Supreme Court Strikes Down Trump’s Tariffs

In this emergency episode Scott Galloway and Ed Elson break down the Supreme Court’s ruling against Trump’s tariffs, how markets reacted, and what it could signal about his next move. Subscribe to the Prof G Markets newsletter Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Subscribe to No Mercy / No Malice Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram, X and Substack Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 1:13Scott Galloway?

  Today's number, $150 billion. That's how much the US government could be refunding importers now that the majority of tariffs were ruled illegal.

• 1:31Scott Galloway?

  That's right. Welcome to an emergency episode of Prof G Markets. Ed, let's get right into it. The Supreme Court just struck down the majority of President Trump's tariffs. In a six-to-three decision, the justices ruled he exceeded his authority by imposing the tariffs without congressional approval. This marks the first time the court has struck down one of his second-term policies. Stocks rose on the news. So essentially, Ed, this was, these tariffs were implemented under sort of an unusual rule, the International Emergency Economic Powers Act. That's usually Only deployed during nine eleven or imminent war or some sort of extraordinary

• 2:14Scott Galloway?

  action and the Supreme Court said, no, you really don't have the authority to do this without Congress, Congress's approval. So this is, it feels like a big deal. What are your initial thoughts, Ed?

• 2:25Ed Elson?

  My initial thought is we are experiencing our second liberation day. I would say to you, happy liberation day, Scott. We're finally liberated. I don't think that we're going to see these tariffs. I mean, put it this way, I don't think that the Trump is going to go down without a fight here. So I think that's probably why you're seeing this reaction from the markets, which I would say is kind of tepid. I mean, I think there's an element of markets trying to understand what is actually happening here. How is this all going to play out? How is it going to work? But I think there's another side to this, which is, is this actually going to mean that tariffs are going to disappear suddenly? I think the answer to that question is probably not. But, you know, I think this is a good moment

• 3:08Ed Elson?

  for the Supreme Court. I'm glad that they had the spine here because it's true. We're not in an economic emergency right now. And that was the card that Trump played to have these powers that are, that are more like the powers of a king. And so I think what the Supreme Court has said here is, no, this is power that resides with Congress. If you're going to implement a tax on the American people, which is what this is, despite whatever Trump will say about it, if you're going to do that, you need to get congressional approval. And that's not something he did. So basically, they're saying, put it to Congress. And then the question will be, will Congress be down for this? I think the answer is going to be no. But we will see. What are your, what are your initial reactions?

• 3:52Scott Galloway?

  In a weird way, I think this sort of benefits Trump in the short term because it's, it's an elegant off ramp. You can say, I tried, it made sense, but the Supreme Court overruled me. And I do believe, I was shocked the markets weren't up more. I mean, there's certain sectors that were especially, the tariff losers have spiked, right? Elf Beauties up 2%, Restoration Hardware is up 9%. Crocs up more than 4%, Stanley Black & Decker 3%, Williams Sonoma up 4%. The companies that got especially hard because of tariffs, because they bring in, you know, we don't manufacture a lot of furniture anymore inside of the US. So in the short run, I actually think he might be a winner here because I think the

• 4:34Scott Galloway?

  economy in the short run will, will get a boost here. If you look at what effectively has happened, about 15% of our GDP is imports. And then loosely speaking, the average tariff is 20%, so that's a 3% hit to GDP, if you will. But some of those companies managed to wiggle out of them, so call it 2%. But 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 that reduced consumer or increased pricing for domestic consumers and then likely increased or decreased the market for our goods overseas because there's going to be some form of a reciprocal tariff.

• 5:18Scott Galloway?

  Now, the medium and long-term damage has already been done here. This is, this is essentially, you're seeing this, you're seeing Canada leading the way around creating new trading zones and Europe doing deals with Mercosur. Everyone's, for the first time, ponying up, not the first time, but a lot of Western nations are much more open to, to doing trade deals with China. You never hear the term "Uighurs" anymore, right? It's not, everyone's like, okay, we can no longer afford to be socially conscious with imprisoned Uighurs, where we can't trust America, they've gone batshit crazy, so we're going to start different, you know, rerouting our supply chain. So in the short run, I actually think it might be beneficial for the president because I do think the stock market and the economy are going to register an uptick.

