A US federal trade court just drew a big red X all over President Trump’s notorious Liberation Day poster board.
Last night, the Court of International Trade unanimously ruled that Trump had overstepped in rolling out sweeping, aggressive tariffs on, well, pretty much everyone. The court argued that Trump’s legal justification for the levies—the 1977 International Emergency Economic Powers Act—was wrongfully invoked, and gave the White House 10 days to end most of his tariffs on major trading partners.
But it looks like Trump will have longer than two business weeks to adjust his tariffs. The White House immediately appealed the ruling, and late this afternoon a federal appeals court granted the Trump administration’s request to pause the tariff pause—meaning that tariffs will stay in place during the appeal process, allowing the White House to continue trade negotiations unimpeded until a final ruling is made.
That may stop the case from going before the Supreme Court as soon as Friday, as the Trump administration was hoping, but it still casts plenty of doubt on the future of post-Liberation Day tariffs.
Not so fast
While this is a blow to Trump’s tariff strategy, the court’s ruling is more of a speed bump than a complete roadblock.
“Overall, we believe the court’s decision makes the imposition of tariffs more complex and may harm Washington’s negotiating position in trade talks, but the Trump administration is still able to impose significant and wide-ranging tariffs over the longer-term through other means,” explained CIO of Global Equities at UBS Ulrike Hoffmann-Burchardi in a note today.
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Some duties will remain in place no matter which way the court’s ruling ends up going. Levies on steel, aluminum, and automobiles were enacted under the authority of a different act than the one the court said Trump overstepped, and there could still be more tariffs to come for pharmaceuticals and semiconductors. Goldman Sachs chief political economist Alec Phillips estimated that this ruling only strikes down about 6.7 percentage points of the tariff increases announced this year.
There are also an array of complex legal maneuvers the White House could use to double down on the levies, Wall Street analysts warned.
“As the administration can impose an across-the-board tariff and country-specific tariffs under other legal authorities (e.g., Sec. 122 and Sec. 301) this ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,” Goldman Sachs chief economist Jan Hatzius wrote in a note to clients.
The bottom line: Today didn’t turn out to be the big buying opportunity many thought it was last night. “We expect further market volatility ahead as headlines on both trade and fiscal policy emerge in the weeks and months ahead. We still expect US equities to rise over the next 12 months, but near-term gains this year are likely to be more limited,” explained Hoffmann-Burchardi.—LB