Diageo & Burberry Rally as Trump Tariffs Are Struck Down by US Court

Shares in Diageo and Burberry surged on Friday following a Supreme Court ruling that struck down a sweeping set of tariffs imposed by the Trump administration. The decision, which found that the former president had exceeded his authority in using emergency powers to implement the tariffs, sent ripples through global markets, offering relief to companies heavily exposed to international trade.

Burberry shares closed up 3.2 per cent at 1,212p, while Diageo jumped 3.9 per cent to 1,851p, according to market data. The gains reflect a broader market rally as investors reassessed the outlook for global trade and the potential for increased economic stability.

The tariffs, enacted under the International Emergency Economic Powers Act (IEEPA) of 1977, had threatened to disrupt supply chains and increase costs for businesses across a range of sectors. The Supreme Court’s decision effectively halts the implementation of these tariffs, removing a significant source of uncertainty for companies like Burberry and Diageo.

Burberry’s Exposure

The luxury fashion house, Burberry, had previously flagged the potential impact of the tariffs, noting in its financial accounts “heightened volatility and instability across key regions.” The company, which generates approximately 21 per cent of its revenue from the US market, estimated that £510 million of its £2.4 billion total revenue in the 2024-25 financial year came from the Americas. Sales in the region had already experienced a 15 per cent decrease from the previous year, a trend partially attributed to the looming threat of increased tariffs.

Burberry is currently undergoing a turnaround effort under its new chief executive, Joshua Schulman, who recently acknowledged that the company had “moved too far, too fast” with its brand strategy. The removal of the tariff overhang provides a more stable environment for Schulman to execute his plans, which focus on re-emphasizing the brand’s heritage and strengthening its core identity.

Diageo’s Relief

For Diageo, the maker of Guinness and Johnnie Walker, the tariffs posed a threat to its North American business, which accounts for roughly two-fifths of its global sales, or around $8 billion in 2024. The company had previously warned of a potential $150 million annual hit from the tariffs, particularly on imports of Scotch whisky like Johnnie Walker, a key product in the US market. Net sales of Johnnie Walker in the US had already fallen by 10 per cent last year.

The Supreme Court’s ruling alleviates this pressure, potentially paving the way for renewed growth in Diageo’s crucial North American market. The company had been preparing for the financial impact, but the removal of the tariffs offers a more favorable outlook.

Rob Burdett, head of multi manager at Nedgroup Investments, highlighted the broader implications of the ruling, stating that it “has major implications for the limits of US presidential power and the division of power between the legislative branch and the executive branch, but also as a macro catalyst across equities, bonds, currencies and global trade flows.” He added that the ruling is “widely expected to lift US and global equities,” with relief from trade uncertainty acting as a tailwind for cyclical and import-dependent sectors.

Beyond Burberry and Diageo, other US retailers also experienced gains following the ruling. Victoria’s Secret shares rose as much as 5.6 per cent, and Abercrombie & Fitch surged 5.5 per cent, indicating a broader market response to the reduced trade uncertainty.

The Supreme Court decision, which saw a split vote with all three liberal justices joined by three conservative justices, underscores the contentious nature of the tariffs and the debate over presidential authority in trade policy. The dissenting justices – Brett Kavanaugh, Samuel Alito, and Clarence Thomas – argued in favor of upholding the tariffs, highlighting the ongoing divisions within the court.

Former President Trump had previously warned of a “complete mess” should he lose the case, and indicated that the US would be forced to “unwind” trade deals. While the immediate impact of the ruling is positive for businesses like Burberry and Diageo, the long-term implications for US trade policy remain to be seen.