Markets reeled overnight as US courts issued conflicting decisions on the future of President Donald Trump’s global tariff regime, reigniting uncertainty around trade policy in a brewing battle likely bound for the US Supreme Court.
A federal appeals court temporarily reinstated the sweeping 10% global tariffs and “reciprocal” tariffs on individual trading partners, as well as separate levies on Mexican, Canadian and Chinese imports – just hours after the US Court of International Trade had ruled the duties unlawful.
The rapid-fire legal reversals have left investors and trade partners scrambling for clarity on where US policy is headed.
Tariff backflips add to trade policy fog
On Wednesday, the Court of International Trade stunned observers by striking down sweeping tariffs that had hit more than 100 countries with levies as high as 25% on some items. The court sided with a group of states and small businesses, finding the president overreached by imposing the so-called Liberation Day tariffs under the International Emergency Economic Powers Act.
The surprise decision prompted a brief Wall Street rally, relieving some investor concern over the effects of the steep tariffs and signalling limits to Trump’s powers.
But by Thursday, the US Court of Appeals for the Federal Circuit put the brakes on the reversal, granting a temporary stay that reinstates the duties while the legal process plays out – a process likely to take several months.
China restrictions widen, EDA firms in the crosshairs
Meanwhile, the Trump administration is pressing ahead with a fresh round of China-focused trade restrictions. A new rule under consideration would block US-based electronic design automation (EDA) firms providing services to Chinese chipmakers working on advanced artificial intelligence (AI) processors.
The move builds on the ongoing effort to choke off China’s access to cutting-edge semiconductor tools and is part of a broader strategic realignment. While framed as national security policy, the restrictions could have ripple effects across the US tech sector, especially among companies reliant on cross-border revenues.
Fed weighs tariff impact on rate outlook
Against this backdrop, the US Federal Reserve is factoring tariff developments into its monetary policy calculus. Chicago Fed President Austan Goolsbee said overnight that if increased tariffs lead to higher input costs, it could fuel inflationary pressures and complicate the path towards rate cuts.
“If, on the back end of this thing, either we don’t put the tariffs in or they reach some deals that allow us to avoid doing that, we could go back to where we were prior to April 2,” Goolsbee told a conference on Thursday.
For investors, Trump’s trade doctrine – and the legal and geopolitical battles surrounding it – are fast becoming central macro drivers. With policy reversals, contradictory court rulings and US-China tensions escalating in tandem, the unpredictable ride for markets is set to continue.