Trump's global tariff war halted by US court

US President Donald Trump

A US federal court has blocked President Donald Trump’s “Liberation Day” tariffs from going into effect.

The little-known Manhattan-based court of international trade ruled that Trump overstepped his authority by imposing across-the-board duties on imports from nations that sell more to the US than they buy.

The White House quickly appealed the decision, and could take it all the way to the supreme court if needed, but in the meantime it offered some hope that Trump might back away from the highest tariff levels he had threatened.

It’s long been suggested that the emergency powers Trump has used to implement tariffs were unconstitutional

“It’s long been suggested that the emergency powers Trump has used to implement tariffs were unconstitutional and that the power to enact tariffs sits with congress,” said Kyle Rodda, a senior financial analyst at Capital.com. “Should the markets get their way, the courts could delay and then deny these tariffs, removing one massive risk and undoubtedly stoking risk appetite.”

It could also encourage US trading partners to stall any trade negotiations they are having with the White House while waiting to see how the case is resolved.

“The ruling will obviously throw into disarray the administration’s push to quickly seal trade ‘deals’ during the 90-day pause from tariffs that have now been declared to be illegal,” said Paul Ashworth, chief North America economist at Capital Economics. “Other countries will wait and see whether a higher court is willing to reverse this ruling.”

Equities soar

Investors reacted by embracing equities and Japan’s Nikkei quickly rose 1.7%, while South Korean shares gained 1.2% to a nine-month top. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3%, while Chinese blue chips firmed 0.5%. The ripples were felt worldwide as Eurostoxx 50 futures rose 1.1%, while FTSE futures gained 0.7% and DAX futures 0.9%.

S&P 500 futures climbed 1.6%, while Nasdaq futures rose 1.9%. The latter had already been lifted by relief over earnings from Nvidia, which beat sales estimates. The chip maker and AI darling also projected strong revenues for the current quarter, sending its shares up 4.4% after hours.

Read: Trump tells Tim Cook: stop building iPhone plants in India

That news helped offset a Financial Times report that the White House had ordered US firms that offer software used to design semiconductors to stop selling their services to Chinese groups.

The New York Times separately reported the US had suspended some sales to China of critical US technologies, including those related to jet engines, semiconductors and certain chemicals.

The news of the court decision hit traditional safe haven currencies, lifting the dollar 0.7% on the Swiss franc. It gained 0.7% on the Japanese yen, while the euro dipped 0.4%. Yields on 10-year treasuries rose three basis points to 4.51% and markets further shaved the chance of a Federal Reserve rate cut anytime soon.

Minutes of the last Fed meeting showed “almost all participants commented on the risk that inflation could prove to be more persistent than expected” due to Trump’s tariffs. A rate cut in July is now seen as just a 22% chance, while September has come into around 60% having been more than fully priced a month ago. — Wayne Cole, with Ankur Banerjee and Stella Qiu, (c) 2025 Reuters

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