Asian Exporters Jump as Court Shoots Down Trump Tariffs (for Now)

It’s green virtually across the screen today as Asian markets welcome the U.S. court decision ruling that U.S. President Donald Trump’s tariffs overstep the mark.

A U.S. trade court delivered a sweeping ruling late on Wednesday that Trump’s worldwide, retaliatory tariffs “exceed any authority” granted to the president by U.S. federal law.

The U.S. Court of International Trade ruled that the tariffs aren’t justified as a response to an economic national emergency. The three judges also decided that the tariffs do nothing to combat drug trafficking, another justification Trump has occasionally given.

No Need for Trial

The court delivered a unanimous summary judgment in favor of the plaintiffs, a swift decision without the need for a trial. The decision, which you can find here, consolidated several cases brought by five small businesses against the U.S. government, as well as cases brought by 12 states with majority Democrat governments.

Asia’s major exporters are breathing a sigh of relief. There’s been uncertainty ever since Trump announced his tariffs in that fateful presentation in the Rose Garden on April 2. But this is the first time, to my mind, that the uncertainty has a positive bias for stocks.

I would say it is a cautious welcome for this new development, since the Trump administration says it will appeal the decision. So this ain’t over. But the tariffs are pretty universally bad news for Asian equities, so we saw tentative gains in the majority of Asian markets.

Toyota Motor TM (T:7203), the flag carrier for “Japan Inc.,” saw its shares close 3.9% higher in Tokyo trade. So we can expect similar gains on Wall Street. Rival Honda Motor HMC (T:7267) got an even bigger 4.6% boost.

Troubled Car Companies Get Biggest Boost

But those two companies have been in relatively good shape in terms of global sales. Rivals Nissan Motor NSANY T:7201 and Mitsubishi Motors MMTOF T:7211 were already experiencing softer sales before the whole tariff episode began. Nissan shares climbed 6.0% today, while Mitsubishi edged up 2.5%.

That helped the broad-market Topix to a 1.5% higher close on Thursday in Tokyo. The blue-chip Nikkei 225 fared slightly better, given its higher share of exporters, ending the day up 1.9%.

South Korean stocks rose 1.9% in the form of the Kospi. There were even gains in Hong Kong and China stocks, even if some higher tariffs on Chinese goods remain. The Hang Seng ended up 1.4% in Hong Kong and the mainland CSI 300 rose 0.6%.

Korea, Taiwan Calm on Chip Prospects

Still, there was no euphoria. Taiwan’s Taiex even ended flat, technically in the red to the tune of 0.1%, perhaps a surprise given roughly 70% of the self-governed island’s economy comes from exports.

There was no response from Taiwan Semiconductor Manufacturing Co. TSM (TW:2330), which closed flat. That stock dominates the Taiwan bourse. Samsung Electronics SSNLF (KR:005930) also barely budged today, up 0.4%, holding back the Seoul market.

Korea is preparing to hold presidential elections on June 3. Strong earnings from Nvidia NVDA did lift Korean chipmaker SK Hynix HXSCL (KR:000660), which ended up 1.9%. Korean carmakers were some of the biggest beneficiaries of the tariff news, with Hyundai Motor HYMPY (KR:005380) up 2.7% and affiliate Kia KIMTF (KR:000270) up 4.7%.

Exports account for about one-third of South Korea’s economy. That figure is around one-fifth for each of China, Japan, Australia and Indonesia.

Economists disagree that U.S. trade deficits are problem, let alone the “national emergency” that Trump has called them. Trump also cited the flow of fentanyl into the United States as a reason to hike tariffs with China, Canada and Mexico.

The trade court decided that the fentanyl tariffs don’t deal with any of the threats posed by that illegal trade, run by organized crime gangs. Meanwhile, the International Emergency Economic Powers Act, which became law in 1977, doesn’t authorize tariffs designed as “pressure” or “leverage” tactics to gain an advantage in negotiations with another nation.

The very language used makes it clear the tariffs aren’t really designed to “deal with an unusual and extraordinary threat,” the ruling finds. “The Government’s ‘pressure’ argument effectively concedes that the direct effect of the country-specific tariffs is simply to burden the countries they target.”

Not All Tariffs Affected

But not all the tariffs are covered by the court ruling. The higher import duties on steel, aluminum and cars are not covered, since they were imposed under separate legislation to the Rose Garden event.

Now we will see this decision make its way through the courts. The Justice Department immediately filed an appeal, so it lies with the U.S. Court of Appeals for the Federal Circuit to decide whether to reinstate the tariffs during litigation.

The trade court’s decision gives the Trump administration 10 days to “effectuate” its order to remove the tariffs, but doesn’t specify how any of that should be done. We may see the ruling make its way to the U.S. Supreme Court.

Asian markets had already begun to move in ways that indicate investors do not believe the full weight of Trump’s tariffs will go into effect. But even hiking tariffs to 10% globally, with a higher prospective rate for China, is a massive increase in U.S. import taxes that have averaged 1.8% over the 30 years through 2024.

The tariffs make no fundamental sense, as economists such as Stephen Roach and Paul Krugman have made clear. Now we have a court saying they make no legal sense, either.

But we will see quarterly earnings numbers start to trickle through that reflect the sudden imposition, then suspension of the highest tariffs. And let’s not forget the 10% bottom-line tariff remains in place, hurting U.S. consumers and impacting global trade.

This is good news, for sure. But far from the end.

At the time of publication, Alex Frew McMillan was long TSM.