In a surprising twist, a federal court has potentially halted Trump’s tariff war in its tracks, saying that he exceeded his authority in imposing the most extreme tariff regime in US history. The three judge panel (including a Trump appointee) ruled unanimously that the US Constitution gives Congress exclusive authority to regulate commerce with other countries.

“The court does not pass upon the wisdom or likely effectiveness of the President’s use of tariffs as leverage,” a three-judge panel said in the decision to issue a permanent injunction on the blanket tariff orders issued by Trump since January. “That use is impermissible not because it is unwise or ineffective, but because [federal law] does not allow it.”

Naturally, the administration has appealed and is questioning the court’s authority and accusing it of judicial overreach.

From an economic and markets perspective, this development will greatly increase confusion and uncertainty. Consider the recent budget passed by the House with a one vote margin which included substantial tariff revenue in its calculations. Consider the impact on currency flows. Consider all the recent announcements – many disingenuous – of manufacturing being moved/returned to the US.

Consider the potential reduced inflation. If you remove inflation from the current stagflation forecast, you’re left with plain ol’ stagnation. Indeed, interest rates are falling along with the DXY. The only certainty in this development is that the chaos of the Trump presidency will continue.

Futures are up strongly but off their highs after mixed economic news and a beat by NVDA.

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