Court ruling against Trump tariffs helps boost stocks – but uncertainty still rule
Federal courts ruled that some tariffs against the Trump administration have injected new uncertainty into the market, with U.S. stocks barely high as trading opened on Thursday.
In early trading, the S&P 500, the Dow Jones industrial average and the technology-heavy Nasdaq all showed moderate gains. Bond yields fell.
A panel of three federal judges ruled on Wednesday on Trump's 10% blanket tariff and 20% fentanyl tariff in China, noting that he has exceeded constitutional authority.
According to capital economic consulting firms, the role of the permanent ban is to reduce the average effective tariff rate in the United States from 15% to 6.5%. The ruling will not affect import duties on automobiles, auto parts, and steel and aluminum.
Even as the market cheers to remove some import taxes, experts say the court's ruling ultimately adds another layer of uncertainty to Trump's trade war effort. The government immediately filed an appeal that could be filed in the Supreme Court, although the timeline is unclear.
Goldman Sachs analysts said in a note to clients that while the ruling raises uncertainty, it “may not change the end result of most major U.S. trading partners.”
They wrote that the government may try to quickly replace the 10% tariff “with a maximum of 15% different from U.S. regulations,” while they wrote, while it is committed to leveraging another regulation to re-exert duties to larger trading partners.
Even if the U.S. Supreme Court ruled on Trump in its current form, “it is unlikely to mark the end of the tariff war, given the various other routes the Trump administration can impose tariffs,” capital economics analysts wrote in a note to clients.
Investment bank UBS warned clients that “important policy uncertainty remains.” They wrote that even if the tariffs suffered do not return, at least some of the economic impacts may have begun to take effect. ”
Citi analysts noted that the ruling could derail the government's ongoing trade discussions.
“The government may successfully appeal the ruling, or use other authorities … to keep the tariffs high and the revenue is considerable,” they said in a report. “Currently, the ruling will be complex and may delay trade negotiations.”
Trump administration officials said they are considering other ways to reimagine the affected tariffs, but they believe their original instructions will be restored.
“We're going to see what happened to the appeal and we're very confident in our success,” Kevin Hassett, director of the National Economic Commission, told Fox Business. “But the fact is, there are some things, measures…we can start now.”
“But we don't plan to pursue these issues now because we are very confident that this is really incorrect,” Hassett added.
Meanwhile, computer chip maker NVIDIA reported that its quarterly revenue had climbed 70%, beating Wall Street estimates. With its chips powering most of the AI revolution, NVIDIA is now seen as a health in the technology sector, and is actually the area of most of the economy, as companies want to include AI into their operations.
As a result, its performance is closely related to the wider market. NVIDIA shares trade as high as 5%.