• 6:03Scott Galloway?

  But the damage has been done here. The, the lack of trust, the, the inconsistency, the general notion that, okay, we have to build our own weapons and we have to develop our own trading alliances. I mean, Canada is just not going to, regardless of this decision, Canada is going to try and diversify away from this very scary number, and that number's 75, and that is 75% of their exports coming to the US. And they're going to say, we can't make ourselves as vulnerable again. So even though, then in the short term, this will be great for Canada. It'd be really interesting to see what's happened, what's happened to the Canadian stock market. And reaction to that because they are the ones that were likely hurt the most.

• 6:46Scott Galloway?

  I think China may go up a little bit, but China's gone from 17% of their exports going to the US down to 10%. They've already said, we need to diversify away from this batshit crazy administration. But this is going to be, and the other thing I was immediately curious on is hedge funds like Daimler Capital were buying the paper, were buying the claims, and I wonder what's happened to those. I actually think there's probably still a good trade there because if the Supreme Court has said this is illegal, I have a difficult time seeing how the claimants, and that is people paying these tariffs, will at some point get their money back.

• 7:19Ed Elson?

  Yeah, well, I think the value of those refunds has definitely skyrocketed. And this was something that we said was probably a good trade a few months ago. By the way, something is also kind of funny is that the guys over at Cantor Fitzgerald, i.e. the children of Howard Lutnick, were one of the biggest buyers of those tariff refund claims. So they're going to be a big winner coming out of this. Something you also said there about Trump, this kind of is a win for Trump potentially. Something I would add on to, I agree with that. I would add that Trump loves being the antagonist. And this was something that almost played into his hand during the previous administration, where a lot of things happened that got in his way.

• 8:02Ed Elson?

  And it was a great excuse to say to the American people, I would have done it this way, but these people didn't let it happen. There was the Russia, Russia hoax, there was the deep state that was getting in my way. So far in this administration, this is probably the first time where a very, very large and powerful body has actually put a stop to Trump. We'll see if that actually is what transpires here. But this is the first time where someone with a lot of power said, no, we're not going to let you do it your way. Which in an interesting ironic way, might actually be a benefit to Trump. Because again, he loves this positioning. He loves being in the place where he says, they wanted to stop me.

• 8:44Ed Elson?

  We tried to do what we could and the elites, the economists, the experts, the expert class.

• 8:52Ed Elson?

  They said, no, we're not going to do it that way. And so I think that that could actually be some juice for him politically. I think it will also take some energy perhaps away from what's happening with Epstein. It it it might also help him in terms of his issues on affordability. He can say, you know, things would have been different had SCOTUS not gotten in the way. And I I I I'm anxious and worried that that might actually be a benefit to him going forward. But you have to give the Supreme Court its credit here. I mean, this was clearly the right decision. This is not, this is not a power that that is supposed to be in the hands of one person.

• 9:33Ed Elson?

  I mean, even in the the court rulings, they were they were quoting the founding fathers constantly. I mean, one of my favorite quotes was from James Madison. I forget the quote exactly, but he said something to the effect of the power of the purse is a power that lies with Congress. The power of the purse is not something that you give to the president. If you're discussing issues that that that actually affect the pockets of everyday Americans, i.e. taxes, then that is something that you have to get through Congress. And that's not something that that Trump did here. So I think this is the right decision, but I do worry that, as you say, it might be a benefit to Trump in a lot of ways.

• 10:17Scott Galloway?

  What'll be interesting is to see his response because there are other means or vehicles through which he could try and hold on to or impose tariffs. There's

• 10:29Scott Galloway?

  there's different tariffs that have different, but they have more limitations. But top administration officials say they expect to keep the the tariff framework in place under other authorities. The thing that really strikes me is that they have been collecting somewhere, I believe, around $30 billion a month because of these additional tariffs. And when I think about the damage it's been done in terms of other nations rerouting their supply chain around the U.S. $30 billion a month is just chicken shit.

