A U.S. federal trade court has blocked a significant portion of the tariffs introduced by Donald Trump earlier this year against most countries. According to the court, the President lacked the authority to make such sweeping changes to trade policy without Congressional approval. The ruling does not affect sector-specific tariffs but primarily targets broad, country-level duties. The decision has boosted optimism on global stock markets, especially when combined with Nvidia’s strong quarterly results.
“TACO Trade” and Trump’s Trade Policy Volatility
The landscape of U.S. trade policy has become so volatile under Trump that it’s difficult to keep up with new announcements—many of which turn out to be little more than media noise. Wall Street investors have grown accustomed to this unpredictability, dubbing it the “TACO trade,” short for “Trump Always Caves Out.” The pattern is familiar: markets fall after new tariff announcements, only to bounce back when Trump softens his stance. This was seen again recently when a proposed 50% tariff on the European Union was quickly abandoned, prompting a market rebound.
If the court’s ruling holds, it could serve as a strong bullish signal for risk assets, especially for export-oriented firms and those dependent on global supply chains. However, Trump may still attempt to reintroduce tariffs through alternative legal channels, meaning the issue is far from settled.
Rising Market Volatility Ahead
The decision adds to expected market volatility as deadlines for postponed tariffs approach. Rather than negotiating trade agreements, the Trump administration will now have to focus on internal legal battles, which may prolong the timeline for international negotiations and weaken the U.S. bargaining position—especially in dealings with China and the European Union.
The reduced tariff revenue could also complicate Trump’s plans for tax cuts. These duties were meant to offset the fiscal impact of tax reforms. Blocking them increases pressure on the federal budget, adding to fears of a growing deficit and national debt. These fiscal concerns were cited by Moody’s in its recent decision to downgrade the U.S. credit rating.
Legal Foundations Called Into Question
Trump’s tariff policy was largely based on the International Emergency Economic Powers Act (IEEPA). However, the court ruled that this law does not authorize the President to unilaterally impose trade tariffs without Congressional involvement. A key part of the ruling also rejected the argument that a trade deficit constitutes a national security threat, undermining a central pillar of Trump’s economic strategy.
The ruling specifically targets the so-called “Liberation Day” tariffs—a sweeping package that included a 10% tax on all imports, retaliatory duties, and 30% tariffs on goods from China, along with 25% tariffs on products from Mexico and Canada. These measures had previously driven U.S. markets close to bear territory. Notably, certain other tariffs—such as those on steel, aluminum, and automobiles—remain in effect, as they were enacted under different legal frameworks.
Appeal and Market Reaction
The Trump administration has already filed an appeal, and the case may eventually reach the U.S. Supreme Court. Meanwhile, the President has 10 days to formally repeal the blocked tariffs.
On financial markets, the court’s decision intensified investor optimism, which had already been bolstered by Nvidia’s impressive earnings. The U.S. dollar gained value, particularly against the euro, Japanese yen, and Swiss franc.
Author: Paweł Majtkowski, Market Analyst at eToro Poland
Source: ceo.com.pl
