Asia markets cautiously welcome US court ruling to block Trump tariffs

SINGAPORE – While US stock futures jumped, Asia markets on May 29 reacted more cautiously to news that a

US federal court has blocked President Donald Trump’s “Liberation Day” tariffs

from going into effect.

The US Court of International Trade ruled on May 28 that Mr Trump 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 the US Supreme Court may ultimately have the final say in the high-stakes case that could impact trillions of dollars in global trade.

While investors sought more clarity on the impact from the court decision, the ruling provided a temporary reprieve after global financial markets were hit by a sweeping sell-off from Mr Trump’s April 2 announcement of the levies, on concerns the trade war will hurt global growth.

“This might be considered a body blow, but it’s not the final rendering,” Mr Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs Group, said in a Bloomberg TV interview. “Specifically, there are a number of other substitute acts that Trump administration could employ to maintain tariffs.”

The order suspends the vast majority of Mr Trump’s tariffs – his global flat tariff, elevated rates on China and others, and his fentanyl-related tariffs on China, Canada and Mexico are all suspended by the ruling. Other tariffs imposed under different powers, like so-called Section 232 and Section 301 levies, are unaffected, and include levies on steel, aluminium and automobiles.

“More details are needed,” said Mr Rodrigo Catril, a strategist at National Australia Bank in Sydney. “Particularly whether there is an injunction or whether this goes to an appeal process and tariffs remain in place for now. The best guess at this stage is that the administration has enough powers to bypass the ruling and implement tariffs on several grounds.”

Japan’s Nikkei and South Korea’s Kospi rallied 1.7 per cent, while South Korea’s Kospi added 1.2 per cent and Tawan’s Taiex index rose 0.5 per cent.

Other stock markets in Asia saw more modest gains. Hong Kong’s Hang Seng Index rose 0.6 per cent while China’s Shanghai Composite gained 0.7 per cent.

Singapore’s Straits Times Index was down 0.3 per cent at the midday trading break. The Ministry of Trade and Industry declined to comment on the US court ruling in response to a query from The Straits Times.

S&P 500 futures climbed 1.6 per cent, while Nasdaq futures surged1.9 per cent. The latter had already been lifted by relief over earnings from Nvidia, which beat sales estimates.

The chipmaker and AI darling also projected strong revenues for the current quarter, sending its shares up 4.4 per cent after hours.

That news helped offset a Financial Times report that the White House had ordered US firms that offer software used to design semiconductors to stop selling their services to Chinese groups.

The New York Times separately reported the US had suspended some sales to China of critical US technologies, including those related to jet engines, semiconductors and certain chemicals.

The US dollar strengthened as much as 0.4 per cent. The dollar has tumbled more than 7 per cent since a February high as the trade war badly hurt sentiment on US assets and fuelled a rethink on the world’s reliance on the US currency.

Mr Kyle Rodda, senior financial market analyst with Capital.com, said: “It’s massive news. It’s long been suggested that the emergency powers Trump has used to implement tariffs were unconstitutional and that the power to enact tariffs sits with Congress.

“It sets up a battle that will likely end up in the Supreme Court now. It’s a situation fraught with danger because the administration may ignore the court’s ruling, potentially placing greater strain on US institutions at a time of increased stress.

“However, should the markets get their way, the courts could delay and then deny these tariffs, removing one massive risk and undoubtedly stoking risk appetite.” REUTERS, BLOOMBERG