Global financial markets surged on Thursday following a significant legal setback for US President Donald Trump’s trade strategy.
A federal appeals court has ruled that Trump overstepped his authority in using emergency powers to impose sweeping tariffs, delivering a temporary reprieve to international markets rattled by months of trade uncertainty.
The court’s decision, delivered by a three-judge panel, found that the 1977 International Emergency Economic Powers Act (IEEPA) does not grant the president the authority to levy broad-based tariffs. Trump had cited the statute as the legal foundation for a series of double-digit tariff hikes targeting imports from key partners including Japan, the European Union, and South Korea.
The White House has indicated it will appeal the ruling. In the meantime, many of the tariffs—some already suspended for a 90-day negotiation window—remain in limbo. It is unclear whether the administration will pause enforcement of those measures while the legal process continues.
The court’s intervention was welcomed by investors and business leaders who have been contending with heightened uncertainty over trade policy. Stephen Innes of SPI Asset Management described the ruling as “a brief respite before the next thunderclap,” noting that it introduced fresh volatility into an already tense trade landscape.
Market Reaction
The decision triggered a broad rally across equities in the United States and Asia-Pacific. Futures for the S&P 500 rose by 1.6%, while the Dow Jones Industrial Average climbed 1.2%. In Asia, Japan’s Nikkei 225 jumped 1.5% to close at 38,263.36. Tokyo has been lobbying Washington to reverse its tariff measures, particularly on key Japanese exports such as automobiles, aluminium, and steel.
The South Korean Kospi gained 1.4% to 2,707.77, also buoyed by a surprise interest rate cut from the Bank of Korea, which lowered its key rate from 2.75% to 2.5% in an attempt to stimulate domestic demand amid export-driven headwinds. Australia’s S&P/ASX 200 index saw a more modest rise of 0.3% to 8,418.90.
Currency markets responded as well. The US dollar appreciated sharply against the Japanese yen, reaching 146.06 from 144.87 late on Wednesday.
Wall Street Snapshot
Despite Wednesday’s mixed performance on Wall Street—where the S&P 500 closed down 0.6% at 5,888.55—the index remains within striking distance of its all-time high. The Nasdaq Composite dropped 0.5% to 19,100.94, while the Dow finished at 42,098.70, also down 0.6%.
Investor attention had been fixed on Nvidia’s quarterly earnings, released after the closing bell. Shares in the AI semiconductor leader rose 4.9% in after-hours trading following the results.
Other corporate earnings also played a role in shaping sentiment. Macy’s reported smaller-than-expected declines in both revenue and profit, though its share price ended down 0.3%. Abercrombie & Fitch, by contrast, surged 14.7% after surpassing analyst forecasts. Dick’s Sporting Goods rose 1.7% after maintaining its full-year outlook and exceeding expectations for the quarter.
Bond and Commodity Markets
Yields on US government bonds edged higher, with the benchmark 10-year Treasury yield rising to 4.47%, up from 4.43% on Tuesday. The move reflected moderate investor confidence in economic growth prospects, though underlying inflation concerns remain.
Minutes from the Federal Reserve’s most recent policy meeting showed no change in interest rates for the third consecutive time, as the central bank continues to monitor the inflationary effects of Trump’s tariffs. Fed officials have maintained a cautious stance on cutting rates further, citing elevated price pressures.
In commodities, US benchmark crude gained 60 cents to trade at $62.44 per barrel, while Brent crude rose 56 cents to $64.88. Movements in the oil market were attributed to improved sentiment around trade and slightly stronger-than-expected demand forecasts.
Outlook
While markets have welcomed the legal pushback against the White House’s tariff measures, uncertainty persists. The administration’s appeal of the ruling could prolong ambiguity around the future of US trade policy. Businesses and consumers remain in a holding pattern, awaiting clarity on whether Trump will seek to reassert authority through alternative legal mechanisms or backtrack on his tariff strategy entirely.
The European Union, Japan, and South Korea are among the economies most affected by the policy. Trade ministries in those countries have yet to issue formal responses, but analysts expect diplomatic engagement to intensify as pressure mounts for a negotiated settlement.
For now, markets appear to be pricing in reduced risk of a full-scale escalation in the trade conflict. But with Trump vowing to challenge the ruling and no permanent resolution in sight, investor caution is likely to remain elevated in the coming weeks.
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