On Wednesday, a landmark decision by the United States (US) Court of International Trade upended President Donald Trump’s global tariff policy, blocking most of his administration’s sweeping tariffs and marking the most significant judicial challenge to Trump’s economic agenda since he took office.
While the ruling may have sought to offer temporary relief from Trump’s aggressive trade measures it has, in fact, opened a new chapter of legal and economic uncertainty. Trump’s administration immediately appealed the decision, and on Thursday, the federal appeals court temporarily reinstated the tariffs while it reviews the administration’s appeal.
Trade court’s decisive ruling
The Manhattan-based International Trade Court issued a unanimous ruling that fundamentally challenged the Trump administration’s approach to implementing tariffs under emergency powers. The three-judge panel concluded that Trump exceeded his authority when imposing the “Liberation Day” tariffs on 2 April under the International Emergency Economic Powers Act. The court determined that the US Constitution grants Congress exclusive authority to regulate commerce with foreign countries, a power that cannot be superseded by presidential emergency declarations for trade-related issues.
The ruling specifically invalidated Trump’s 10% baseline tariff applied to most trading partners and the higher “reciprocal tariffs” targeting countries with whom the US maintains significant trade deficits. The court found these measures lacked “any identifiable limits in duration or scope,” distinguishing them from more narrowly tailored emergency tariffs that had previously received judicial approval. As the judges stated, “An unlimited delegation of tariff authority would constitute an improper abdication of legislative power to another branch of government.”
Market response and economic implications
Financial markets responded decisively, reflecting investor relief at the potential removal of tariffs that had been disrupting global supply chains and raising consumer prices. Investors interpreted the decision as having the potential to reduce economic uncertainty and trade-related inflation pressures. US stock futures surged, while the US dollar strengthened significantly against safe haven currencies.
However, analysts cautioned that the immediate response may be premature given the administration’s commitment to appeal the decision and explore alternative legal pathways. And they were right. Thursday’s appeals court ruling saw markets retreat on the back of renewed uncertainty around the future of tariffs.
Alternative tariff tools still available
In addition to the federal appeals court, the Trump administration retains significant tools for implementing trade restrictions through other legislative authorities. The ruling did not address sector-specific tariffs imposed under different statutes, leaving intact measures targeting automobiles, steel, and aluminium.
Section 122 of the 1974 Trade Act provides the president with authority to impose tariffs of up to 15% on countries with whom the US maintains “large and serious” trade deficits, though such measures are limited to 150 days without congressional approval. This authority has never been used previously but could serve as an immediate alternative for the administration. Additionally, Section 301 Investigations allows for targeted tariffs on specific countries found to engage in unfair trade practices, as demonstrated by the ongoing China tariffs that originated during Trump’s first term.
The administration also continues to pursue Section 232 National Security Investigations across multiple industries, including ongoing reviews of copper, timber and lumber, pharmaceuticals, semiconductors, and critical minerals.
Ongoing trade negotiations and diplomatic pressure
The trade court’s ruling could significantly impact the administration’s negotiating position with major trading partners, particularly the European Union (EU) and China, where high-stakes discussions were already underway. Prior to the trade court’s ruling, Trump had paused implementation of a threatened 50% tariff on EU imports following a “productive call” with European Commission President, Ursula von der Leyen, setting a 9 July deadline for reaching a comprehensive trade agreement. European officials expressed cautious optimism about the court decision, with Hong Kong Financial Secretary, Paul Chan, suggesting it would “bring President Trump to reason.” However, EU negotiators remain concerned about the underlying uncertainty in US trade policy, as businesses struggle to plan investments and supply chain arrangements amid rapidly changing tariff threats. A protracted appeals process will further feed into this growing uncertainty.
The initial ruling may also affect ongoing discussions with China, where the administration had been using tariff threats as leverage in broader negotiations covering technology transfer, intellectual property protection, and market access issues. While the appeals process has reinstated tariffs, markets will be watching these negotiations closely.
Legal uncertainty and appeals process
The Trump administration’s appeal of the trade court’s decision has set up a protracted legal battle that could extend through multiple court levels. White House spokesperson, Kush Desai, strongly criticised the trade court’s decision, arguing that “it is not for unelected judges to decide how to properly address a national emergency” and he emphasised that trade deficits constitute a crisis that “has decimated American communities.”
The appeal, which will first go through the US Court of Appeals, may ultimately reach the Supreme Court, meaning the appeals process could take months or even years to resolve, creating an extended period of legal uncertainty around US trade policy.
Business impact and supply chain disruption
Small businesses welcomed the trade court’s ruling hoping it would bring relief for those that have been struggling to adapt to rapidly changing tariff policies since Trump’s return to office. Small importers have faced significant challenges in managing supply chains and pricing strategies amid the administration’s frequent tariff announcements and reversals. The Liberty Justice Centre, representing five small businesses in the legal challenge, argued that the tariffs were causing immediate harm to their ability to compete in global markets.
However, the uncertainty created by the ongoing legal battle continues to complicate business planning and investment decisions. Companies must now navigate the fact that tariffs have been reinstated through the appeals process or may be permanently implemented under alternative legal authorities.
The trade court’s ruling will also affect the administration’s revenue projections, as Trump’s tariffs had been expected to generate between $3.3 trillion and $5.2 trillion over a decade to help finance Trump’s proposed tax cuts. Without this revenue source, the administration may face renewed pressure to either find alternative funding mechanisms or scale back its fiscal plans.
