Time to wrap up….A US trade court has ruled Donald Trump’s sweeping tariffs regime illegal, after several lawsuits argued the President has exceeded his authority, left US trade policy dependent on his whims and unleashed economic chaos.The three-judge panel said they were not passing judgment on the “wisdom or likely effectiveness of the president’s use of tariffs as leverage”. Instead, their ruling centred on whether the trade levies had been legally applied in the first place. Their use was “impermissible not because it is unwise or ineffective, but because [federal law] does not allow it”, the decision explained.Financial markets cheered the court’s ruling, with the US dollar rallying against a basket of other currencies, although it has since pared back these gains. Stocks in rose the US on Thursday.However investors are still weighing whether the ruling from the trade court in New York will be enough to block Trump from pursuing his trade tariffs.Analysts at Deutsche Bank think if the court ruling is upheld, Trump could pursue his other tariffs through the same means. They wrote: “If the ruling did remain in place, preventing the use of tariffs under IEEPA, one option for the administration would be to expand the use of other tariff instruments, like the Section 232 on national security grounds, which have been used for autos, steel and aluminium tariffs.”Trump has claimed authority to set trade tariffs under the International Emergency Economic Powers Act, or “IEEPA”. The law has historically been used to impose sanctions on enemies of the US or freeze their assets. Trump is the first US president to use it to impose tariffs.But the Court of International Trade in New York has said the US Constitution gives Congress exclusive authority to regulate commerce with other countries, and that is not overridden by the president’s emergency powers.In other news:More than 60,000 low-paid workers have received back pay worth £7.4m after their employers failed to meet the legal minimum wage level.Some of the UK’s most prominent employers were caught out paying below the minimum wage, following investigations by HM Revenue & Customs.Pizza Express, British Airways and the outsourcing firm Capita were among 518 businesses forced to pay wages that fell short of the minimum wage over a period of years.German-owned supermarket chain Lidl and Halfords were also on a “name and shame” list of culprits issued by the department for business and trade.Capita was the worst offender after it failed to pay £1.5m to 5,543 workers.The investigations were conducted between 2015 and 2022, but have only recently been completed and back-payments agreed.Last year the previous Conservative administration said a separate group of 524 businesses had failed to pay the minimum wage affecting 172,000 workers, giving rise to a £16m back-pay bill.Minister for Employment Rights, Justin Madders said: “There is no excuse for employers to undercut their workers, and we will continue to name companies who break the law and don’t pay their employees what they are owed.”The National Living Wage for workers aged 21 and over rose in April from £11.44 an hour to £12.21 an hour.Elsewhere in the US market, shares in the cosmetics business Elf Beauty are up by about 30%, after the company announced last night that it agreed to buy Hailey Bieber’s beauty brand, Rhode, in a $1bn deal.Hailey Bieber, the model wife of pop singer Justin Bieber, launched the company three years ago. It reported $212m worth in net sales in the 12 months ended in March.Bieber said she would “continue as founder and step into an expanded role of chief creative officer and head of innovation.”US stocks have risen at the opening bell in New York, with the blue chip S&P 500 index up 0.8%, after a federal court blocked Trump’s tariffs and Nvidia reported a 69% rise in quarterly revenue.The tech heavy Nasdaq index rose 1.5%, and shares in Nvidia bounced by 5.6% in early trading.It is not clear whether the rally will last today as investors weigh whether Trump will still pursue tariffs through means outside the International Emergency Economic Powers Act (IIEEPA).The US dollar, which initially rallied strongly on news of the court ruling, has now fallen against a basket of other major currencies by 0.45%.Economic adviser to the White House Kevin Hassett has said he is confident the trade court ruling that blocked most of Trump’s trade tariffs will be overruled.Speaking to Fox Business Network, he said:
If there are little hiccups here or there because of decisions that activist judges make, then it shouldn’t just concern you at all, and it’s certainly not going to affect the negotiations.
