Supreme Court questions emergency Trump tariffs

Good morning from the Financial Times. Today is Thursday, November 6th, and this is your FT News briefing. The president of Argentina sat down with the FT after his big election victory. And then grab your gavel. First, U.S. Supreme Court justices seemed skeptical of Trump's tariffs. And then creditors will be fighting for scraps at the contentious First Brand's bankruptcy proceedings. It's very messy. It's very complicated. It's going to be an epic fight. I'm Mark Filipino, and here's the news you need to start your day. Javier Milei is blowing off investor calls to let the peso float freely. The president of Argentina sat down with the FT after his party's huge win in legislative elections, and Javier Milei said he would keep the peso within gradually widening bans against the U.S. dollar, at least until elections in late 2027. This is to temper Argentina's chronic currency volatility. But critics say this has caused the peso to become overvalued. The U.S. spent an estimated $2 billion propping up the currency last month. Pressure on the exchange rate has eased since Javier Milei's electoral victory, and in his interview with the F.T, Javier Milei said he would continue to deepen ties with President Donald Trump.

the power of Congress because under the Constitution it is Congress that actually has the power to impose tariffs. So there was a lot of talk yesterday about if you open this door in terms of Congress delegating away this power, are you ever really going to get it back? Stefania, how crucial is this decision to U.S. economic policy? I mean, this is fundamental. I think... Definitely for the Trump administration because for his second presidency, this has really, really become a critical pillar of his administration. Also, you know, we have to remind ourselves, if the government loses this case, it really throws into question something like more than $50 billion in extra revenue that the tariffs have generated for the government in 2025. And this was sort of a big boon for the administration because it also kind of calmed down investors who may have been, say, nervous about U.S. borrowing levels. So it presents a whole host of very, very complex legal questions. Okay. So then what's next for this case and the outcome? Yesterday we just had oral arguments. Now basically the Supreme Court is going to go away and deliberate and it will be at least several weeks before they hand down a decision. I think it's also worth reminding our listeners that there definitely are other sort of tools that the government can use to impose tariffs. And I wouldn't be surprised if they weren't already putting together contingency. plants in terms of finding other ways to implement these levies. That's the F.T. Stefania Palmer. Thanks, Stefania. Thank you.

The swift and messy unraveling of auto parts maker First Brands has gripped the world of finance. It also attracted the attention of federal prosecutors who are suspicious about alleged fraud. Today, attorneys and dozens of involved parties will gather in a Texas courtroom. It'll be the second hearing on First Brand's bankruptcy. So what's at stake and what's next for the company? The FT, Sugeet, Indap, joins me now to delve into all those details. Hi, Sujit. Hi, Mark. Could I talk to you? So before we get into the case itself, remind me, how did we get here? In late September 1st Brands, this company we had never really heard of, it's private, its family owned, essentially ran out of money. It had $12 billion of debts and couldn't refinance or repay some of them. And it crashed into bankruptcy very suddenly in this first day hearing that was held about a month ago, the most interesting detail that lawyers for the company. shared was that there was a more than $2 billion hole or gap or just missing cash that was supposed to be accounted for that was just gone and was owed to various creditors. And that is like the mystery of the case. Where is that cash? Today's court session really is a progress check on where we are in the case a month later now that some dust has settled. Earlier this week, the founder of first brands Patrick James, a longtime auto parts entrepreneur, was formally sued by the new first brands management and board of directors, and he's been now accused of pilfering hundreds of millions, perhaps billions of dollars from first brands in the lead up to the bankruptcy. Yeah, can you go a little bit more into those allegations from the company about the CEO? What is it saying? And how does that affect today's proceedings? The lawsuit essentially makes two large-scale charges, if you will. One is that James looted the company. That was money that belonged to the company. And it ended up in his personal possession, in his accounts, in his family investment firm. And then separately, the thing that is most interesting about first brands and why we're all paying attention to it is that it relied on so-called working capital finance, where it would sell invoices. Let's say Walmart bought some brake pads rather than... Getting that cash immediately, Walmart would pay in 90 days. And so what First Brands would do is they would find some third-party lender who would buy that invoice and get paid by Walmart. And First Brands itself would get the money up front from that lender. The allegation now is that those invoices, which it was using to raise immediate cash, were in fact fraudulent. They were either... manipulated or manufactured, and that is the fraud here. That, in fact, he just invented money out of thin air, and then that money somehow ended up in his personal accounts. Among all this, creditors are trying to get their money back, right? So what is happening with that part of the process, and what is first brands planned for moving forward?

That is what this court hearing today is about. It's about establishing some order on how this case is going to proceed. The company's new management and directors want to sell the underlying business. It does make auto parts and sell auto parts, and that's like real, how valuable that is we don't know. But that business is going to get sold. And then separately, there are these legal claims. We talked about the lawsuit. If there's any proceeds from that, that's another. pot of cash. So these pots of cash have to be received. And then after that, how that flows to the various creditors is what the fight in court is about. Who's first, who's second, who owns the existing collateral, who owns the legal claims. It's very messy. It's very complicated. It's going to be an epic fight. That's the FT's Wall Street editor, Sujit Indap. Thanks, Sujit. Thanks, Mark. You can read more on all these stories for free when you click the links on our show notes. This has been your daily FT&E's briefing. Check back tomorrow for the latest business news.

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