Economy

Companies welcomed a court decision striking down President Trump’s tariffs. Then a stay of that ruling left no one breathing easy.Emma Mcilroy’s apparel company, Wildfang, had been working overtime to move its production out of China in the months since President Trump launched his trade war. Finding another factory that could produce jumpsuits and button-downs — while every other U.S. importer was also jockeying for space — was a huge drain on the 11-person staff’s attention.But when Ms. Mcilroy saw on Wednesday night that a federal court had ruled most of Mr. Trump’s tariffs illegal, all of that work paused. Would the tariffs be gone when her next shipment arrived in August, or not?“I have absolutely no idea where it’s going. I am learning in real time how to run my business,” Ms. Mcilroy said Thursday. “Yesterday I would’ve told you, ‘Yes, absolutely, you’re going to see me manufacturing stuff in Vietnam.’ Today I’m not sure.”American businesses are rapidly digesting the latest twist in Mr. Trump’s roller-coaster trade war, which has made it impossible to plan more than a few weeks in advance. It’s particularly hard on industries that place their orders entire seasons ahead of time.The details of Wednesday’s decision seemed likely to bring relief. A three-judge panel of the U.S. Court of International Trade ruled that the Trump administration had acted illegally in using an emergency powers law to impose 30 percent tariffs on goods from China, 25 percent tariffs on most goods from Mexico and Canada, and 10 percent on everyone else. The court gave the White House 10 days to halt the new duties.Hours later, a higher court stayed the decision.If the initial ruling sticks, it will preclude the return of steeper “reciprocal” tariffs that Mr. Trump paused for 90 days in early April. It might even allow companies that have paid the emergency tariffs over the past several months to claim refunds, already an established process at Customs and Border Protection.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldA US federal appeals court gave Donald Trump’s global tariff plans a temporary reprieve on Thursday, pausing a ruling that had found his “liberation day” levies to be illegal. In a ruling on Thursday, the US Court of Appeals for the Federal Circuit granted the temporary stay “until further notice”. The stay was issued hours after the White House vowed to go to the Supreme Court to try to overturn a judicial decision on Wednesday night that Trump could not use emergency economic powers to impose sweeping tariffs on trading partners.“This is a big victory for the president,” Kevin Hassett, director of the National Economic Council, said in an interview with Fox News. “President Trump’s case is iron clad . . . the bottom line is that President Trump’s trade team has their eyes on the horizon.”The latest decision marks a small legal win for the Trump administration but leaves the longer-term fate of its global tariff regime in the balance. The US can continue to collect tariffs while the stay is in place. On Wednesday, the US Court of International Trade’s surprise ruling delivered a blow to the president’s tariff plans and drew a backlash from the White House, which accused judges of “judicial over-reach”.“Three judges of the US Court of International Trade . . . brazenly abused their judicial power to usurp the authority of President Trump, to stop him from carrying out the mandate that the American people gave him,” White House press secretary Karoline Leavitt said on Thursday. “Ultimately the Supreme Court must put an end to this, for the sake of our constitution and our country.”A separate ruling by a district court judge in Washington also found the tariff scheme to be “unlawful” but gave the administration 14 days to appeal. Show video infoTrump’s top trade and economic advisers have insisted there are other ways for the president to pursue his global trade war — and that negotiations for deals with other nations would carry on. “We think we have a strong case. Yes, we will immediately appeal and try to stay the ruling,” Peter Navarro, the chief architect of Trump’s trade wars, told Bloomberg on Thursday morning.He said the trade court ruling showed the administration could also use different legal bases to impose a baseline 10 per cent tariff and higher “reciprocal” duties on many countries. “So nothing has really changed here in that sense . . . We are still, as we speak, having countries call us and tell us they want a deal. These deals are going to happen.”Wall Street analysts suggested the court ruling would slow down, but not derail, the White House’s plans. US stocks rose after the decision but the rally moderated, with the S&P 500 index and the tech-heavy Nasdaq Composite both closing up 0.4 per cent.“The administration is likely to either successfully appeal the ruling or to use other authority . . . to keep tariff rates high and revenue substantial,” Citi analysts wrote in a note on Thursday. “For now, the ruling will complicate and potentially delay trade negotiations.”Goldman Sachs president John Waldron told a conference in New York on Thursday that he still expected the US government to increase tariffs on most countries. “I think we’re going to go towards a 10 per cent universal baseline tariff with individualised, targeted tariffs on top with individual countries,” he said.Hassett also insisted that the Trump administration would be able to press ahead with its plans.“Trump does always win these negotiations because we are right. We are right that America has been mishandled by other governments, that our tariffs are taking them to the table, and they are coming in with massive concessions, opening up their markets to our products and lowering their tariffs on us,” he said.He added there were “different approaches” that the administration could take to impose tariffs if required, but added: “We’re not planning to pursue those right now because we’re very, very confident that this really is incorrect.”Additional reporting by Joe Miller in Washington and Martin Arnold in New York More

