Markets are set for continued chaos after the US Court of International Trade ruled this week that the president’s emergency powers do not give him unilateral authority to impose his sweeping ‘Liberation Day’ tariffs.
Trump had used the International Emergency Economic Powers Act (IEEPA) to drive through his tariffs, but Lale Akoner, global market analyst at eToro, said this is “legally untested and is now coming under increased scrutiny”.
AJ Bell investment director Russ Mould said it was a “seismic development” that has “generated some hope in the market that the tariff threat might be wiped away with its latest ruling”.
However, most experts agreed that the latest news on Trump’s tariffs has left more questions than answers.
To start, the decision will be appealed by the Trump Administration, with Akoner suggesting the federal appeals court is likely to take a more favourable view than the US Court of International Trade.
Even if unsuccessful, the US government has other ways to push through its tariff agenda, including the Balance of Payments Act (Section 122), the Tariff Act of 1930 (Section 338), or initiating Section 301 investigations to reintroduce tariffs under an alternative legal framework, she said.
Iain Barnes, chief investment officer of Netwealth, said the news “does little to reduce uncertainty around the direction of the global economy”.
“It’s increasingly clear that there is not going to be a steady end point on the structure, magnitude and breadth of tariffs and therefore overall trade policy, making it ever harder for chief executives to plan long-term decisions on their supply chains and customer bases.”
Bond markets may look favourably on the news, as it could give the US economy a “much-needed” confidence boost and extend rate cuts further into the future.
However, he still expects “passive diversification away from US assets” over the medium term.
Mould agreed that doubt remains, suggesting the latest development could “prolong uncertainty” even if it results in a better outcome for markets overall.
“It also exacerbates the issue of how the big tax cuts being brought forward in the US will be funded – given revenue from tariffs was supposed to help on this front,” he noted.
Not all were as pessimistic, however. George Lagarias, chief economist at Forvis Mazars, said he expected a positive reaction from markets and businesses.
“At the very least, the ruling paves the way to dent some of the sharp economic impact of tariffs and give businesses further time to prepare. It could also help with retail sales, reducing crisis-level consumer pessimism especially in the US,” he said.