Stock markets around the world rallied after a US court blocked President Trump’s “Liberation Day” tariffs from going into effect.
The FTSE 100 gained 0.5 per cent before easing back to trade flat, although the pound was steady around $1.35 despite a stronger dollar.
In Europe, Germany’s DAX index rose 0.8 per cent and France’s CAC 40 was up 1 per cent. In Asia, Japan’s Nikkei 225 and China’s SSE Composite gained 1.88 per cent and 0.7 per cent, respectively. Futures markets indicate that Wall Street exchanges are expected to open higher. In commodity markets, gold slipped 0.12 per cent to $3,283 an ounce as safe-haven demand eased.
The Manhattan-based Court of International Trade ruled that Trump had overstepped his authority by imposing across-the-board duties on imports from nations that sell more to the United States than they buy.
The White House quickly appealed the decision, and could take it to the Supreme Court if needed, but in the meantime, it offered some hope that Trump might back away from the highest tariff levels he had threatened.
Paul Ashworth, chief North America economist at Capital Economics, said: “The ruling will obviously throw into disarray the administration’s push to quickly seal trade ‘deals’ during the 90-day pause from tariffs that have now been declared to be illegal. Other countries will wait and see whether a higher court is willing to reverse this ruling.”
Alec Phillips, an analyst at the investment bank Goldman Sachs, wrote that the ruling represented only a temporary setback to Trump’s trade agenda and could be “offset by other taxes”.
Yunosuke Ikeda, head of macro research at Nomura in Tokyo, said: “It’s almost impossible to know if the tariffs will be completely unwound by this. But in the hypothetical situation that they are, it’s natural to see dollar appreciation. Trump’s tariffs will lead to stagflation pressure on the U.S. economy, so reversing those tariffs would be a positive for the dollar.”
The dollar has fallen sharply as investors reassessed assumptions around the strength and outperformance of US markets as Trump’s erratic trade and tax policies hit confidence and stoked inflation. While equities have rallied recently after declining earlier in the year, after Trump rowed back on his trade policy.
Yields on 10-year US government bonds rose 4 basis points to 4.52 per cent and markets further shaved the chance of a Federal Reserve rate cut anytime soon.
Minutes of the last Federal Reserve meeting showed “almost all participants commented on the risk that inflation could prove to be more persistent than expected” due to Trump’s tariffs.
A rate cut in July is now seen as just a 22 per cent chance, while September has come into around 60 per cent having been more than fully priced a month ago.