Jerome H. Powell stressed in his first meeting since the president returned to the White House that policy decisions would be “based solely on careful, objective and nonpolitical analysis.”President Trump revived his criticism of the Federal Reserve in a private meeting with its chair, Jerome H. Powell, on Thursday, saying it was a mistake not to lower interest rates.The meeting, which was organized at Mr. Trump’s request, is the first since the president returned to the White House.Mr. Powell and Mr. Trump discussed how the economy was evolving with regards to inflation, the labor market and growth. The chair did not share his expectations for monetary policy, the Fed said in a statement.He told the president that such decisions would “depend entirely on incoming economic information and what that means for the outlook,” according to the statement, and would be “based solely on careful, objective and nonpolitical analysis.”Karoline Leavitt, the White House press secretary, told reporters on Thursday that Mr. Trump expressed his belief to Mr. Powell that the Fed was making a mistake by not lowering interest rates.The meeting comes at a fraught moment for the economy, which now faces a variety of risks stemming from Mr. Trump’s policies. That has complicated the Fed’s job as it seeks to stamp out the remaining pressures on prices stemming from the pandemic and contain new ones that surface as a result of the tariffs, while also supporting a labor market that has begun to slow.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Bank of England governor Andrew Bailey has called on the government to “minimise the negative effects” of Brexit by seeking closer alignment with the EU.Bailey made the case on Thursday for non-tariff barriers to be reduced, particularly in the financial services industry, saying that less red tape would boost trade and economic growth.His comments come after Prime Minister Sir Keir Starmer unveiled the UK’s “reset” deal with the EU this month. It includes plans to cut barriers to trade in areas including foodstuffs and electricity.In a speech, Bailey welcomed the government’s efforts to increase trade with Europe but cautioned that Brexit had “weighed” on productivity and growth and suggested the UK and the EU should seek to further deepen their ties.Bailey joined forces in November with chancellor Rachel Reeves in calling for the UK to rebuild relations with the EU, at a time when fears were growing about a transatlantic trade war after Donald Trump won the US presidential election.The BoE governor, speaking in Ireland, suggested that more could be done to increase UK-EU trade in financial services, saying that a “two-way street” would deepen markets and benefit both sides.“There is merit in seeking to increase the openness of our financial markets by reducing non-tariff barriers,” he told a financial services dinner in Dublin.Reeves has argued that Britain should seek a closer trading relationship with the EU partly by agreeing to align rules between the two sides in “mature industries” such as the chemicals sector.Starmer’s allies have said the UK-EU reset deal was a starting point for negotiations about closer relations and that the confidence built by new arrangements could lead to more ambitious moves to boost trade in the future.Bailey said that, while he was not saying Brexit was “wrong”, it had created non-tariff barriers. “We should do all we can to minimise negative effects on trade,” he said.He was clear on the benefits to both the UK and EU economies of increasing the openness of financial markets by reducing non-tariff barriers, as he disputed the idea that trade was a “one-way street” from Britain to the bloc.“As with goods trade, open financial markets support economic growth as well as increasing investment and reducing the cost of capital,” Bailey said.He added that close co-operation between the UK and EU was increasingly relevant in the context of the “increased market volatility” observed following Trump’s tariff announcements. More

Kevin Hassett, director of the National Economic Council, said he fully believes the administration’s efforts to use tariffs to ensure fair trade are perfectly legal and will resume soon.
The comments follow a ruling from judges on the Court of International Trade who said Trump exceeded his authority on tariffs.

National Economic Council Director Kevin Hassett speaks to reporters at the White House in Washington, D.C., U.S., April 14, 2025. 
Kevin Lamarque | Reuters

A top economic advisor to President Donald Trump expressed confidence Thursday that court rulings throwing out aggressive tariffs will be overturned on appeal.
Kevin Hassett, director of the National Economic Council, said in an interview that he fully believes the administration’s efforts to use tariffs to ensure fair trade are perfectly legal and will resume soon.

“We’re right that America has been mishandled by other governments,” Hassett said during a Fox Business interview. “This trade negotiation season has been really, really effective for the American people.”
The comments follow a ruling from judges on the Court of International Trade who said Trump exceeded his authority on tariffs, which are aimed both at combating barriers against American goods abroad and stemming the flow of fentanyl across the U.S. border.
While the Centers for Disease Control and Prevention has said that fentanyl is the primary driver in domestic overdose deaths, the judges ruled that related tariffs “fail because they do not deal with the threats set forth in those orders.”
Hassett bristled at the ruling and said the administration will continue its anti-fentanyl efforts.
“These activist judges are trying to slow down something right in the middle of really important negotiations,” he said. “The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I am sure that when we appeal, this decision will be overturned.”

