A federal appeals court on Thursday granted the Trump administration's request for a stay of a Wednesday ruling that President Donald Trump overstepped his authority in imposing reciprocal tariffs announced on April 2 and earlier tariffs aimed at China, Mexico and Canada. The S&P 500 barely reacted to the latest Trump tariffs twist, remaining slightly higher on the session.
The stay granted by the U.S. Court of Appeals for the Federal Circuit is a short-term one — while the court considers filings from both plaintiffs and the U.S. that are due by June 9. Even if the tariffs don't survive, Wall Street believes Trump has alternative ways to enact the trade policies he wants. Still, the longer the uncertainty extends, the more tariff revenue will be collected that might eventually have to be refunded.
China, Apple Almost Get Temporary Reprieve
Late Wednesday, the Court of International Trade found that the International Emergency Powers Act of 1977 (IEEPA) did not confer the "unbounded authority" to impose tariffs that Trump asserted. While unexpected, it wasn't a shock. Trade policy experts had questioned whether Trump had taken an illegal shortcut in announcing tariffs on the fly, in contrast to his first term, when tariffs were rolled out based on other statutes that required extended investigations.
For about 20 hours, it seemed as though second-term Trump tariffs as high as 30% tariff on Chinese imports had been slashed to zero, including a 20% tariff tied to fentanyl that hits U.S. imports of Apple iPhones. The threat of Trump's 10% reciprocal tariffs ratcheting up to 20% or more on July 8 also seemed to have been tabled.
The Trump administration asked the appeals court to block the ruling from taking effect while the case plays out, citing the "irreparable harm" to U.S. foreign policy and national security.
For now, the status quo before the trade court's decision remains in place. Meanwhile, Trump's industry-specific tariffs on steel, aluminum and autos aren't affected by Wednesday's ruling.
Goldman Sachs analysts had characterized Wednesday's trade court ruling as "a setback for the administration's tariff plans" but said it "might not change the final outcome for major U.S. trading partners."
What Comes Next For Trump Tariffs?
The staying power for the April 2 reciprocal tariffs and separate tariffs tied to fentanyl and border crossings, which hit China, Mexico and Canada, is unclear. Two separate courts have now found that Trump lacked the authority he asserted.
A federal district court also ruled on Thursday that the same Trump tariffs were impermissible under IEEPA authority, but that ruling has a much narrower scope, shielding the two companies that filed the suit, Learning Resources and hand2mind, from tariffs.
The trade court's ruling that struck down the IEEPA tariffs also required the U.S. to refund the tariffs already paid, noted Nomura economist David Self. If the ruling survives, Nomura estimates that the Trump administration would have to refund between $40 billion and $60 billion in collected tariff revenue, which would be "mildly stimulative" for the U.S. economy. That potential refund figure will keep rising for now.
Morningstar analyst Preston Caldwell noted that Trump has other authorities that could keep most current Trump tariffs in place, if his reciprocal tariffs don't ultimately survive. "Trump could use Section 122 authority to impose tariffs of up to 15% for up to 150 days."
Section 122 gives the president authority to address "large and serious" trade imbalances.
A temporary jump in tariffs under Section 122 would give the Trump administration time to get other country-specific tariff measures ready pending negotiations with trading partners. In his first term, Trump imposed tariffs on China following Section 301 investigations.
Trump's industry-specific tariffs use Section 232 authority that requires a national-security justification. While Trump has focused mostly on country tariffs since April 2, Trump has threatened to extend tariffs to copper, lumber, pharmaceuticals and semiconductors.
Separately, Trump has threatened 25% tariffs on cellphones produced outside the U.S., targeting Apple, but also hitting Samsung.
S&P 500
The S&P 500 edged up 0.4% in Thursday stock market action. Apple lose 0.2%, after climbing more than 2% in premarket action on Trump's fleeting legal defeat.
The S&P 500 finished 18.65% above the 52-week low on April 8, a day before Trump announced a 90-day delay before reciprocal tariffs would jump.
The S&P 500 ended 3.8% below its all-time closing high on Feb. 19.
