Fin-X Pulse 29th May 2025

US equity futures and the dollar have risen sharply after an American trade court blocked some of the recently-imposed tariffs. The administration has appealed. The ruling provides some temporary relief but doesn't provide any clarity on the eventual outcome and seems likely to prolong the period of economic uncertainty.

• The American federal Court of International Trade unanimously blocked President Donald Trump's tariffs from going into effect in a ruling that the president overstepped his authority by imposing across-the-board duties on imports from nations that sell more to the United States than they buy on April 2nd.

• The court said the Constitution gives Congress exclusive authority to regulate commerce with other countries that is not overridden by the president's emergency powers to safeguard the US economy. It found that efforts to justify them with broad claims of national emergencies exceeded his legal authority.

• "The court does not pass upon the wisdom or likely effectiveness of the President's use of tariffs as leverage. That use is impermissible not because it is unwise or ineffective, but because [federal law] does not allow it," the court said.

• According to Politico, the court nullified Trump’s executive orders imposing 25% duties on Canadian and Mexican products and a 20% tariff on Chinese products in response to a purported national emergency on drug trafficking.

• It also struck down a 10% tariff imposed on all US trading partners to address trade deficits, as well as Trump’s paused “reciprocal” tariffs of between 20% and 50% on roughly 60-odd trading partners, which are scheduled to go into effect on July 9 if foreign governments can’t reach a deal with the White House before then.

• The court’s ruling also means that the government may have to pay back duties it has already collected.

• The Trump administration filed a notice of appeal within minutes.

• The ruling only relates to executive orders made under the International Emergency Economic Powers Act (IEEPA). Other tariffs made under powers such as Section 232 of the Trade Expansion Act, are unaffected. These include tariffs levied on national security grounds, including 25% duties on steel, aluminium and foreign auto imports. The administration has launched several other Section 232 investigations that could lead to future tariffs on semiconductors, pharmaceuticals and other products.

• Nvidia reported results after the close, allaying fears that regulatory controls would negatively impact revenue. However, the company offered revenue guidance of $45 billion in Q2, up +51% compared to last year but clearly indicating slowing revenue growth.

• S&P500 future 6,001 +1.7%, Nasdaq Comp. future 21,800 +2.0%, S&P/ASX200 8,415 +0.3%, US 2yr 4.00% +1bp, US 10yr 4.50% +2bps

• US dollar (DXY) index 100.3 +0.4%, AUDUSD 0.6416 -0.2%, Gold US$/oz 3,264 -0.7%

Fin-X Wealth View

• The ruling is likely a temporary setback for the administration rather than an end to tariff levies. In our view, the ruling provides some short-term relief and lowers the probability that new tariffs will come into force as soon as July 9th.

• The court only impacted tariffs that had been levied under one act. There are other legal grounds that the president could seek to rely on by executive order, even if an appeal is unsuccessful. For instance, the Trade Act of 1974 enables the president to levy 15% import taxes for 150 days on nations with which the US runs a significant trade deficit. In addition, the administration could seek the approval of Congress.

• The administration can also continue to negotiate trade deals. However, the ruling will complicate the negotiation process since it marginally reduces the government's bargaining power.

• More broadly, the ruling prolongs the trade policy uncertainty which would be enough to slow economic growth while companies follow the Federal Reserve in taking a "wait and see" approach. European and Japanese equity futures have followed the US equity futures higher. But US and global bond yields are little changed today and not yet suggesting there will be a pick up in demand.

Disclaimer

The contents of this communication is prepared by Brerona Capital Asset Management Pty Ltd (A.C.N. 627 650 293; AFSL 520526). The information contained in this communication is general in nature and does not take into consideration any investors personal objectives, goals, needs and financial situation. You should not rely on the information contained in this document to make any investment decisions without first consulting an investment professional such as your financial adviser. Any unauthorised use of this document is prohibited. This document (including any attachments) is intended only for the addressee, it may contain information of a privileged and confidential nature. If you are not the addressee of this communication, you must not copy, reproduce, disseminate or use this email and its contents. If this communication has been received in error by you, please inform us immediately and securely delete. Sharing, transmitting, copying, disseminating all or part of the contents of this document may result in a breach of the Federal Privacy Legislation and or copyright and trademark infringement of Brerona Capital Asset Management Pty Ltd and its related entities.