Weekly Update 11/7/2025: Tariffs before Supreme Court
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- Amgen sales blast higher
- Apple to use Gemini to power AI efforts
Learning Resources v. Trump & V.O.S. Selections v. Trump
The U.S. Supreme Court heard oral arguments this week which will determine the validity of tariffs as his signature economic initiative. The session lasted an abnormally long two and half hours, which seemed appropriate given the magnitude of the case. Chief Justice John Roberts said the tariffs were an “imposition of taxes on Americans and that has always been the core power of Congress.” A decision to reverse the tariffs could result in over $100 billion in refunds. On a more precedent-setting level, it would be the Supreme Court’s most significant pushback against the Trump administration’s assertion that presidential powers are far and wide and are applicable in a variety of situations that heretofore have not been implemented. As expected, the Court’s three liberal justices, Justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson expressed doubt about the legality of the tariffs. Additionally, besides Chief Justice Roberts, Justice Neil Gorsuch asked questions which hinted at skepticism for the levies. Trump appointee Amy Coney Barrett asked probing questions of both parties, signaling she may vote either in-line with or against her conservative track record.
Trump’s lawyers argue that the President of the United States has authority under the 1977 International Emergency Economic Powers Act (IEEPA). While the law is broad in scope, it does not specifically mention tariffs as one of the powers of the executive branch. Under the government’s logic, “what would prohibit Congress from just abdicating all responsibility to regulate foreign commerce – for that matter, declare war – to the president?” Gorsuch asked US Solicitor General D. John Sauer, the government’s top Supreme Court lawyer. “Can you point to any other place in the code or any other time in history where that phrase together ‘regulate importation’ has been used to confer tariff-imposing authority?” Barrett asked Sauer. But Barrett also joined Justice Brett Kavanaugh in questioning whether the arguments of the tariff challengers made sense, given that IEEPA authorizes the president to shut down trade entirely with a foreign country.
While issuing refunds would be complex and open the administration to potential lawsuits, the companies’ lawyer, Neal Katyal, acknowledged refunds would be “very complicated,” but argued that the Supreme Court previously had held that “serious economic dislocation isn’t a reason to do something.” Lower courts have ruled that the tariffs are unlawful prompting the Trump administration to petition the Court for relief. While the Court never provides a timetable for a ruling, given the importance of the case (using the “major questions doctrine” meaning there are key questions that have sweeping national significance), it would not be surprising to get a decision before the year is over. However, given the intersection of such a variety of forces and factors—economics, foreign trade, national security and presidential authority—the Court may take extra-long to thoroughly discuss each and every nuance and then render a verdict.
In our view, regardless of the decision, we believe that tariffs are here to stay. Taxes on steel, aluminum and automobiles were put in place under a different law and are not in question for these cases. The path to levy such tolls on specific industries is more complex and time consuming, but there is a path to do so which this administration has implemented and will likely pursue if these more “sweeping” tariffs are struck down. Bombastic threats to impose 100% or more tariffs might become a thing of the past, but investors would be wise to continue to model the expense. While a loss by the executive branch would signal resistance from the judicial branch of government, from a financial perspective, we believe it would merely delay the inevitable.
That being said, we have seen and heard companies from a wide variety of industries mitigate and cope with imposed tariffs and still be able to report better-than-expected results. While the eventual effect of tariffs on the overall price level has yet to be determined (and will play a crucial role in how the Federal Reserve implements monetary policy), corporate America has climbed that wall of worry. Some companies are passing along costs while others share in the burden. Some firms are changing their input sources and rearranging their supply chains. As you will read in the company events section below, S&P earnings are on a roll, supercharged by AI spending but also getting meaningful contributions from non-tech sectors. Keep watching this space as this unfolding story continues.
Economic info
With the federal government shutdown now reaching record lengths, investors are looking at alternative sources for economic data. While trends and anecdotal evidence can be gleamed from these stand-ins, oftentimes they do not have the same scope or depth that the missing government data had collected with decades worth of history in many cases. We never turn down reliable, informative information, but as the shutdown continues, it gets increasingly more difficult to ascertain definitive trends in various areas.
We did receive Institute of Supply Management (ISM) data which is sourced from a private provider. The ISM index of services rose to 52.4 in October, the fastest growth in eight months thanks to an upturn in new orders. Ratings above 50.0 indicate expansion. The orders index rose to 56.2, reaching a one-year high. The prices-paid index also rose to 70, indicating that there are more profound pricing pressures at work on the services side. ISM manufacturing came in at 48.7 suggesting that that sector remained in contraction territory. It shrank for an eighth consecutive month, suggesting that demand remains tepid and production challenged. Manufacturers are concerned about the lack of clarity around trade policy, according to Susan Spence, chair of the ISM Manufacturing Business Survey Committee. “It’s the overall tone of we don’t know what country is coming next, we don't know what commodity is coming next,” she said. However, there is hope that the worst of the tariff-driven pressure on manufacturers’ input costs are fading given that there was a 3.9-point fall in the manufacturers’ priced paid index to 58.0.
There will not be a non-farm payroll report released by the Bureau of Labor Statistics (BLS) for the second consecutive month. Unlike last month, when most of the data was collected but no analysis was done thus resulting in no report, this month, collecting information has not been done at all. Weekly initial unemployment filings by states continues to be released because it is collected by states which are not shut down. The general trend in total still has weekly filings hovering in the +200,000 to +240,000 range. Those numbers are expected to rise as large companies have announced big layoffs in recent weeks. Numbers will be further muddled because some states treat severance as continued income and thus ineligible for unemployment assistance while others do not. A lump sum versus installments payments also effects eligibility.
According to outplacement firm, Challenger, Gray & Christmas Inc., U.S. companies announced the most job cuts for any October in more than two decades. “Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” Challenger said in the report. “Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market.” Year-to-date cuts have exceeded 1 million, the most since the pandemic. “It’s possible with rate cuts and a strong showing in November, companies may make a late season push for employees, but at this point, we do not expect a strong seasonal hiring environment in 2025,” said Challenger. According to payroll processor (and SGK Core holding) ADP, private payrolls rose by 42,000 in October after a revised 29,000 decline a month earlier. That suggests some stabilization in the job market, but it is far from a robust environment for job seekers. Large companies accounted for the increase in payrolls according to the report, while employment at small businesses fell for the fifth time in the past six months. Workers who changed jobs showed a 6.7% increase in pay, while those who did not saw a more modest 4.5% increase. While ADP covers more than 26 million U.S. private sector employees, it still does not have the depth of the BLS report, with the next installment release uncertain.
Company Events
SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.
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