Stock markets rallied and the US dollar dipped on Wednesday 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, near its record high.
The ruling applies to tariffs imposed under the International Emergency Economic Powers Act (IEEPA), which accounted for roughly half of the overall average effective tariff rate increase since Trump returned to office. Michael Brown, senior research strategist at Pepperstone, noted that the decision chiefly concerns levies imposed on a 'reciprocal' basis and those on China, Canada, and Mexico regarding fentanyl supply.
However, Brown warned that the administration has at least five other sections of US commerce law to re-implement similar measures, potentially keeping the average tariff rate around 16%. The ruling also opens the possibility of refunds for companies that paid tariffs, though these are likely to be paid over time and funded by short-term Treasury bill issuance.
In the UK, a hat-trick of good economic news included 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 hit a new intraday high of 10,745 points after the ruling, with Diageo, hurt by tariffs on Scotch whisky and Mexican tequila, rising 3.9%.
European carmakers also jumped, with Stellantis up 2.3% and BMW 0.8% higher. Lizzy Galbraith, Senior Political Economist at Aberdeen Investments, predicted 'a period of heightened uncertainty' as the administration may seek to rebuild tariffs through other legal avenues, such as Section 232 and 301 tariffs.
