Court Strikes Down Trump’s Tariffs, Sparking Market Rally

A U.S. court declared President Donald Trump’s tariffs, set to take effect on April 2, invalid, stating they were “contrary to law.” This unanimous decision, made by a panel of three judges—appointed by Trump, Obama, and Reagan—indicates a clear consensus that Trump overstepped his authority in declaring an emergency to impose these tariffs globally.

The White House swiftly announced its intention to appeal the ruling to the U.S. Court of Appeals for the Federal Circuit in Washington, with plans to escalate the matter to the Supreme Court if necessary. Historically, higher courts tend to be hesitant to overturn unanimous rulings, suggesting that this legal battle could be prolonged. In the interim, the uncertainty surrounding the tariffs could lead countries negotiating with the U.S. to adopt a wait-and-see approach, diminishing the likelihood of swift “beautiful deals.”

Investors are reacting positively to the ruling, as it raises hopes for a more stable policy environment. S&P 500 futures surged 1.6%, while Nasdaq futures climbed approximately 2%, buoyed by Nvidia’s strong earnings guidance, which boosted its shares by 4.4% after market close. Most Asian markets and European stock futures recorded gains of 1% or more, and the U.S. dollar strengthened against the Swiss franc, euro, and yen.

Meanwhile, Treasury yields experienced a modest uptick, and Fed fund futures have only slightly adjusted their expectations for future rate cuts given the implications of the tariff ruling. The potential removal of the tariffs could enhance the economic outlook and significantly reduce recession risks. However, it could also dampen the anticipated inflationary pressures, a key concern for Federal Reserve officials during their last meeting.