Filenews 29 May 2025
A federal trade court has ruled Trump's tariffs illegal, and the market is taking a breather after weeks of volatility and volatility. However, no one can say that the uncertainty that is catastrophic for investors is a thing of the past.
President Trump's tariff saga took another turn when the court struck down most of its tariffs, prompting the government's immediate appeal to appeal the decision and sparking a rally over the U.S. stock index's futures.
The International Trade Court
Trade Court in Manhattan ruled in favour of a group of small businesses and Democrat-led states, ruling that Trump had exceeded the limits of his executive power. In particular, Trump had invoked the International Economic Emergency Powers Act of 1977, or IEEPA, which does not specifically mention tariffs, to justify the contributions.
The Constitution transfers the power to set tariffs to Congress. In turn, Congress over the years had specifically delegated the power to the president to impose tariffs in certain cases, such as violations of trade treaties. The question posed before the court, which has national jurisdiction over all tariff and trade matters, was whether the IEEPA gave Trump the authority to impose unlimited tariffs on goods from almost every country in the world.
"The court does not interpret the IEEPA to grant such unlimited authority and nullifies the disputed tariffs imposed under it," the three-member panel wrote in its ruling.
The market's reaction
Financial markets are in a frenzy when it comes to tariffs, especially U.S. stocks, which have fallen sharply in response to surprise tariffs, or threats of tariffs, against major trading partners and others. Trump has proven to have quick reflexes in softening or delaying tariffs, causing the market to recover.
The decision caused sharp gains for stock futures. S&P 500 futures rose 1.6%, while Dow Jones futures jumped more than 540 points or 1.3% and Nasdaq-100 futures gained 1.9%.
If those gains are sustained until Wall Street opens, major indexes will be on track to add to May's strong gains, which have erased the sharp selloff that had pushed the S&P 500 to the brink of a bear market after Trump imposed sweeping "reciprocal" tariffs on U.S. trading partners on April 2.
As Marketwatch notes, this decision should not come as a shock. Investors had seen the possibility of a decision against Trump as a risk for the market.
Wednesday night's move brought a breath of relief from the market after weeks of intense volatility caused by the bra de fer of the trade war, Steven Innes, chief executive of SPI Asset Management, said in a note.
The tariff shock had fuelled fears of a possible rise in inflation and an economic slowdown. Trump then proceeded to delay most of the tariffs, helping to boost the recovery. On Friday, Trump had threatened a 50 percent tariff on imports from the European Union from June 1, sending stocks lower. Over the weekend, it postponed the deadline for tariffs to July 9 as the EU agreed to speed up talks, contributing to a major recovery on Tuesday.
"This decision is more than just a legal footnote. It's a structural shift in the Trump narrative: from the strongman's tariffs to the protection of institutions, Innes wrote. "And traders, who are always chasing upside dynamics, are already running ahead of developments." That said, the decision is not the last act in the series, Ines and other analysts noted.
What's Next
The decision confuses trade talks between the U.S. and many trading partners.
"How will China, Japan, the EU, India and the UK react to this news? We believe that one reason the bilateral negotiations were stuck was that U.S. trading partners may have foreseen this outcome," Aniquet Shah, a strategic analyst at Jefferies, said in a note. It is unclear whether they will now consider trade negotiations as an issue to be resolved by the courts or renegotiate with Washington on trade policy, he said.
There is also the question of whether the government will look for alternative legal avenues to enforce the tariffs, Shah noted. Does the administration have alternative legal avenues for imposing tariffs beyond invoking IEEPA? Could it use section 232, 301 or 201 to apply tariffs?
The International Economic Emergency Powers Act, or IEEPA, may be used in conjunction with Section 232, Section 301, and Section 201. The IEEPA provides additional authority to the President to impose tariffs, particularly during national emergencies, and may be used to impose duties beyond the scope of the other sections. Section 201 responds to industry injury caused by imports; No injustice is required. Section 301 deals with specific misdemeanors from abroad. Section 232 depends on national security threats from imports.
Meanwhile, investors are now facing the uncertainty surrounding appealing to the Supreme Court. "As this decision will be appealed, it will prolong the uncertainty currently weighing on business investment," analysts at Renaissance Macro Research said in a post on X.
For all the talk about TACO (Trump always chickens out) – a popular Wall Street acronym that defends the so-called "buy the dip," the fall in the market caused by tariffs because "Trump is always timid" — it's worth remembering that the U.S. president "usually follows through on at least some of his tariff threats." "If Trump wins on appeal, the tariffs will likely come back."
newmoney.gr
