Intelligent Investment
Global Economy Gets Potential Reprieve With Tariffs Under Legal Dispute
Canada Monthly Market Commentary
May 29, 2025 2 Minute Read
The barrage of erratic U.S. tariff threats over the last few months may have come to an end after a U.S. federal court has blocked the vast majority of the tariffs. A unanimous ruling by the Court of International Trade has found that the U.S. administration exceeded its authority in imposing global tariffs under a national emergency declaration. These include the broad “reciprocal” tariffs, targeted levies on China and the fentanyl-related tariffs against Canada that have whipsawed financial markets and weighed on the global economic outlook. The court ordered the immediate suspension and permanent ban of these tariffs and also required the U.S. administration to reverse all related executive orders by June 7th.
Tariffs imposed under different mechanisms still remain in force such as the steel, aluminum and auto tariffs that continue to drag on those sectors of Canada’s economy. Impacts from the trade war were already starting to emerge in Canada as seen through employment losses, higher core inflation and weaker growth forecasts. In fact, some economist groups were forecasting that Canada was likely already in the early stages of a technical recession. Furthermore, the cost of longer term debt has been steadily rising across major economies as the bond market grows wary of ballooning government deficits. With most U.S. tariffs now facing legal challenge, this development could stem the economic damage and alleviate some of the pressure on the Canadian economy.
However, the U.S. administration has appealed the ruling and the affected tariffs were temporarily reinstated while the appeal process continues. Ultimately, it may fall onto the U.S. Supreme Court for a final decision in this legal dispute. But for the moment, the ruling represents the most significant roadblock to U.S. trade strategy and potentially lifts a major headwind on the global economy.
Economic Highlights:
- Headline inflation fell to 1.7% in April 2025 but the core measures CPI-Trim and CPI-Median increased to 3.1% and 3.2%, respectively.
- Retail sales increased 0.8% in March 2025 and advanced estimates suggest a further increase of 0.5% in April 2025.
- Overall employment grew by 7,400 jobs in April 2025 but the unemployment rate rose to 6.9% as job losses were seen in the manufacturing and wholesale & retail trade sectors.
Viewpoints:
- Trump's Global Tariffs Deemed Illegal, Blocked by Trade Court
- U.S. court rules Trump does not have ‘unbounded authority’ to impose tariffs
- Economists say Canadian recession has already begun
- Bond Market Shudders as Tax Bill Deepens Deficit Worries
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