markets barrier, is you know, how much of a profit impact could the relaxation of some tariffs have on Corporate America? Because I'm not sure we've got a great handle on how much it impacted them on the downside in the last several quarters.
Well, it just goes to show you the you know, the counterfactual is always what would have been otherwise. And look, the president inherited a strong economy, a robust economy with markets at or near all time highs, and profits that are near all time highs. And so even the pick a number one seventy five, two hundred billion in tariffs that have been collected already over the past ten months, you know, arguably a lot of that comes right out
of the bottom line for Corporate America. So when we see these tariffs get refunded, and I'm fighting my way through the decision, reading the decision to figure out, all right, if you're a big company, you certainly have corporate counsel and resources to go through the process to apply for refunds. If you're a smaller company, I'm trying to figure out if how you go about this?
Do you have to.
Join some sort of consortium or maybe even a class action suit, because it's not you know, it's not just like doing an online tax form and getting refunds.
It takes a whole process.
It's definitely heavy lift for companies that you barely have an HR department, barely have an in house lawyer.
Well, I'm coming up with an app that anybody could use wouldn't that be good some person.
Solve this, So let's wait for AI to solve just that.
Barrett, you are fantastic at kind of thinking ahead, thinking around corners, looking around corners.
What do you want to know?
What are the questions you're asking right now to kind of help us get through this period of uncertainty, a new period of uncertainty once we kind of get through and start to understand how things move forward, whether the president can move right away on the tariffs under the different sections, or whether he's going to backpedal and kind of rethink everything.
So yeah, I've been trying to think about second and third order magnitude results from this. It's not just the pebble you toss in the pond, it's the waves that bounce off of the other waves and how this works. You know, I'm not a political expert, so I'm always reluctant to venture into that space. But staying with market and economic factors. So a couple of things are very positive.
The dollar in twenty twenty five had its worst year since twenty seventeen, not coincidentally, two years that were both first year of President Trump's tariffs, first year of a new tariff program first year of a Trump presidency in each of these cases, and the dollar fell nine point nine percent in twenty seventeen nine point three percent last year. This arguably could be very strong for the dollar, which would begin to co into question the rally and precious
metals gold especially is kind of been trading crazy. You almost have to look at it as a smaller, wackier little brother of gold. But I wonder if this caps the rally and goal. That's number one. Number two. I have to think that everybody that's engaged in any sort of tariff negotiation is gonna rethink it and decide, hey, do we want to stick with these tariffs? Do we
want to see if we can press our hands. That's gonna be kind of interesting it also, and perhaps most enthusiastically, look, depending on which study you consider, tariffs have cost the average American household anywhere between you know, nine hundred dollars and three thousand dollars, and I suspect as you go up the the economic strata, it's probably a whole lot more than that that's gonna essentially get cut in half
or more, depending on you know what you're buying. If you're eying burken bags and ferraris you're gonna see and rolexes. You're gonna see your taft drop pretty pretty dramatically. And so this is positive for inflation. This is positive for you know, the Fed has been warning that, hey, rate cuts are not a sure thing in the first half of the year. This is this is very positive for lowering CPI and lowering the possibility of rate hikes. All of this could lead to a reacceleration of the economy,
and certainly in specific sectors. And I'm thinking in particular manufacturing and retailing and consumer discretionary. Those sectors can all do really well. We may you know, a lot of people have been talking about the possibility of a recession in the second half of the year. I think the Supreme Court just lowered the possibility of a recession by a not insubstantial percentage. And again these are all second, third, fourth order effects.
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