Please see today’s Daily Investment Bulletin from Brooks Macdonald covering the overnight news that the US Court of International Trade ruled that President Trump lacked the authority to impose the ‘Liberation Day’ tariffs:
What has happened
Yesterday was a quiet day for markets, with the S&P 500 dipping 0.56% after Tuesday’s 2.05% surge, while Europe followed a similar trend. The big news came after the US market close, when the US Court of International Trade ruled that President Trump lacked the authority to impose the ‘Liberation Day’ tariffs. This decision sparked a global market rally, with S&P 500 futures jumping 1.60% overnight. The positive sentiment spread globally, with Asian equity indices advancing and European markets opening higher this morning.
US trade court strikes down Trump’s tariffs
The US Court of International Trade unanimously ruled that the Trump administration lacked the authority to impose most of its recently announced tariffs under the International Emergency Economic Powers Act (IEEPA). This decision nullifies several tariffs, including the 10% baseline reciprocal tariffs announced on April 2, the 25% tariffs on Canada and Mexico, and the 20% duties on China tied to border crossings and fentanyl traffic. However, tariffs on steel, aluminium, and automobiles, enacted under separate authorities like Section 232 for national security, remain unaffected. The Justice Department has filed an appeal with the US Court of Appeals, and this case could potentially reach the Supreme Court. While President Trump has not yet commented publicly, the ruling poses a challenge to the administration’s tariff strategy, which aimed to use tariff revenue to fund tax cuts. For now, the decision may delay high tariff rates, giving businesses and investors more time to adapt.
Nvidia revenues holding up
Nvidia’s Q1 earnings, released after the US market close, further fuelled market optimism. The chip giant reported $44.1 billion in revenue, slightly above the $43.3 billion expected, and forecasted $45 billion for Q2, in line with analyst projections despite an $8 billion sales hit from US restrictions on AI chip exports to China. Nvidia’s shares jumped nearly 5% in after-hours trading. However, the broader tech sector faced headwinds earlier in the day. A Financial Times report revealed that the Trump administration ordered US chip design software companies to halt sales to China, leading to sharp declines in stocks like Cadence Design Systems (-10.67%) and Synopsys (-9.64%). The ‘Magnificent 7’ tech group also fell 0.53% before Nvidia’s earnings provided a counterbalance.
What does Brooks Macdonald think
While the tariff ruling is a setback for the Trump administration’s trade agenda, it is not the endgame. The ongoing appeal could overturn the decision, and the administration may pivot to alternative tariff mechanisms, such as expanding Section 232 tariffs used for steel, aluminium, and autos. Nonetheless, the decision could slow the pace of aggressive tariff hikes, offering investors and businesses a window to adjust. It also underscores the strength of the US judicial system in upholding the rule of law. However, with multiple other legal pathways available for imposing tariffs, the tariff war is far from over.
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Andrew Lloyd
29/05/2025