Markets cheer court ruling against US President Trump’s tariffs

Markets have cheered a court ruling against US President Donald Trump’s tariffs, boosting US stock index futures, regional benchmarks and crude oil prices.

People take a look to Nvidia''s new products during the Computex 2025 exhibition in Taipei, Taiwan. Picture: AP Photo/Chiang Ying-ying, File

Investors had a tantalising glimpse of life before US President Donald Trump’s tariffs as a US court ruling invalidating the trade war revived Wall Street.

The decision boosted US stock index futures, regional sharemarkets and crude oil. Gold, a rare winner from the conflict, receded.

The Federal Court of International Trade blocked most of Trump’s Liberation Day tariffs, saying he wrongfully invoked an emergency law. The White House intends to appeal.

A strong showing and earnings outlook from Nvidia helped lighten the mood, too.

Chief executive Jensen Huang said the AI computing market is still poised for “exponential growth” after the company’s first quarter sales rose 69 per cent to $US44.1bn versus $US43.3bn expected by analysts.

However, Australian stocks sat out the ride.

The S&P/ASX 200 index added just 12.9 points or less than 0.2 per cent to 8409.8.

After falling about 17 per cent from a record high in February as the trade war escalated, the Australian benchmark index rebounded 18 per cent in seven weeks as the US delayed country-specific tariffs and subsequently made a limited trade deal with the UK and a truce with China that saw retaliatory tariffs removed.

S&P 500 futures were up 1.7 per cent in Asia-Pacific trading, indicating that Wall Street could hit a fresh three-month high when it opens on Thursday. In the region, export winners like Japan’s Nikkei 225 index rose 1.7 per cent and South Korea’s KOSPI index climbed 1.8 per cent.

China’s Shanghai Composite was up 0.7 per cent and the Hang Seng index rose 0.8 per cent.

Brent crude oil futures rose 1.2 per cent to $US65.68 a barrel and Comex copper futures rose 0.4 per cent to $US4.69 a pound. Spot gold was down 0.3 per cent at $US3,276.75 per ounce after falling as much as 1.5 per cent on the tariff news. 10-year US bond yields rose 3 basis points to 4.505 per cent.

The US dollar index was up about 0.5 per cent as the Japanese yen and Swiss franc fell about 0.9 per cent against the greenback. The Aussie dollar was little changed and slipped 0.2 per cent to US64.23c.

President Trump roiled against suggestions that Wall Street believes he’s ultimately unwilling to follow through on extreme tariff threats, saying his repeated retreats are instead part of a strategy to get trade concessions from other countries.

“It’s called negotiation,” Trump said on Wednesday, US time, adding that he intentionally would “set a number at a ridiculous high number” and then “go down a little bit” as part of his tactics.

Other countries will wait and see whether a higher court decides to side with Trump.

Meanwhile, Blomberg Economics analyst Matt Ingram said that for the Australian stock market the blocking of US tariffs could support an S&P/ASX 200 price-to-earnings valuation that’s already re-rated 14 per cent since the temporary US-China trade deal was announced.

“Our model suggests earnings for the Australian market could rise 3-4 per cent a year through 2027, and that the tariffs would have minimal impact if imposed,” he said.

According to Goldman Sachs, Wednesday’s ruling – which blocks 6.7 percentage points of the US tariff increase since the start of the year, including on Canada, China, Mexico, and the 10 per cent baseline tariff, is only a “setback”.

Liberation Day with Donald Trump. Photo by Brendan SMIALOWSKI / AFP

“As the administration can impose an across-the-board tariff and country-specific tariffs under other legal authorities, 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,” said Goldman Sachs chief political economist, Alec Phillips.

He said that administration would be unlikely to win an appeal in the 10 days it has under the court order to remove the tariffs, and so would be likely to announce a similar across-the-board tariff using Section 122.

“This would then provide the administration time to launch a series of Section 301 cases against larger trading partners, potentially opening the door to imposing tariffs higher than 10 per cent in some cases,” Mr Phillips said.

However, he also said the administration seems unlikely to complete Section 301 investigations on every US trading partner within the next several months.

So if the court’s ruling against the IEEPA-based tariffs remains in effect, this could mean that smaller trading partners or countries with smaller trade surpluses with the US might not face a baseline tariff when Section 122 tariffs roll off after 150 days – assuming the Trump administration can’t find a legal means to extend them.

Capital Economics said the court ruling and subsequent appeal by the Trump Administration adds another layer of uncertainty to the “reciprocal tariffs” which were set at 10 per cent for most nations when a 90 day “pause” in country-specific tariffs was announced on April 9.

“While the Commerce Clause of the US Constitution grants Congress the exclusive power to ‘regulate commerce with foreign nations’, Congress has delegated some of those powers to the executive branch over the decades,” said Capital Economics chief US economist Paul Ashworth.

“However, today’s order makes clear that the court thinks Trump exceeded those powers.”

Trump was wrong to use trade deficits as a justification for declaring a national emergency, and as a result, ‘the Liberation Day executive orders “are declared to be invalid as contrary to law”.

“This is pretty damning stuff,” said Capital Economics’ Mr Ashworth.

The IEEPA was used as the justification for the reciprocal tariffs imposed on most countries as well as the fentanyl-related tariffs imposed on Canada, Mexico and China.

Most of the other product-specific tariffs on steel, aluminium and motor vehicles were imposed under the standard trade laws following Section 232 investigations, so will presumably remain in place, for now at least, according to Mr Ashworth.