U.S. Stocks Rise 1.5% as Court Halts Trump's Tariffs

On the evening of May 29, Beijing time, U.S. stocks opened higher on Thursday. The U.S. International Trade Court issued an injunction against Trump's "reciprocal" tariffs, adding more uncertainty to Trump's tariff agenda. The strong performance of AI chip giant NVIDIA also boosted market sentiment.

On Wednesday, U.S. stocks closed slightly lower. The S&P 500 Index fell nearly 0.6% on the day, while the tech-heavy Nasdaq Composite Index fell 0.5%. The Dow Jones Industrial Average fell nearly 245 points, or 0.6%.

U.S. major stock indexes are still expected to close higher for the week and the month. The S&P 500 Index and the 30-stock Dow Jones Industrial Average rose 1.5% and 1.2% respectively for the week, while the Nasdaq Index rebounded nearly 2%. Driven by the positive news of Alphabet's artificial intelligence, the tech sector has risen more than 10% in May.

So far this month, the S&P 500 Index has risen 5.7%, the Dow Jones Industrial Average has risen 3.5%, and the Nasdaq Index has surged 9.5%.

Recent gains in U.S. stocks are due to Trump's softer stance on tariffs over the weekend, delaying the threat of a 50% tariff on the EU from June 1 to July 9. While investors welcomed the move, criticism has already surfaced given the market's dramatic impact from tariff policies.

The U.S. International Trade Court has halted Trump's tariffs. The U.S. International Trade Court ruled late Wednesday that Trump's action to impose "reciprocal" tariffs exceeded presidential authority. The court ordered the revocation of the challenged tariff order.

A panel of three judges in the U.S. International Trade Court in Manhattan ruled in favor of the views of Democratic-led states and a group of small businesses that Trump had erroneously invoked an emergency order to justify the imposition of tariffs.

The Trump administration has filed a notice of appeal, stating that it is appealing the ruling. The U.S. Supreme Court may ultimately have the final say on the case, which could affect tens of billions of dollars in global trade.

This ruling is one of Trump's biggest setbacks in court so far in a series of lawsuits he has filed over administrative orders, testing the limits of presidential power. Trump's mass firing of federal workers, restrictions on birthright citizenship, and cuts to congressionally approved federal spending have also been questioned.

Trump's "reciprocal" tariff policy announced on April 2, his flip-flopping on trade policy, and expectations that tariffs could exacerbate inflation led to a dramatic market volatility last month.

Many companies have also emphasized the impact of tariffs and lowered their performance guidance, citing the uncertainty of Trump's trade policy and its impact on consumers.

For now, the ruling by the U.S. International Trade Court appears to have eased investor concerns. However, this development could also raise new concerns - U.S. trade negotiations with foreign countries could be delayed until later this year, longer than previously expected.

Analysts commented on the halt of Trump's tariffs. James Leong, CEO of Grasshopper Asia, said: "This ruling has brought temporary relief to the market, although there is still uncertainty about whether the government will fully implement the ruling. While volatility has eased for now, uncertainty about the government's response could still cause new market turmoil. We are unlikely to see a lasting solution until the Supreme Court makes a final ruling."

Goldman Sachs analysts pointed out that the ruling is only a temporary setback for Trump's trade agenda and can be offset by other tax measures. Trump can also use other powers to impose tariffs on specific industries or countries, as he did during his first term.

Goldman Sachs analyst Alec Phillips noted in a report: "This ruling is a blow to the government's tariff plan and adds uncertainty, but the final impact on most major trading partners may not be significant."

Vital Knowledge analyst Adam Crisafulli noted in a morning report: "The tariff drama is not over. Trump still has other legal avenues to push his tough tariff agenda, and investors expect him to use them."

Ipek Ozkardeskaya, an analyst at Credit Suisse, said: "If the court ruling ultimately stands, tariffs will be blocked, and with improving global growth expectations, major global stock indexes, the dollar, and commodities could see a broad rally in risk assets."

Jordan Rochester, EMEA macro strategy chief at Mizuho International, said: "For the market, this is just a slight deviation from the same path, with the ultimate goal unchanged. Tariffs will eventually come. But with the possibility of a rebound in U.S. growth expectations, it may weaken the overall bearish theme on the dollar, and we may see some short covering."

Virginie Maisonneuve, chief investment officer at Allianz Global Investors, said investors should be prepared to counter Trump's actions to resist his trade policy agenda. However, she welcomed the ruling by the U.S. International Trade Court.

She said: "I think we have to expect him to try to do this. But what is really important is the grassroots action we have been waiting for to inject some rationality into these actions."