Daily Commentary

MarketMinder’s View: As always, MarketMinder is politically agnostic, preferring no politician nor any party. We also aren’t opining on the merits of the case and arguments discussed in this piece, which gives a snapshot of the arguments and judges’ response in yesterday’s appellate court hearing for President Trump’s reciprocal and blanket tariffs. We are looking solely at the potential implications—namely, what are the chances the tariffs get struck down again, likely setting up a Supreme Court showdown? If the snippets here are a good indication, the judges are rather skeptical of the use of emergency powers. There was a lot of debate over whether the statute’s granting the president to “regulate” imports includes tariffs, with the judges seeming to come down on the side of, if Congress had intended to give the president latitude to rewrite the tariff schedule, they would have said so. “JUDGE TIMOTHY DYK: It’s just hard for me to see that Congress intended to give the president in Ieepa the wholesale authority to throw out the tariff schedule that Congress had adopted after years of careful work, and revise every one of these tariff rates.” There was also discussion of whether chronic issues like the trade deficit—a constant for decades—qualify as acute emergencies, with skepticism abounding here, too. We shall see how this shakes out, and the chance for tariffs to go away remains. However, so does uncertainty, which could continue deterring risk-taking and investment. For more background, see our May 29 commentary, “America’s Courts Weigh In on Trump’s Tariffs.”

MarketMinder’s View: This is a pretty big deal for UK Financials, one that should drastically reduce uncertainty. Last year, an appeals court ruled auto lenders’ undisclosed commissions violated a duty of care to customers, essentially establishing a fiduciary duty by judicial fiat. Whatever your opinion of this might be, it risked upending standard bank financing practices far beyond auto loans, creating massive uncertainty for banks. Today, the Supreme Court overturned this part of the ruling. “The supreme court has partly overturned a lower court decision on the car finance commission scandal, closing the door to compensation except in more serious cases. In their ruling, a panel of justices led by the supreme court president, Lord Reed, only upheld one consumer’s case, originally filed by borrower Marcus Johnson. Cases brought by two other consumers – alleging that commissions paid to car dealers were bribes and that dealers owed a duty of loyalty to the customer – were rejected.” This should allow the standard business model to continue, clearing regulatory uncertainty. It also negates the potential for the government to address the issue with retroactive legislation, which would have injected further uncertainty. This isn’t a massive tailwind or anything, but it gives everyone one less thing to worry about, and it is one less roadblock for the UK economy.

MarketMinder’s View: Well that was fast. One day after releasing a proposal to nudge Korea’s corporate tax rate from 24% to 25%, raise the stock transaction tax from 0.15% to 0.2% and drag a boatload more investors into capital gains taxes by lowering the threshold, the government is now mulling a U-turn. How come? The local benchmark dropped 3.9% today, its worst single-day showing since April’s global tariff freakout. Now, we are of two minds about this. High level, tax changes have no preset market impact, and by the time they take effect, they are generally long since priced in. Tax hikes can hit sentiment, as this market reaction showed, but they aren’t auto-negative. We have a long history of returns worldwide showing this. So this is all perhaps a tempest in a teapot. But also, the government—like those before it—has nodded to trying to make Korean markets more competitive to win more global investor enthusiasm and a promotion to developed-market indexes. These tax proposals might have cut against that a bit, so watering them down could be beneficial. Either way, we don’t think Korean firms’ long-term earnings potential hangs in the balance. Stock returns depend on a host of factors, and US stocks haven’t suffered under an even broader capital gains tax dragnet here.