A federal court ruling striking down some of the Trump administration’s tariffs has injected a fresh bout of uncertainty into markets, with U.S. stocks barely edging higher as trading opened Thursday.
The S&P 500 gained as much as 0.54%, while Dow Jones Industrial Average climbed 0.13% or 55 points. Tech-heavy Nasdaq futures gained 0.94%. Bond yields fell.
A federal three-judge panel on Wednesday ruled against Trump’s 10% blanket tariffs and 20% fentanyl tariffs on China, stating that he had exceeded his constitutional authority.
The permanent injunction has the effect of lowering the U.S.’s average effective tariff rate from 15% to 6.5%, according to Capital Economics consultancy. The ruling did not affect import duties on automobiles, auto parts, and steel and aluminum.
Even as markets cheered the elimination of some import taxes, experts said the court decision ultimately adds another layer of uncertainty to Trump’s trade-war effort. The administration immediately filed an appeal that is likely to wind up in the Supreme Court, though the timetable was not clear.
In a note to clients, Goldman Sachs analysts said despite the increased uncertainty sparked by the ruling, it “might not change the final outcome for most major US trading partners.”
The administration may seek to quickly replace the 10% tariff “with a similar tariff of up to 15%” under a different U.S. statute, they wrote, while it works to tap another statute to reimpose duties against larger trading partners.
Even if the nation’s highest court were to rule against Trump’s tariffs in their current form, “it would be unlikely to mark the end of the tariff war given the various other routes through which the Trump administration could impose tariffs,” Capital Economics analysts wrote in a note to clients.
The investment bank UBS warned clients that “significant policy uncertainty remains.” Even if the struck-down tariffs do not come back, they wrote, “at least some of the economic impact has likely already begun to take effect.”
Analysts with Citi noted the ruling is likely to derail the administration’s ongoing trade discussions.
“The administration is likely to either successfully appeal the ruling or to use other authority … to keep tariff rates high and revenue substantial,” they said in a note. “For now, the ruling will complicate and potentially delay trade negotiations.”
Trump administration officials said that they were considering alternative ways of reimposing the affected tariffs, but that they were confident their original directives would be reinstated.
“We’re going to see what happens on appeal, and we’re very confident in our success there,” National Economic Council director Kevin Hassett told Fox Business. “But the fact is that there are things, measures … that we could start right now.”
“But we’re not planning to pursue those right now because we’re very, very confident that this really is incorrect,” Hassett added.
Meanwhile, computer chipmaker Nvidia reported that its quarterly revenues had climbed 70%, beating Wall Street estimates. With its chips powering much of the artificial intelligence revolution, Nvidia is now seen as a bellwether for the health of the tech sector and indeed much of the economy as businesses look to incorporate AI into their operations.
As a result, its performance has become tightly correlated to that of the broader market. Nvidia shares were up as much as 5% in pre-market trading.