• 11:01Scott Galloway?

  I mean, if you were going to say, all right, the government gets to collect $30 billion from consumers, which is what this is, a tax on consumers, and in exchange for that, every large economy in the world is going to be trying to figure out how to work around the US, that's just the worst trade in the world. And I don't think this is, as I said, I don't think this is business back to normal. I think Italy's like, yeah, fuck you, boss. We're going to try and figure out a way to sell more limoncello into China. And Canada has said that they, they've removed the imports on BYD Chinese electric vehicles. They're not going to reimpose those tariffs. So this has been, again, short term, I think this is an off ramp for Trump. I'll be very curious if his administration says we're going to

• 11:44Scott Galloway?

  try and impose these tariffs and maintain them through different legislative frameworks, or if he says, well, we tried, and if the markets start ripping tomorrow, I think he's probably going to say, well, I tried, it was the right decision, but the Supreme Court, they're fucking idiots, and okay, we'll find other means, and he just lets them kind of melt back to where it is.

• 12:01Ed Elson?

  You think he'd just give the tariff revenue back? I kind of think it's, I mean, he hates losing so much, he has to be the winner. And I kind of think the idea of, okay, like, you win, I'll give you guys back the tariff revenue, that he's been boasting about for a long time now, that to me seems like something that he's never going to be willing to do. He's gonna have to win this in some way.

• 12:24Scott Galloway?

  Yeah, but if he's out of office, if the Supreme Court has ruled that these things are illegal, then, I mean, I think you're going to see in the next couple of days, a lot of companies who've been paying millions, tens of millions, or hundreds of thousands of dollars, they'll file, file suits saying, we want our money back, and we want it back with interest. And if there's a Supreme Court ruling saying that these tariffs are illegal, they've got a pretty good case in court. And also, what they might decide is to file these, these claims and just wait the guy out, because these court cases can take a while. So it strikes me, I mean, I would really love to know what has happened for these, these

• 13:02Ed Elson?

  Those tough claims.

• 13:03Scott Galloway?

  Yeah, but this is, this is, and is it psychologically a turning point where the Supreme Court or?

• 13:12Scott Galloway?

  I mean, effectively, Congress has become the Duma, and that is, it is symbolic. Even Republican congressmen are resigning, saying, "This job fucking sucks. I'm not doing anything. I have no power. No one listens to me. No one in the White House is interested in meeting and talking about anything, because he just tells, he just tells the Speaker of the House what to do, and the Speaker of the House, you know, uses Congress like his bitch, and ignores them, and doesn't even bring things to the floor." I mean, Mike, Mike Johnson is not the Speaker of the House. He is, he's Trump's mouthpiece. He's Trump's acolyte. So it's just, it's just ridiculous that he claims to be representing the House of Representatives. I think even his own, his own constituents, Republicans, are like, "Okay, bitch, you're not doing it. You don't, you don't speak for me. All you do is show up and try and run roughshod over me."

• 13:57Scott Galloway?

  So, this is, to a certain extent, the big winner here is Congress. Because what they've said is, effectively, the, the ruling is, you have to get congressional approval. Congress is supposed to control the purse. They're supposed to be the ones that approve expenditures, or something like this, tariffs. They're supposed to be the ones that can, they can say yea or nay. And that has been taken away from them. And what you've effectively seen, the minority party is sort of used to being ignored. But I think the folks who are really fed up here, and probably are for this ruling, are the Republicans in Congress. Because, one, they don't like tariffs. They tend to be more economic free markets. And, two, this was an example that they weren't even consulted on. They just run roughshod. So, be interesting

• 14:42Scott Galloway?

  to see what happens in the market in a couple of days. Really interesting to see what happens with these claims, whether they think that they're gonna get this money back. And also, we're just gonna find, I think, that people are gonna say, "No, you've been abusing me, and you, you claim you've changed, and you want me back. Fuck that. I'll be at my sister's. I'm taking the kids." I think we're just gonna see, again, a continued rerouting of supply chain.

• 15:09Scott Galloway?

  Around America, the damage has been done.

