Stock markets rallied on Tuesday after the US Supreme Court ruled that Donald Trump exceeded his authority in imposing sweeping global tariffs under emergency powers. The Dow Jones industrial average rose 0.3% to 49,533 points, while the S&P 500 gained 0.32%. In London, the FTSE 100 closed 0.56% higher at 10,686 points, having hit a new intraday high of 10,745 points shortly after the ruling.
The ruling applies to tariffs imposed under the International Emergency Economic Powers Act (IEEPA), which accounted for roughly half of the increase in the average effective tariff rate since Trump returned to office. Michael Brown, senior research strategist at Pepperstone, noted that the tariffs struck down include those levied on a reciprocal basis and those on China, Canada, and Mexico regarding fentanyl supply.
However, economists warned that the Trump administration could reimpose similar measures using other legal authorities, such as Section 232 or 301 of US trade law. Lizzy Galbraith, Senior Political Economist at Aberdeen Investments, predicted a period of heightened uncertainty as policy adjusts. The US dollar dipped slightly, while Treasury yields rose as traders considered the possibility of refunds for companies that paid tariffs.
In the UK, there was a hat-trick of positive economic news: a record-breaking budget surplus of £30.4bn, a boost for Chancellor Rachel Reeves, and the biggest monthly rise in retail sales since 2024, driven by art and antiques. The FTSE 100 was led higher by Diageo, which rose 3.9% on relief over tariffs on its Scotch whisky and Mexican tequila. European carmakers also jumped, with Stellantis up 2.3% and BMW 0.8% higher.
