On Wednesday afternoon, the judges from the US Court of International Trade struck down some of President Trump’s tariffs. Notably, the judge’s actions included an injunction on the “Liberation Day” tariffs and specific tariffs targeting China, Mexico, and Canada. The court’s three judges found that Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA).
The IEEPA is the act Trump invoked to justify the tariffs as a national emergency. The judges essentially ruled that the Constitution assigns tariff-making powers to Congress. Furthermore, they note that trade deficits, Trump’s justification for tariffs, do not constitute an “ unusual and extraordinary threat ” required by IEEPA. The Trump administration has 10 days to comply. Accordingly, the administration has already filed an appeal with the U.S. Federal Court of Appeals.
Stocks and the US dollar initially surged on the news. However, they quickly relinquished their gains as the Federal Court of Appeals could overturn the decision. Moreover, if Trump loses his appeal, a Supreme Court hearing is highly likely. Interestingly, despite the narrative that tariff-induced inflation would push yields higher, bond yields initially rose slightly on the ruling.
The Fed blames tariffs and the potential for them to induce inflation for not cutting rates . They stated the following yesterday in the release of its May 6th FOMC minutes :
Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer.
Lastly, we should consider that not all tariffs were struck down by the judges, as shown in the Bloomberg graphic below. Furthermore, there are other ways Trump can effectively limit imports and promote exports.
Even if the courts rule against Trump, trade-induced volatility may not be over. As Goldman Sachs states, the court ruling appears at first glance to be a “
nothing burger
.”
Nvidia (NASDAQ: NVDA ) Keeps Printing Money
The chart below, courtesy of Charlie Bilello, shows the stunning growth of Nvidia’s revenue. Once again, Nvidia did not disappoint with its earnings release on Wednesday night, posting revenue of $44.062 billion, up 12% from the previous quarter and 69% year-over-year. Analysts were expecting revenues of $43.30 billion. The bulk of revenue is from its data center division.
Data center revenue, driven by demand for AI and the company’s latest Blackwell chips, reached $39.6 billion, representing a 73% increase from last year. The only fly in the ointment was a $4.5 billion charge related to excess inventory resulting from new trade restrictions and export licensing requirements with China.
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Have a great weekend.