He added that three more trade deals “basically look like they’re done”, though he did not specify which countries.The US economy shrank in the first quarter of the year, with gross domestic product decreasing by 0.2%, according to the second estimate released from the Bureau of Economic Analysis. It first estimated that GDP had fallen by 0.3%.The fall was driven partly by weaker consumer spending and an increase in imports as Americans bought foreign goods before tariffs came into effect.The estimated 0.2% drop from January to March is the first contraction in three years and puts the US on the brink of a technical recession, defined by two quarters of negative growth.Separate data showed filings for US jobless claims rose last week. Jobless benefits applications rose by 14,000 to 240,000 for the week ending 24 May, according to the US Labor Department. Analysts had forecast 226,000 new applications.Closer to home, there are some new figures today on the rate of inflation experienced by British households.Overall UK household costs rose by 2.6% in the year to March, according to the Office for National Statistics. That marks a deceleration from 2.9% in the year to December 2024.Private renters experienced the biggest rise in costs, with these households experiencing the highest annual inflation rate of 3.6% in March. Meanwhile households who owned their homes experienced an inflation rate of 1.8%, and those with a mortgage had a rate of 2.8%.The White House is also under pressure from rising interest rates on US debt. Last week the lower house in Congress passed a tax bill funded largely by extra borrowings. It is estimated the giveaways will add $5tn to US debt levels.Olivier Blanchard, an economics professor at the Massachussetts Institute of Technology and a former chief economist at the International Monetary Fund, said the tax bill had spooked investors, and especially those that wanted to buy bonds that last 10 or 30 years, concerned that they might not get their money back.“If I were an investor, i would worry about buying a thirty year maturity treasury [bond], because god knows what’s going to happen,” he told Bloomberg News.“I would buy a one year [bond] because there’s not much risk. I mean, even if I think that the [tax] policy is crazy, I’m going to get my money back after one year. But if I buy a 10 year, I start saying, yeah, things could happen.“So, the utter fiscal irresponsibility of this administration is clearly what explains higher rates.”Another bumper set of quarterly results from Nvidia has rippled over to the European stock markets too. Shares in the Dutch semiconductor equipment maker ASML have risen by 2.4% today, and the Stoxx Europe tech index has risen by 0.8%.Over in the US, futures for the tech-heavy Nasdaq were up by as much as 2%, and shares in Nvidia itself are up 6% in pre-market trading.Shares in Tesla, another leader in artificial intelligence technology, are also up 2.6%. Last night its chief executive Elon Musk announced he will leave his role in the Trump administration.The chief executive of Hargreaves Lansdown, Dan Olley, is leaving the investment broker after less than two years in the top job.Richard Flint, an independent non-executive director, will act as chief executive on an interim basis, subject to approval from the City regulator.Olley will remain in post for a three-month handover period, and be available to the business for a further two months, Hargreaves said.Last year the company agreed to a £5.4bn takeover by a consortium of private equity firms.More scepticism arriving today as investors weigh whether the ruling from the trade court in New York will be enough to block Trump from pursuing his trade tariffs.Mark Haefele, chief investment officer at UBS Global Wealth Management, said:
In our view, tariffs are unlikely to disappear completely, as the administration could rebuild some of its tariff agenda through certain sections of the Trade Act of 1974. For investors, we continue to highlight volatility in the near term as more headlines emerge.
Meanwhile analysts Joachim Klement and Susana Cruz, of the broker Panmure Liberum, say the likelihood oof tariffs being cancelled has increased but is not their “base case”. They wrote:
Indeed, we expect that tariffs have been delayed, but not cancelled. Instead, the Trump administration will likely use other legal authorities like Section 301 of the Trade Act to impose similar tariffs, but with a slower and more deliberate approach.
This means that on the one hand, extreme tariffs and rapidly changing tariffs are less likely to happen going forward, which reduces uncertainty somewhat.
But in the short term, the court ruling, and the subsequent legal challenges will add significant uncertainty to the mix, making it even harder for US businesses to plan their capex and thus reduce US GDP growth due to a decline in investment activity.
The UK has said it wants to accelerate negotiations to conclude a trade deal with Donald Trump in the wake of the US court ruling that the sweeping tariffs he imposed on imports from more than 60 countries were illegal.Despite Keir Starmer sealing the first deal with Trump since his so-called “liberation day” at the start of April no legal text exists to bring the concessions he won into force.The UK is also still threatened with a 10% reciprocal tariff on all exports outside the deal which was seen as a life saver for the car and steel industries.The business secretary, Jonathan Reynolds, is expected to meet US commerce secretary Howard Lutnick at a meeting of the OECD in Paris next Tuesday.A UK government spokesperson played down the US court ruling on Thursday plainly indicating it would continue to negotiate despite a technical opening to walk away from the deal.“These are matters for the United States to determine domestically and we note this is only the first stage of legal proceedings.“We were the first country to secure a deal with the US in a move to protect jobs across key sectors, from autos to steel, and we are working to ensure that businesses can benefit from the deal as quickly as possible,” the spokesperson said.Trade experts have said the US court’s verdict just added more uncertainty to the global markets already heavily disrupted by the volatility of US trade policy.“This court ruling doesn’t affect the tariffs that the UK negotiated down on cars and steel, but clearly adds another layer of complexity and uncertainty to what Trump is doing when businesses don’t know what tariffs their product would face in the US that can’t be good for the economy,” said David Henig, director of think tank European Centre for International Political Economy.The EU is also in the middle of tense trade negotiations with Trump’s administration following last week’s threat to impose tariffs of 50% on all exports. It was already facing a 20% tariff on all exports as well as sectoral tariffs on autos and steel and aluminium, with both sides pausing measures and counter measures for 90 days until the beginning of July.Its lead negotiator Maroš Šefčovič is also expected to meet with US commerce secretary Howard Lutnick in Paris next week at the OECD council meeting with EU sources saying a call between Donald Trump on Sunday with European Commission president Ursula von der Leyen unlocking a route to proper negotiations.Also in the UK, some bleak figures from the car manufacturing industry, where production hit its lowest monthly output in more than 70 years.Car and commercial vehicle production dropped 15.8% to 59,203 in April, according to figures from the Society of Motor Manufacturers and Traders (SMMT). Monthly vehicle output has not been that low since 1952, excluding 2020 when the pandemic shut down most manufacturing.The decline was because of a late Easter, SMMT said, as well as “model changeovers and lower demand in key export markets”.The UK looks like it is losing out on the broader rally in Europe, with the FTSE 100 index down slightly by 0.1%.The online car marketplace Auto Trader is at the bottom of the index, with shares down by 12%. It reported a 5% rise in revenue to £601m in the year ended in March, below analyst expectations of £606m.Demand for used cars has been very strong, but that has been a problem for Auto Trader. Analysts at the broker Peel Hunt write:
The resilient car market has created headwinds for Auto Trader, as theaccelerated speed of vehicle sales on its platform weighs on ARPR [average revenue per retailer] growth.
