In a unanimous decision, three judges in the Court of International Trade in Manhattan ruled that many of Trump’s tariff measures lacked sound legal basis.
While the tariffs were not immediately struck down, the court’s decision sent a clear signal that Trump’s aggressive trade policies are now in a shaky position.
The US dollar index, which measures the dollar’s performance against six major currencies, jumped 0.4%, marking a recovery after falling nearly 7% since February.
The dollar is now at its highest level in more than a week, as investors began to close short positions and return to risk on US assets.
Court casts doubt on Trump’s authority, markets breathe a sigh of relief
The court’s decision provided some relief to global markets that were shaken by Trump’s massive tariff hike on April 2. The move sparked fears around the world and caused many investors to sell off US-related assets.
The tariffs, described as the “largest in modern history,” have been criticized for disrupting global supply chains and undermining confidence in U.S. economic leadership.
The panel sided with a coalition of Democratic-led states and small businesses that argued that Trump abused emergency powers to impose sweeping tariffs without vetoing.
However, the court did not issue a clear order for the ruling to be implemented, instead giving the White House 10 days to implement the decision in any way it chooses.
Steel, Aluminum, and Vehicle Tariffs Still in Place for Now
Importantly, tariffs under Sections 232 and 301, including on steel, aluminum, and vehicles, have yet to be debated.
The most affected are the sweeping tariffs on all countries and the fentanyl-related duties imposed on China, Canada, and Mexico.
Legal analysts expect the Trump administration may still be able to use other executive channels to defend its tariff policies, which could lead to the issue going to the U.S. Supreme Court.
Dollar Recovers as Trade Sentiment Changes
The US dollar's recovery reflects a shift in sentiment among currency traders who were previously more pessimistic about the direction of US trade and fiscal policy.
Concerns that Trump's tariff policies and a second round of tax cuts will boost the US deficit have led global investors to reduce their holdings of dollar assets.
But now, on the assumption that the legal system can limit the White House's overreach, investors are once again confident in the dollar and US assets. Although this change is still small, it is enough to change sentiment and re-ignite demand for the American currency.
SARACEN MARKETS View: This Court Decision Brings Hope, But Not the End
The court decision opens a new chapter in the tariff debate, bringing relief, but also new uncertainty.
If the court ends up overturning a large part of Trump's tariff regime, this could have a major positive impact on global trade flows and investor confidence in the US economy.
However, this is not a green light to take uncontrolled risks. This legal battle is far from over, and Trump's policy approach is also unpredictable.
Investors should closely monitor any further developments, especially follow-up steps from the White House and any signs of whether the Supreme Court will intervene in this issue.
