Investors are Suffering from Tariff Whiplash, David Kelly

Wall Street traders cheering solid results from Nvidia Corp. had to face the harsh reality of slowing economic data and legal uncertainties around Donald Trump’s trade war. The president told Federal Reserve Chair Jerome Powell he’s making a mistake for not cutting rates.

The S&P 500 pared most of an advance that earlier approached 1%. A federal appeals court offered Trump a temporary reprieve from a ruling threatening to throw out the bulk of his tariff agenda. Treasuries rose on bets the Fed will slash rates twice this year and after a solid $44 billion sale of seven-year notes. The dollar fell. The US economy shrank at the start of the year, restrained by weaker consumer spending and an even bigger impact from trade than initially reported. Pending sales of previously owned homes last month fell by the most since September 2022, while a rise in recurring jobless claims signaled higher unemployment.

President Donald Trump’s administration insists his tariffs are here to stay, one way or another.

The White House spent Thursday triaging the fallout from a pair of rulings that suspended the bulk of his tariffs, imposed under an emergency authority that the courts say he overstepped. A federal appeals court temporarily paused that decision in order to hear arguments, though it could ultimately back the original ruling and block Trump’s tariff policy.

While Trump has vowed to appeal all the way to the Supreme Court if needed, the message from his top aides has been that the president will not be denied his tariff push, and would simply turn to other authorities if needed.

“There’s no Plan B. It’s Plan A,” Peter Navarro, one of Trump’s most hawkish trade advisers, told reporters Thursday. “Plan A encompasses all strategic options.”

Possible alternatives include Section 232 and 301 powers, which Trump has used previously, or so-called Section 122 powers, which are heavily restricted. He could also seek congressional approval, though that option would be laborious and steal precious Senate floor time from other priorities like judicial nominations and his signature “one big, beautiful” tax bill.

Trump imposed wide-ranging tariffs on nearly every country using the International Emergency Economic Powers Act, or IEEPA, which the landmark trade court ruling Wednesday evening focused on. Using IEEPA is essentially a shortcut that allowed Trump to declare an emergency and seize unilateral tariff authority that has historically rested with Congress.

“He wanted to use the sweeping powers of IEEPA,” Commerce Secretary Howard Lutnick said in a Fox News interview aired Thursday evening. “Now, he has many, many other laws and authorities that he can use, and he’ll take them out if he needs to, but right now, he likes the sweeping authority because it lets him deal with everybody who treats us unfairly.”

If Trump’s appeals fail, he may be forced to pivot to other powers to resuscitate his “Liberation Day” tariffs, including those paused at 10% pending negotiations ahead of a July deadline. Also struck down were tariffs related to fentanyl.

Section 122 would allow the president to impose tariffs of 15% — higher than his paused 10% rate, but well below rates of up to 50% he initially announced — and only for as long as 150 days.

Navarro acknowledged Thursday that it was under consideration but appeared disinterested. “Section 122 only gives you 150 days,” he said in a Bloomberg Television interview. “So there’s your answer right there.” The Wall Street Journal reported late Thursday that the option was under consideration.

Trump has already used Section 232 powers to enact tariffs on steel, aluminum and automobiles, all of which were enacted based on investigations that predated his current term. He’s launched other investigations to add other tariffs under the same authority, including on semiconductors and a raft of consumer electronics that carry them, pharmaceutical drugs, copper and other products.

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