On May 28, the U.S. Court of International Trade ruled that President Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) when imposing broad tariffs. The court stated that trade deficits do not qualify as an “unusual and extraordinary threat” under the IEEPA, making the tariffs legally invalid.
The ruling affects the 10% baseline tariff on all imports, along with higher duties applied to specific countries. The Trump administration has announced plans to appeal the decision.
Tariff Developments Ahead of the Ruling
Before the court ruling, the U.S. and China had agreed to reduce and suspend certain tariffs for 90 days to ease trade tensions. Separately, President Trump had proposed a 50% tariff on all EU goods. However, implementation has been postponed until July 9, 2025, pending further negotiations.
These moves helped lift global markets, despite lingering uncertainty. The court ruling further supported risk sentiment, leading to a stronger U.S. dollar and continued gains in equity markets.
Are Trump’s Tariffs Now Invalid?
The federal court concluded that President Trump’s tariff actions violated constitutional limits on executive power. The ruling emphasized that such wide-reaching tariffs cannot be imposed unilaterally without proper legal grounds.
Unless overturned by a higher court, the decision means the tariffs must be revoked. This could have wide-reaching effects on trade and import costs.
Market Implications
With tariffs now invalidated, U.S. businesses and importers are expected to benefit from lower costs. On May 28, U.S. stock markets responded positively to the reduced trade tension.
However, legal and political uncertainty remains. Trump is expected to appeal, which could delay policy changes. Additionally, global trade partners may hold off on adjusting their responses until the legal process is resolved.
US Dollar: Signs of Renewed Optimism?
Despite recent easing in trade tensions, the US Dollar remained weak against major currencies last week, with the US Dollar Index (USDX) trading below the 100 mark. However, following the May 28 court ruling invalidating former President Trump’s tariff measures, the dollar has shown signs of renewed strength.
USDX, Daily Chart Analysis | Source: Ultima Market MT5
Technically, the Dollar Index rebounded from key support near the 98 level, indicating a potential floor for the currency. The positive news surrounding the tariff ruling helped the USD regain the 100 mark, signaling a potential shift in sentiment.
If the USDX holds above 100, it could support a short-term bullish outlook for the dollar.
Fiscal Risk Could Still Cloud Dollar
On a broader scale, the US Dollar remains under pressure from persistent fiscal concerns and market uncertainty. While the court decision offers a short-term boost, structural fiscal risks continue to cloud the long-term outlook. However, in the near term, a sustained break above 100 could signal renewed strength in the dollar.
Disclaimer
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