The Manhattan-based Court of International Trade ruled on Wednesday that the U.S. Constitution gives Congress exclusive authority to regulate commerce with other countries, and that this authority is not overridden by the president's emergency powers.
In response, the White House quickly set an appeals process in motion, one that could go all the way to the Supreme Court.
But the trade court has, at least temporarily, invalidated all of Trump's orders on tariffs since January that were rooted in the International Emergency Economic Powers Act, a law meant to address "unusual and extraordinary" threats during a crisis.
While the ruling doesn't cover sector-specific tariffs on steel or autos, analysts said it does invalidate the 10% universal tariff, the global 'reciprocal' tariffs, levies on Canada and Mexico and the new China levies.
At the very least, the tariffs are in limbo for now.
Appeals are pending and there may be other legal routes to reinstate the levies, but, as it stands, the ruling effectively freezes bilateral trade negotiations with Europe, China and other countries that needed to be concluded by July 9.
Stock markets - which were already cheering a decent set of Nvidia results that came out shortly before the court announcement - zoomed higher ahead of today's bell on the prospect of frustration, delay and possible suspension of the central plank of Trump's trade war.
U.S. futures jumped between 1.5% and 2% ahead of Thursday's bell. Bourses in Europe and Asia rose too, with Japan's Nikkei leading the way with gains of almost 2%.
The S&P 500 is currently about 4% below an all-time high touched on February 19, having rebounded from a near 20% decline last month.
For individual stocks, Apple climbed 3.6% overnight, while Meta and Alphabet added more than 2%.
Shares of Nvidia were up more than 5% as the chip giant beat estimates again for first-quarter sales, driven by customers stockpiling AI chips ahead of restrictions on U.S. exports to China. Markets seemed relaxed even as the company warned that the new curbs were expected to cut $8 billion from current-quarter sales.
The Nvidia gains appeared to hold even after news emerged that Washington had ordered a broad swathe of companies to stop shipping goods to China without a license and revoked licenses already granted to certain suppliers.
Products affected include design software and chemicals for semiconductors, butane and ethane, machine tools, and aviation equipment, Reuters sources said.
But the tariff ruling has since dominated markets.
The dollar, which had fallen as the tariffs were rolled out over the past few months, initially climbed, hitting its best levels in a week. But it gave back much of these gains as the New York open neared.
Crude oil prices pushed higher and gold fell.
In the midst of a heavy week of new debt sales, U.S. Treasury yields nudged higher and the yield on long-bonds held above 5%.
Federal Reserve futures are now pricing in less than two rate cuts through the end of the year, with barely 40 basis points of easing now expected before December.
Minutes from the U.S. Fed's latest policy meeting released on Wednesday indicated that policymakers felt they could face "difficult tradeoffs" in the coming months in the form of rising inflation alongside rising unemployment.
A second estimate for first-quarter GDP is due out later, and the latest update on the Fed's favored inflation gauge is slated for Friday. Big retailers top the earnings calender on Thursday.
And now onto today's column, where I explain how Germany's re-emergence as the world's top creditor may affect international capital flows in a time of international economic upheaval.
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