Stock ETFs Volatile as Court Strikes Down Trump's Tariffs
- A federal court has struck down a major chunk of the president’s tariff agenda.
- Investors were initially bullish after the court's ruling, but tempered their enthusiasm as the day went on.
Stock ETFs seesawed Wednesday after a federal court struck down a major chunk of President Donald Trump’s tariff agenda, raising fresh uncertainty about the future of U.S. trade policy.
The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) initially jumped on the news. SPY climbed nearly 1% at its intraday high, while QQQ rallied as much as 1.5%. But those gains evaporated by midday as investors processed the implications of the ruling and the likelihood that the administration would pursue other avenues to restore tariffs.
Tariffs Blocked
Late Wednesday, a three-judge panel from the U.S. Court of International Trade unanimously ruled that several of Trump’s sweeping tariff orders exceeded his authority under the International Emergency Economic Powers Act (IEEPA), a 1977 law that allows the president to regulate commerce in response to national emergencies.
Specifically, the court invalidated a series of executive orders that imposed tariffs on Canadian, Mexican and Chinese imports—tariffs that had been justified as responses to emergencies like drug trafficking and trade deficits.
The ruling also blocked a set of "reciprocal" tariffs targeting dozens of U.S. trading partners, which were slated to go into effect in July unless trade deals were reached.
In its opinion, the court concluded that IEEPA does not grant the president unlimited power to impose tariffs. While the ruling doesn’t affect tariffs imposed under other statutes—such as Section 232 of the Trade Expansion Act, which allows for duties on national security grounds—it does curb the use of emergency powers for broad trade restrictions.
The Trump administration quickly signaled it would appeal the decision and indicated that it might turn to other authorities to reimpose similar tariffs.
“There are so many different authorities the administration can reach into to put it back together,” said Michael Zezas, head of fixed income and thematic research at Morgan Stanley, on Bloomberg TV. Peter Navarro, a top White House trade advisor, also indicated that other mechanisms remain available, though many are slower and more cumbersome than IEEPA.
The back-and-forth left investors unsure how to interpret the ruling. While the court decision marked a temporary legal win for importers and trade groups challenging Trump’s tariff regime, it didn’t signal the end of tariff threats more broadly.
SPY & QQQ Digest the News
As investors recalibrated their expectations about what the latest court ruling means for the economy, stock ETFs gave up their early gains. Both SPY and QQQ briefly turned negative before rebounding to trade modestly higher.
For now, markets are waiting to see how the administration responds. Trump’s tariff agenda, a cornerstone of his economic platform, is unlikely to disappear without a fight.