The administration has multiple options to get around the judges’ ruling, including other sections of trade laws it can utilize. However, Hassett said that’s not the plan at the moment.
“The fact is that there are measures that we can take with different numbers that we can start right now. There are different approaches that would take a couple of months to put these in place,” he said. “We’re not planning to pursue those right now, because we’re very very confident that this ruling is incorrect.”

Don’t miss these insights from CNBC PRO More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldThe key pointsUS Court of International Trade rules that Donald Trump does not have the authority to impose sweeping “liberation day” tariffsThis is not the end of Trump’s tariff mission, with levies imposed under other powers unaffected and lengthy court battles aheadThe ruling raises the possibility of much lower tariffs and the Fed lowering interest rates because disinflation is progressing as it hopedThe verdictOur base case is not to change our central scenario on this court decision. The Trump administration will first seek a stay to ensure tariffs can remain in place while the matter goes through the courts and there are many other routes the president can use to impose import taxes. The court’s ruling, however, increases the probability of a more benign tariff regime, with the US administration imparting less of a stagflationary shock than has seemed likely over the past two months. The detailsLate on Wednesday, the US Court of International Trade ruled that Donald Trump’s administration cannot use the International Emergency Economic Powers Act of 1977 to unilaterally impose unlimited tariffs on goods from nearly every country in the world.It said that Trump had exceeded his powers in using the 1977 Act because the tariffs imposed did not deal with the threats outlined by Trump and those in the law and the Act did not specify trade deficits to be an international emergency covered by the Act. The ruling applies to the “liberation day” tariffs, which now stand at 10 per cent for most countries under the climbdown Trump announced on April 9, a week after threatening higher duties. More from Monetary Policy RadarSee more articles from Monetary Policy Radar, a new product from the FT, which has been designed to boost investors’ confidence and help them anticipate future monetary policy decisions.The ruling does not end tariffs, however. The US administration last night said it would appeal against the ruling in action that would ultimately go up to the Supreme Court. In the meantime, it is likely to seek a stay of this ruling while appeals are ongoing, so that tariffs will not be dismantled quickly.The administration also has other vehicles it can use to impose restrictive trade practices. Section 301 tariffs are in place against China and are designed to counter practices deemed to be “unreasonable or discriminatory and burden or restrict United States commerce”. These can be set only after an investigation by the US Trade Representative. After a similar investigation, Section 232 tariffs can be levied on national security grounds and currently apply to autos, steel and aluminium.Part of the court’s reasoning that the International Emergency Economic Powers Act did not apply to trade balance concerns was grounded in another presidential power from 1974 to apply Section 122 tariffs of up to 15 per cent for 150 days to address “fundamental international payment problems”, including “large and serious balance-of-payments deficits”. These could easily replace the 10 per cent current minimum tariff applied by the US.Although Trump can appeal and still has other powers to impose tariffs, the ruling suggests his powers are weaker than we previously thought. It raises the chances of a more benign US trade policy, which does not impose as great a stagflationary impulse to the economy as previously expected. The odds of a benign outcome in which US inflation falls gently to target and output growth remains robust have risen. This raises the chances of steady interest rate cuts on the basis of good economic news. But we still judge the probability of this more positive scenario to be relatively low. More from Monetary Policy RadarFed minutes show ‘transitory’ inflation argument losing steam Concerns about more persistent pressure from trade tariffs were higher at the US central bank’s May meetingUS bank reform is unlikely to ease market interest rates for longChanges to bank capital rules are a short-term fix to the long term US debt problem More

President Trump has stopped some critical products and technologies made only in the United States from flowing to China, flexing the government’s power over global supply chains.The Trump administration has suspended some sales to China of critical U.S. technologies, including those related to jet engines, semiconductors and certain chemicals. The move is a response to China’s recent restrictions on exports of critical minerals to the United States, a decision by Beijing that has threatened to cripple U.S. company supply chains, according to two people familiar with the matter.The new limits are pushing the world’s largest economies a step closer toward supply chain warfare, as Washington and Beijing try to flex their power over essential economic components in an attempt to gain the upper hand in an intensifying trade conflict.The standoff could have significant implications for companies that depend on foreign technologies, including makers of airplanes, robots cars and semiconductors.It could also complicate efforts to negotiate an end to a trade fight over the administration’s tariff policies. On May 12, negotiators from the two countries agreed to reduce the punishing tariffs they have imposed on each other for 90 days while negotiators sought a longer-term resolution.Scott Bessent, the Treasury secretary, said at the time that “the consensus from both delegations is that neither side wanted a decoupling.” Yet the administration continues to target China with punitive measures.Secretary of State Marco Rubio announced on Wednesday that the United States would “aggressively revoke” visas for Chinese students who study in critical fields or who connections to the Chinese Communist Party.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The cost of insuring exposure to U.S. government debt has been rising.
Investors are pricing in the increased concerns around the unresolved debt ceiling, several industry watchers said.
The surge in CDS prices is likely a “short-lived” reaction while traders wait for a new budget deal to raise the debt limit.

Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell on May 27, 2025, in New York City.
Timothy A. Clary | Afp | Getty Images

Investors are getting nervous the U.S. government might struggle to pay its debt — and they are snapping up insurance in case it defaults.
The cost of insuring exposure to U.S. government debt has been rising steadily and is hovering near its highest level in two years, according to LSEG data.

Spreads or premiums on U.S. 1-year credit default swaps were up at 52 basis points as of Wednesday from 16 basis points at the start of this year, LSEG data showed.
Credit default swaps are like insurance for investors. Buyers pay a fee to protect themselves in case the borrower — in this case the U.S. government — can’t repay their debt. When the cost of insuring the U.S. debt goes up, it’s a sign that investors are getting nervous.
Spreads on the CDS with 5-year tenor were at nearly 50 basis points compared with about 30 basis points at the start of the year. In a CDS contract, the buyer pays a recurring premium known as the spread to the seller. If a borrower, in this case, the U.S. government defaults on its debt, the seller must compensate the buyer.

CDS prices reflect how risky a borrower seems and are used to guard against signs of financial trouble, not just a full-blown default, said Rong Ren Goh, portfolio manager in Eastspring Investments’ fixed income team.
The recent surge in demand for CDS contracts is a “hedge against political risk, not insolvency,” said Goh, underscoring the broader anxiety about U.S. fiscal policy and “political dysfunction,” rather than a market view that the government is verging on failing to meet its obligation.

Investors are pricing in the increased concerns around the unresolved debt ceiling, several industry watchers said.
“The credit default swaps have become popular again as the debt ceiling remains unresolved,” said Freddy Wong, head of Asia Pacific at Invesco fixed income, pointing out that the U.S. Treasury has reached the statutory debt limit in January 2025.
The Congressional Budget Office said in a March notice that the Treasury had already reached the current debt limit of $36.1 trillion and had no room to borrow, “other than to replace maturing debt.”
Treasury Secretary Scott Bessent said earlier this month that his department was tallying the federal tax receipts collected around April 15 filing deadline to come up with a more precise forecast for the so-called “X-date,” referring to when the U.S. government will exhaust its borrowing capacity.
Data from Morningstar shows that spikes in CDS spreads on U.S. government debt have typically aligned with periods of heightened worries around U.S. government’s debt limit, particularly in 2011, 2013 and in 2023.
Wong pointed out that there are still several months before the U.S. reaches the X-date.
The U.S. House of Representatives has passed a major tax cut package which could reportedly see the debt ceiling raised by $4 trillion, pending approval from the Senate.
In a May 9 letter, Bessent urged congressional leaders to extend the debt ceiling by July, before Congress leaves for its annual August recess, in order to avert economic calamity, but warned “significant uncertainty” in the exact date.
“There is still enough time for the Senate to pass its version of the bill by late July to avoid a technical default in U.S. Treasury,” added Wong.
During the debt ceiling crisis in 2023, the U.S. Congress passed a bill suspending the debt ceiling just days before the U.S. government entered into a technical default.
In the past, the U.S. has come dangerously close to a default but in each case, Congress acted last minute to raise or suspend the ceiling.

Fiscal reckoning

The surge in CDS prices is likely a “short-lived” reaction while investors wait for a new budget deal to raise the debt limit. It is unlikely a sign of an impending financial crisis, according to industry watchers.
During the 2008 financial meltdown, institutions and investors actively traded CDS linked to mortgage-backed securities, many of which were filled with high-risk subprime loans. When mortgage defaults soared, these securities plummeted in value, resulting in enormous CDS payout obligations.
However, the implications for soaring demand for sovereign CDS are very different compared to demand for corporate CDS which was the case in 2008, where investors were making an actual call about growing default risk at corporations, said Spencer Hakimian, founder of Tolou Capital Management.
“Traders seem to believe that CDS provides a speculative instrument for betting on a government debt crisis, which I view as extremely unlikely,” said Ed Yardeni, president of Yardeni Research, who added that the the U.S. will “always prioritize” paying interest on its debt.
“The U.S. government won’t default on its debt. The fear that it might do so is not justified,” he told CNBC.
Moody’s earlier this month downgraded the U.S. sovereign credit rating to Aa1 from Aaa, citing the government’s deteriorating fiscal health. 
Should the Senate pass the bill in time, the massive ceiling increase will push up the Treasury supply, putting the U.S. fiscal deficit condition back in the spotlight, Wong warned. More