Diageo, Burberry rally after Trump tariff ruling

Shares in two of the FTSE 100’s biggest retailers rallied on Friday afternoon after it was revealed President Trump’s sweeping global tariff regime had been struck down by the top US court.

Burberry shares ended the day’s trading session up 3.2 per cent to 1,212p, while Diageo jumped 3.9 per cent to 1,851p after the Supreme Court said Trump exceeded his authority by seeking to use emergency-powers laws to implement steep tariffs across major global trading partners.

All three liberal justices – Ketanji Brown Jackson, Elena Kagan and Sonia Sotomayor – voted against the tariffs and they were joined by Amy Coney Barrett, Neil Gorsuch and John Roberts. Justices Brett Kavanaugh, Samuel Alito and Clarence Thomas dissented.

The President had previously warned of a “complete mess” should he lose the case and warned the US would be forced to “unwind” trade deals.

Burberry bounce

London-based luxury fashion retailer Burberry, for whom US sales account for as much as 21 per cent total revenue, had previously warned of the threat of Trump’s tariffs.

The fashion house’s most recent financial accounts noted “heightened volatility and instability across key regions”.

“This includes trade tariffs and divergent government policies that may have implications on the macroeconomy, financial markets and supply chains in our core operating regions,” the report said.

The accounts graded its tolerance against this risk as “moderate”, and said increased instability could impact consumer demand and harm the brand’s supply chain.

In the 2024-25 financial year, £510m of Burberry’s total £2.4bn revenue came from the Americas, where 85 stores operate. This marked a 15 per cent decrease in sales in the region from the previous year.

The fashion house is currently undergoing a turnaround as it attempts to move on from performance which its new chief executive, Joshua Schulman, described as “disappointing”. 

Writing to shareholders he said: “We had moved too far, too fast, with disappointing results. Our brand expression was too modern at the expense of celebrating our heritage.”

Over in the States, major US fashion retailers also saw their stocks jump, with Victoria’s Secret shares rising as much as 5.6 per cent and Abercrombie & Fitch surging 5.5 per cent.

Diageo lift

Meanwhile, Diageo shareholders were in high spirits, after hopes were raised for a return to stronger US growth for the Guinness and Johnnie Walker maker.

Diageo previously warned it was preparing for a $150m (£111.2m) annual hit from the impact of US tariffs on imports from the UK and Europe. The calculation assumed a 10 per cent tariff on imports from Europe and a continued tariff exemption on imports from Mexico and Canada under the USMCA trade agreement.

North America accounts for as much as two fifths of Diageo’s global sales, worth around $8bn in 2024. That includes imports of whisky such as Johnnie Walker, considered a key brand for the US market, which had already suffered a 10 per cent fall in net sales in the region last year.

Rob Burdett, head of multi manager at Nedgroup Investments, said: “This ruling 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. 

 “For equities, the ruling against the tariffs is widely expected to lift US and global equities. Relief from trade uncertainty may act as a tailwind for cyclicals and import‑dependent sectors such as IT hardware, retail and industrials.”