US Markets React to Tariff Halt, Musk’s Exit & Nvidia's Surge

This week has been eventful for the world’s largest economy, with key news and developments taking centre stage. 

From the Court of International Trade halting Trump’s tariffs, to Nvidia surpassing earnings expectations despite the ongoing US-China trade tensions, and Elon Musk’s departure from the White House council, let’s explore the main economic developments of the week:

Court of International Trade Challenges Trump’s Tariffs

On Wednesday, 28 May, a federal court in New York, the Court of International Trade (CIT), ruled that most of President Trump’s tariffs, including those targeting Chinese goods, were unlawful and exceeded his authority under the International Emergency Economic Powers Act (IEEPA).

Key Aspects of the Ruling:

The court’s decision applies to:

• A 10% tariff imposed on all foreign imports;

• Higher tariffs levied on goods from multiple countries;

• Tariffs on goods from Mexico, Canada, and China.

However, duties on specific products such as automobiles, auto parts, steel, and aluminium remain in force.

The court determined that Trump’s justification, citing a "national emergency" due to trade deficits and illicit cross-border activity, did not meet the IEEPA’s legal threshold of presenting an "unusual and extraordinary threat.”

Market Reaction:

The ruling initially sparked a positive reaction in financial markets, with S&P 500 futures rising by 1.4%. However, the US Department of Justice (DOJ) promptly announced its intention to appeal the decision.

Government Response:

In response, the Trump administration defended its actions, asserting that longstanding trade deficits constituted a national emergency. It also criticised the court for overstepping its judicial remit. (Source: Washington Post)

Musk Departs from Washington

Tesla (TSLA) CEO Elon Musk announced on Wednesday via a post on his social media platform X (formerly Twitter) that he was stepping down from his White House role. He thanked President Trump for the opportunity to help reduce wasteful government spending and said the Department of Government Efficiency (Doge) mission would continue to strengthen and become a permanent part of government operations. 

Musk’s departure was expected after reaching the 130-day federal work limit for his temporary role as a special government employee. It came shortly after he criticised Trump’s multi-trillion-dollar budget bill, saying it would increase the deficit and undermine Doge’s work. During his tenure, Musk aimed to cut $2 trillion from the federal budget but lowered the target to $150 billion, with around 260,000 federal jobs cut or made redundant. 

Courts blocked some layoffs, and Musk faced criticism over mistakes, including firings in sensitive areas. He is reportedly refocusing on Tesla and SpaceX amid declining Tesla sales and protests. Moreover, he plans to reduce his Doge involvement and cut political donations after spending nearly $300 million backing Trump and Republicans. (Source: BBC)

Nvidia Beats Earnings Despite US-CHINA Trade Wars

While some may have anticipated that US-China trade tensions would significantly impact Nvidia’s performance, particularly since China is its second-largest market, the company’s earnings report on Wednesday demonstrated notable resilience.

Here are Nvidia’s Earnings Highlights:

• Better-than-expected results: Earnings per share of 96 cents vs. 93 cents expected; revenue of $44.06 billion vs. $43.31 billion expected.

• Strong revenue growth: Overall revenue up 69% year-over-year; data centre sales, including AI chips, rose 73% to $39.1 billion, 88% of total revenue.

• Impact of China export restrictions: Lost $2.5 billion in potential sales and $4.5 billion in inventory charges due to US export controls on the H20 AI chip for China; gross margin would have been 71.3% without these charges, reported 61%.

• CEO comments: Jensen Huang stated that the Chinese AI chip market is effectively closed to US companies and that the demand for global AI infrastructure remains strong.

• Net income: Increased 26% to $18.8 billion, or 76 cents per share.

• Division growth:

  • Gaming division grew 42% to $3.8 billion.

  • Automotive and robotics sales up 72% to $567 million.

  • Professional visualisation grew 19% to $509 million.

• Customer highlights: Major cloud providers contribute nearly half of data centre revenue, and Microsoft is rapidly expanding its use of Nvidia GPUs through OpenAI partnerships.

In response to the strong figures, Nvidia shares rose about 6% in after-hours trading, nearing their highest level in four months. It will be interesting to see what the future holds for this AI leader and how the latest developments in tariffs might impact its stock price. (Source: CNBC)

Conclusion 

This week highlighted significant shifts in the US economic and trade landscape. The Court of International Trade’s ruling against key Trump-era tariffs challenged established trade policies, while Nvidia’s strong earnings demonstrated resilience despite ongoing US-China tensions. Meanwhile, Elon Musk’s departure from the White House council may have marked the end of a high-profile yet contentious government role. These events illustrate the complex interplay of legal, political, and market forces shaping the world’s largest economy today.

*Past performance does not reflect future results.