• 15:10Ed Elson?

  And in a lot of ways, the biggest loser here is actually the consumer because if these tariff refunds go through, they will be issued to the importers who have the receipts. They'll say, yes, that this, we were supposed to, we had to pay you this amount. We have the receipts here. Give us the money back. But the consumers, the American people, don't have those receipts. And as we've seen in all the studies, 90 to 95% of the tariff costs have been passed on to the consumer. So in a very ironic and kind of dark way, the people who are going to get their money back are the corporations, who were the ones who have those receipts with the federal government, but then who passed that money down onto the consumer, and it was the consumers who ended up having to pay the price.

• 15:55Ed Elson?

  But are consumers going to get their money back? Are we going to have tariff refunds for the American people? I don't think so. We don't really have the receipts here. So I think that's going to be another sort of downfall for the American consumer here. And it's something that probably won't get enough attention because these are kind of complicated economic concepts.

• 16:17Scott Galloway?

  Yeah, but so to your point, it's unlikely Restoration Hardware is going to send everyone a 20% refund if they, on whatever they bought in the last three or six months, right? But the analysis so far shows that the average American household has been paying $1,300 more a year because of these tariffs. That should logically go away. If the tariffs go away and the sector is competitive enough where corporations can maintain their margins while lowering prices to consumers, theoretically, that $1,300 should go away.

• 16:50Ed Elson?

  Well, in the future, I mean, then they've already paid it for the past year.

• 16:54Scott Galloway?

  No, I'm not. Again, I don't think they're going to get a refund, but I think what you should see is you should see corporations can maintain their margins with lower prices because they're not paying, they're not paying those tariffs. What remains to be seen is how much more companies are going to have to pay structurally because. Importers or our trading partners just aren't as willing or as excited to trade with us, that they they're setting up different supply lines, or they don't want to integrate as tightly, whatever it might be, you know, the free trade zone, if you will, has gone away. We've gone the other way. We have. What's interesting is that the Trump, what the Trump tariffs did, they did accomplish their goal. And that was, he wanted to, if

• 17:33Scott Galloway?

  you will, that the tariffs inspired tremendous globalization. Unfortunately, it was globalization for everybody but us. And that is, everyone, trade barriers are coming down, there's going to be more prosperity, you know, BYD is going to boom, Canadian consumers are going to get cheaper electric cars, and then take that money and spend it on other things that Canada does, has a cost advantage around producing. So it'll, he's inspired this unbelievable, I would think, kind of unlock or globalization of trade. It's just, he's inspired it around, you know, all 158 nations sans the US. I mean, Korea, Japan, and China are talking

• 18:13Scott Galloway?

  again. Mercosur and the EU are talking about an agreement. But anyways, any closing thoughts before we wrap up here, Ed?

• 18:21Ed Elson?

  I think on that point, this is just Brexit. This is America's Brexit all over again. It's like, let's figure out a way, and you said this before-

• 18:27Scott Galloway?

  Those are fighting words.

• 18:28Ed Elson?

  It is. I mean, let's figure out a way to make everyone hate us, to alienate all of our allies. And then while we do it, let's also fumble the ball and not even accomplish our main objective in the first place, make things more expensive for us at home, and then also ruin our relationships with everyone around the globe. And, you know, I'm literally just got here in London, we've seen the effects on the UK. They haven't been good. I think the same thing is going to happen here. And I think it's exactly to your point. These tariffs didn't work for America. And at the same time, it was this double whammy of also pissing off all of our allies abroad, which will probably make things more expensive

• 19:11Ed Elson?

  for Americans structurally. This isn't just something that's going to exist in a vacuum. The damage has already been done. We've already ruined our relationships with a lot of these countries. They're already sick of us. Yeah, I think this is going to be a problem for a long time.

• 19:26Scott Galloway?

  Our entry into Iraq. These tariffs, I'm trying to think what the other own goals have been. What other distractions? What other, I mean, what's, what's next here? Anyways, Ed, good to see you in London. Good to see you. Safe travels, and this has been another Hot take. From Prof G Markets. Thanks, everybody.

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