Even with the court action, Trump’s trade policies could still affect other big economies, analysts are warning. Alec Phillips, an analyst at the investment bank Goldman Sachs, wrote: This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners. Trump has claimed authority to set trade tariffs under the International Emergency Economic Powers Act, or “IEEPA”. The law has historically been used to impose sanctions on enemies of the US or freeze their assets. Trump is the first US president to use it to impose tariffs. But the Court of International Trade, which is in New York, has said the US Constitution gives Congress exclusive authority to regulate commerce with other countries, and that is not overridden by the president’s emergency powers. It has been busy in the US overnight. Elon Musk has said he will leave his role in the Trump administration. The billionaire boss of Tesla has played a leading role at the department of government efficiency, or “DOGE”. His 130-day mandate as a special government employee in the Trump administration was set to expire about 30 May. He had already been signalling his departure from Washington and a commitment to refocus on his businesses. He also criticised Trump’s new tax bill, calling it too expensive and a measure that would undermine his work to make the government more efficient. Hopes that tariffs might be blocked has helped lift stocks in Asia, but there is likely to be much more uncertainty ahead, analysts say. Prashant Newnaha, senior Asia-Pacific rates strategist, at TD Securities, said: The knee-jerk reaction for equities to rally and bond yields to back up on the tariff pause makes sense. However, with tariffs now in the appeal process and likely heading to the Supreme Court, uncertainty is back. Expect to see this lead to delays in investment and hiring. The pause also puts tariff revenue at risk which could bring deficit issues back on the radar. Meanwhile Gary Ng, senior economist at Natixis, says: The decision will fuel temporary risk-on sentiment in equities and lower bond yields as the market dials back inflation expectations driven by tariffs. However, this is not the end of the tariff story. There is no clarity as the legal battle will continue and it does not change the fact that Trump will find ways to reshape global trade order. Yunosuke Ikeda, head of macro research at Nomura, said: At this point it’s almost impossible to know if the tariffs will be completely unwound by this. But in the hypothetical situation that they are, it’s natural to see dollar appreciation. Basically Trump’s tariffs will lead to stagflation pressure on the U.S. economy, so reversing those tariffs would be a positive for the dollar. Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. A federal court in the US has blocked Donald Trump from imposing sweeping trade tariffs under an emergency powers law. A three-judge panel at the court of international trade argued that Trump has exceeded his authority, left US trade policy dependent on his whims and unleashed economic chaos. The court wrote: The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs. …The court does not pass upon the wisdom or likely effectiveness of the president’s use of tariffs as leverage. That use is impermissible not because it is unwise or ineffective, but because [federal law] does not allow it. There are reports that the Trump administration has filed a notice of appeal. White House officials have already publicly challenged the court’s authority n the case. A White House spokesperson told Reuters that it was “not for elected judges to decide how to properly address a national emergency”. News that Trump’s tariffs may be unlawful was welcomed by stock markets in Asia. In Japan the Nikkei 225 index rallied by 1.9%, while in China the SSE Composite rose by 0.8% and Hong Kong’s Hang Seng rose by 1.1%. The South Korean Kospi index rallied by 1.8%. In the UK, the blue chip FTSE 100 index is also poised to rise when markets open at 8am, with futures up 0.82%. The agenda 9:30AM BST: ONS estimates of inflation for different household types 1:30PM BST: Second reading of US GDP 1:30PM BST: US weekly jobless claims
Author: Lauren Almeida