Supreme Court Rules Trump's Tariffs ILLEGAL

Episode Overview

• This episode of Prof G Markets covers a breaking Supreme Court decision striking down the majority of President Trump's tariffs in a 6-3 ruling, stating he exceeded his authority by imposing them without Congressional approval.
• Scott Galloway and Ed Elson analyze the immediate market reaction, noting that stocks rose on the news, particularly for companies heavily hit by import costs like Elf Beauty and Restoration Hardware.
• The discussion explores the political and economic ramifications, debating whether this legal defeat might actually benefit Trump politically by providing a scapegoat for economic issues while potentially lowering consumer prices.
• The hosts also examine the broader geopolitical consequences, suggesting that despite the ruling, the damage to international trade relationships and global supply chains may be irreversible.

Key Concepts

• Separation of Powers in Trade Policy: The core of the Supreme Court's ruling is that the "power of the purse" and the ability to levy taxes (which tariffs effectively are) resides with Congress, not the President. This challenges the use of the International Emergency Economic Powers Act for non-emergency economic policy.
• The "Winner's Curse" of Tariffs: While the removal of tariffs theoretically lowers costs for importers, the podcast argues that the long-term damage to the US economy has already occurred. Trading partners like Canada and the EU have already moved to diversify their supply chains away from reliance on the US, creating a fragmented global trade environment that a court ruling cannot undo.
• Political Antagonism as Strategy: A counter-intuitive concept discussed is that losing this court case may be a political win for Trump. It allows him to position himself against "the elites" and the "expert class," blaming them for any future economic shortcomings while simultaneously benefiting from the short-term economic boost that removing tariffs might provide.
• Consumer Cost Pass-Through: The episode highlights that tariffs are essentially a tax on domestic consumers, not foreign exporters. Data suggests that 90-95% of tariff costs were passed on to American buyers, meaning the potential $150 billion in refunds would logically belong to consumers, though corporations are likely to retain them.

Quotes

• At 3:36 - "That 2% was nothing but really just taking money in the street and burning it. It wasn't money being invested for growth, it was money that we were paying the government... and likely increased or decreased the market for our goods overseas." - Explaining the economic inefficiency of the tariffs and how they acted as a deadweight loss rather than a strategic tool.
• At 8:26 - "The power of the purse is a power that lies with Congress... If you're discussing issues that actually affect the pockets of everyday Americans, i.e., taxes, then that is something that you have to get through Congress." - Clarifying the constitutional basis for the Supreme Court's decision and the limits of executive power regarding taxation.
• At 16:26 - "The tariffs inspired tremendous globalization, unfortunately it was globalization for everybody but us." - Highlighting the unintended consequence of protectionist policies: accelerating trade alliances between other nations while isolating the United States.

Takeaways

• Investors should look closely at "tariff loser" stocks—companies with high import exposure like Restoration Hardware, Williams-Sonoma, and Elf Beauty—as they stand to gain the most immediate margin relief from this ruling.
• Business leaders should not expect a return to pre-tariff "business as usual"; supply chain diversification away from the US by foreign partners is likely permanent, requiring US companies to adapt to a more fragmented global trade environment.
• Observers of the political landscape should watch for a pivot in narrative, where the administration uses the "deep state" or judicial interference as a primary explanation for future economic difficulties, rather than accepting the ruling as a return to constitutional norms.