Market Wire: Markets Soar After Trump Tariffs Are Ruled Illegal 

The dollar and equity futures are spiking higher after the US Court of International Trade invalidated many of President Trump’s tariffs on key trading partners, finding in two cases that he had substantially exceeded his authority to impose duties under federal law.

Citing the president’s overreach under the 1977 International Emergency Economic Powers Act, a bipartisan panel of three judges this evening suspended the majority of the levies imposed in recent months, including near-universal 10-percent “baseline” tariffs, “reciprocal” measures against a number of countries, and fentanyl-related duties on imports from China, Canada, and Mexico. Other tariffs imposed under different powers, such as the Section 232 and Section 301 levies on autos, aluminum, and steel, were not included in the decision.

In a single ruling on two separate cases, the panel found that the emergency powers act “does not authorize” the president to enact tariffs, and that the use of tariffs to address issues like drug trafficking and immigration was not permitted under existing law.

We are unsure as to when – or if – tariff collection might stop. Although the executive branch was given up to 10 days to halt its efforts, the Justice Department promptly said it plans to file an appeal, meaning that the issue could go to the federal appeals court before ultimately landing in front of the Supreme Court – and that the administration could find ways to reinstate levies through other means.

Investors are nonetheless likely to welcome a degree of restraint on the president’s trade-war powers. Tariffs announced over the last few months have triggered an unprecedented rise in economic policy uncertainty, several extreme selloffs in financial markets, and a broad-based reappraisal of dollar-denominated assets. Evidence of a functioning set of checks and balances in the American legal system could help reduce downside risk and put markets on a steadier footing going forward.