Brief relief as appeals court reinstates tariffs
The Court of International Trade’s ruling represents a significant legal and political setback for the Trump administration’s trade agenda, potentially blocking the most sweeping aspects of its tariff strategy while leaving multiple avenues for continued trade restrictions. While markets initially responded positively to the immediate reduced threat of global tariffs, the underlying uncertainty around US trade policy remains substantial as a protracted legal process has just begun.
A LOOK AT THE MARKETS
The week’s key themes:
- Yields on the 10-year US Treasury bonds fall below 4.5%, after signs showed the US economy is slowing down.
- Uncertainty around tariffs linger on Wall Street, as initial optimism fades.
- Oil prices dropped for the second week in a row.
- Rand trades at best level since December, before retreating.
Bonds
Yields on the 10-year US Treasury bond dropped below 4.5% after data showed the US economy is slowing down. Data revealed that more people are applying for unemployment benefits than expected, reaching the highest level since late 2021, which suggests it’s getting harder for people to find jobs. At the same time, new data confirmed that the US economy shrank in the first quarter of 2025. These signs of weakness make investors think the US’s central bank, the Federal Reserve (Fed), will cut interest rates several times this year to support the economy. There’s also ongoing uncertainty because on Wednesday, the US Court of International Trade blocked many tariffs that President Trump put on goods from other countries, but a day later the federal appeals court temporarily reinstated them, making the future of US tariffs unclear.
In the United Kingdom (UK), government bond yields also fell as investors expect the US to cut interest rates, and the UK is pushing for a trade deal with the US to remove tariffs on exports like cars and steel. The UK government is also planning reforms to get pension funds to invest more in local projects, but some fund managers have expressed concerns about the risks. In Germany, bond yields also fell, as weak economic data makes more EU rate cuts likely.
Meanwhile, in South Africa, the South African Reserve Bank (SARB) cut its main interest rate given the country’s low inflation numbers and to help stimulate the economy which has seen its growth forecasts reduced.
Overall, weaker economic data and ongoing trade policy changes are making investors cautious around the world.
Stocks and indices
US stock futures slipped slightly as investors await a key inflation report – the Personal Consumption Expenditure (PCE) index – that the Fed watches closely, as it is its preferred inflation gauge. There is also a lot of uncertainty about trade policy because of ongoing court battles over tariffs introduced by President Trump. This back-and-forth has made it hard for investors to predict what will happen with US trade rules.
After the market closed, clothing retailer, Gap’s shares dropped sharply because the company gave a weak sales outlook for the next quarter, even though its recent results were better than expected. In contrast, technology company, Dell’s shares rose after it reported strong sales. Earlier, major US stock indices saw small gains, helped by computer chip manufacturer, Nvidia’s strong earnings thanks to high demand for its AI chips, despite some restrictions on sales to China.
In the UK, the FTSE 100, the UK’s main stock index, fell as initial optimism about the court blocking Trump’s tariffs faded. Some companies, like information and analytics company, RELX, and energy giants, Shell and BP, also saw their shares fall. In Germany, the DAX, Germany’s main stock index, lost ground as new US data raised concerns about the economy and increased expectations for interest rate cuts. Meanwhile, South Africa’s Johannesburg Stock Exchange has performed strongly so far this year breaking above record highs, yet again, this week.
Commodities
Oil prices have dropped for the second week in a row, with Brent crude trading near $63/barrel. This decline is driven by investors remaining uncertain about what will happen with US tariffs, as the legal back-and-forth is making the market more unpredictable. Traders are also watching the upcoming expanded Organization of the Petroleum Exporting Countries, OPEC+, meeting, where major oil-producing countries are expected to agree on increasing oil production in July. There’s extra tension because Kazakhstan is producing more oil than it’s supposed to, which could lead to even more supply than planned. On the demand side, recent US economic data shows the economy shrank slightly in the first quarter, raising worries that people and businesses might use less fuel. However, oil prices got some support after US oil stockpiles fell more than expected, likely because of strong seasonal demand.
Gold prices also slipped to around $3,290/ounce and are heading for a weekly loss, as investors wait for the PCE index, which could affect future interest rate decisions. Investors remain cautious as they wait for more clarity on US inflation and interest rates.
Currencies
The US Dollar Index remained steady around 99.4 as traders await today’s key inflation report that could show whether recent tariffs are starting to push prices higher. The US economy shrank in the first quarter for the first time in three years, making it harder for the Fed to decide whether or not to cut rates soon in a high inflation environment. A Fed official said there could be two rate cuts this year but stressed the need to keep rates steady until inflation is clearly under control. The dollar’s value was also affected by court decisions about President Trump’s tariffs. At first, the dollar rose when a court blocked the tariffs but then fell back after an appeals court put them back in place, causing more uncertainty about US trade policy.
Meanwhile, the euro gained against the dollar as investors expected more US rate cuts after weak economic data. The British pound slipped from recent highs as investors weighed US economic weakness and ongoing trade talks. In South Africa, the rand strengthened to its best level since December, helped by a weaker dollar and a rate cut by the SARB, which aims to support the local economy, and as inflation remains low.
* Please note that all market information and data is as at the time of writing.
Key indicators:
USD/ZAR: 18.88
EUR/ZAR: 20.26
GBP/ZAR: 24.06
GOLD: $3,287
BRENT CRUDE: $63
Sources: BBC, Time, Liberty Justice Center, Washington Post, Reuters, Refinitiv, Bloomberg, Trading Economics and Trading View.
Written by: Citadel Advisory Partner and Citadel Global Director, Bianca Botes