Trump Tariff Court Block Will Drive Uncertainty Says Former IMF Chief Economist (Full Interview)

Olivier Blanchard, Senior Fellow at Peterson Institute, and Former Chief Economist at the International Monetary Fund discusses the news that a US court has blocked many of President Trump's tariffs on imports from dozens of countries, declaring them illegal and throwing his tariff strategy into turmoil.

In a ruling issued late Wednesday, a three-judge panel for the US Court of International Trade declared that the Trump administration had wrongly invoked a 1977 law in imposing his “Liberation Day” tariffs on dozens of countries and they were therefore illegal. It also extended that ruling to previous tariffs levied on Canada, Mexico and China over the security of the US border and trafficking in fentanyl.

The Trump administration immediately said it would appeal, putting the fate of the tariffs in the hands of an appellate court and potentially the Supreme Court. The ruling doesn’t affect Trump’s first-term levies on many imports from China or sectoral duties planned or already imposed on goods including steel, which are based on a different legal foundation that the Trump administration may now be forced to make more use of to pursue its tariff campaign.

Olivier Blanchard spoke with David Ingles from the sidelines of the “UBS Asian Investment Conference” in Hong Kong.

It’s unclear just how fast Wednesday’s ruling will go into effect, with the court giving the government up to 10 days to carry out the necessary administrative moves to remove the tariffs. But if the decision holds, it would in a matter of days eliminate new 30% US tariffs on imports from China, 25% tariffs on goods from Canada and Mexico and 10% duties on most other goods entering the US.

Those tariffs and the prospect of retaliatory ones have been seen as a significant drag on US and global growth and eliminating them — even temporarily — would improve prospects for the world’s major economies. Some central banks have cited the uncertainty caused by trade wars as a hindrance to economic activity.

US stock futures pulled back from session highs as traders parsed the court ruling. S&P 500 contracts rose 1.1% by 7 a.m. in New York.

The Bloomberg dollar index initially strengthened as much as 0.4% on Thursday, before erasing that advance. Yields on 10-year US Treasuries rose five basis points to 4.53%, while two-year yields climbed as much as six basis points to around 4.05% before trimming the move.

Even as investors cheered prospects for a tariff reprieve, there’s uncertainty over whether the ruling represents a permanent setback to Trump’s push to reshape global trade or a mere impediment. Trump and his supporters have attacked judges as biased and his administration has been accused of failing to fully comply with other court orders, raising questions over whether it will do so this time.

A White House spokesman dismissed the ruling as one made by “unelected judges” who should not have the power “to decide how to properly address a national emergency.” Trump has invoked national emergencies ranging from the US trade deficit to overdose deaths to justify many of his tariffs.

“Foreign countries’ nonreciprocal treatment of the Unites States has fueled America’s historic and persistent trade deficits,” White House spokesman Kush Desai said in a statement. “These deficits have created a national emergency that has decimated American communities, left our workers behind, and weakened our defense industrial base – facts that the court did not dispute.”

If the ruling isn’t reversed or ignored, one of the consequences could be greater fiscal concerns at a time when bond markets are questioning the trajectory of the US’s mounting debt load. The Trump administration has been citing increased tariff revenues as a way to offset tax cuts in his “one big, beautiful bill” now before Congress, which is estimated to cost $3.8 trillion over the next decade.

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