World stock markets rose after a US court blocked most of the tariffs imposed by the administration of President Donald Trump.
On Wednesday, a three-judge panel at the Court of International Trade in New York said an emergency law invoked by the White House to launch protectionist policies on dozens of nations could not be used to bypass US Congress.
“The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by [The International Emergency Economic Powers Act] to regulate importation by means of tariffs,” it said.
As Morningstar’s senior US economist Preston Caldwell says, all product-specific tariff hikes still remain in place following the court’s decision, the largest of these being the 25% tariff hikes on autos, steel, and aluminum.
“Altogether, the average US tariff rate falls from about 18% to about 7% after the court’s decision. That’s still up significantly from the 2024 level of 2.4%, but is a much milder shock to the economy than the previous levels,” he says.
“However, we’re not out of the woods yet. The Trump administration could continue to rollout large tariff hikes on specific products.”
The Stoxx Europe 600 Index was initially led higher by Dutch semiconductor supplier ASML ASML and car manufacturer Stellantis STLAM, which have been badly hit in the tariff turmoil. Early gains faded as the day progressed and the index ended marginally lower on the day.
US markets were higher on Thursday, with the S&P 500 rising nearly around 0.50% and the tech-heavy Nasdaq Composite Index gaining around 1%.
The euro and pound gained against the US dollar, while German 10-year bund yields softened to 2.52%, down four basis points from Wednesday’s levels.
Shares in artificial intelligence giant Nvidia NVDA, deemed a bellwether for technology sentiment globally, rose more than 5% after earnings showed another strong rise in sales.
Morningstar analysts increased their fair value estimate for the company to $140 per share from $125, arguing that export controls were not slowing the company down.
Do European Investors Have Tariff Fatigue?
Thursday’s more modest moves in European indexes can be explained by market skepticism after weeks of stock and bond volatility. Investors have become numb to the tariff headlines, says Gilles Moëc, chief economist at AXA Group, succumbing to what he calls “fear fatigue”.
European stock markets slumped on May 23 after Trump threatened 50% tariffs on EU goods, before recovering on Monday when the US president appeared to walk back on this proposal and postpone tariffs until July 9.
AJ Bell investment director Russ Mould says markets aren’t convinced by what might otherwise be deemed good news.
“That the gains were measured rather than blockbuster reflects a healthy level of skepticism over whether this can truly rein in the Trump administration, which has already launched an appeal against the judgment,” he says.
Certain European tariffs will stay in place anyway, a note from economists at ING adds.
“In the case of Europe, the largest part of tariffs affects the automotive sector, and this part simply remains in place,” the company says.
“If the US administration moves along with the intended tariffs or quotas on European pharmaceuticals, the largest part of European exports to the US would still be subject to tariffs of more than 20%.”
Investors Still Expect More Market Volatility
The judgment may not dissolve the perceived threat of tariffs and the likelihood of more market volatility, especially with an appeal already launched by the White House.
“This does not necessarily mean tariffs are disappearing any time soon, as the federal appeals court is likely to take a more favorable view of them,” says Lale Akoner, global market analyst at trading platform eToro.
“What it does signal is the beginning of a lengthy legal battle, [and] one that could ultimately reach the Supreme Court, a development with significant market implications.”
Other commentators agree the ruling does little to assuage investors’ fears. For equities, this means continued uncertainty.
“The overnight news on the US trade court’s ruling does little to reduce uncertainty around the direction of the global economy, assuming that the Trump administration challenges the decision and looks for new routes to introduce tariffs on trade,” says Iain Barnes, chief executive at Netwealth.
“It’s increasingly clear that there is not going to be a steady end point on the structure, magnitude and breadth of tariffs and therefore overall trade policy, making it ever harder for [bosses] to plan long-term decisions on their supply chains and customer bases.
“This obviously calls into question whether the intended policy outcomes to readjust the US’s trading relationships can ever be achieved, but it also leaves the equity markets in limbo between solid current profit margins and a very uncertain outlook.”
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
