Introduction:

A significant ruling by the U.S. Court of International Trade blocked President Trump’s across-the-board tariffs, citing that he overstepped his authority and that Congress holds the exclusive power to regulate commerce. This decision led to positive reactions in financial markets, including a rally in the U.S. dollar and rising equities, while simultaneously the South African Reserve Bank was widely expected to cut interest rates to support its economy, influenced by domestic factors and a temporary pause in U.S. tariff escalations.

Key takeaways from sources:

A significant ruling by the U.S. Court of International Trade blocked President Trump’s “across-the-board” tariffs imposed since January under the International Emergency Economic Powers Act (IEEPA). The court issued a permanent injunction on these blanket orders.
The court’s primary legal basis was that the U.S. Constitution grants Congress exclusive authority to regulate commerce with other countries, which is not overridden by the president’s emergency powers under IEEPA for the purpose of imposing widespread tariffs. The court emphasized that the use of tariffs in this manner was impermissible because the federal law (IEEPA) does not allow it, regardless of whether it was wise or effective.
The Trump administration quickly filed a notice of appeal minutes after the ruling and questioned the court’s authority, stating it is “not for unelected judges to decide how to properly address a national emergency”. They argued that trade deficits constituted a national emergency.
The ruling resulted from lawsuits filed by the nonpartisan Liberty Justice Center on behalf of five small U.S. businesses and by 12 U.S. states, who argued the tariffs were unlawful and economically devastating.
Financial markets largely reacted positively to the ruling, seeing it as potentially reducing trade tensions and uncertainty.
The U.S. dollar rallied against major currencies like the euro, yen, and Swiss franc, with the dollar index rising back above 100.
U.S. stock futures and equities across Asia and Europe rose in a “risk-on rally”.
The ruling and other news caused traders to reduce expectations for interest rate cuts by the Federal Reserve. Minutes from the last Fed meeting indicated concerns among almost all participants about the risk of persistent inflation due to Trump’s tariffs.
In commodity markets, gold prices slipped as the dollar strengthened and geopolitical tensions were perceived to ease. Oil prices extended a rally.
The ruling specifically addressed tariffs imposed under IEEPA and did not affect industry-specific tariffs (e.g., on steel, aluminum, automobiles) imposed under different statutes. Analysts noted that other legal avenues for imposing tariffs may still exist.
Meanwhile, the South African Reserve Bank (SARB) was widely expected to cut its benchmark interest rate by 25 basis points to support its economy.
This expectation was influenced by easing domestic concerns, such as the annual inflation rate holding below 3% and optimism about the latest budget being approved.
Externally, the temporary pause in U.S. tariff escalations until July was seen as providing “a window of policy space” for the SARB to potentially act “pre-emptively”.
The South African rand remained relatively steady ahead of the SARB decision, with its movement predominantly driven by domestic monetary policy expectations and commodity influences. Softening gold prices added pressure on the rand, while stable platinum prices provided some offset.

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Sources referenced:

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