Trade Court Blocks Trump Tariffs. Forecast as of 29.05.2025
In the United States, the president’s actions are subject to certain constraints inherent in the democratic process. The US Court of International Trade has stated that the implementation of universal tariffs by President Donald Trump exceeded the scope of his authority. Its verdict has the potential to reshape the Forex market landscape. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- The Court has blocked universal tariffs.
- Monetary policy factor returns to the Forex market.
- The Fed’s decision to keep rates unchanged is good news for the US dollar.
- The 1.1225 mark is the line in the sand for the EURUSD pair.
Weekly US Dollar Fundamental Forecast
The International Trade Court’s ruling that Donald Trump exceeded his authority by imposing universal and certain other tariffs could radically change the rules of the game in financial markets. The cancellation of import duties will shift the focus of investors back to monetary policy, and in this area, the US dollar is unparalleled. As a result, the fall in the EURUSD pair risks turning from a correction into a full-fledged downtrend.
When introducing tariffs, the US administration cited the International Emergency Economic Powers Act (IEEPA) of 1977, and the Court determined that duties on imports of steel, aluminum, and automobiles were permissible. However, the proposal to implement universal fentanyl-related tariffs on Mexico, Canada, and China appears to be a significant overstep.
US Average Effective Tariff Rate
Source: Bloomberg.
The US administration has 10 days to comply with the US International Trade Court ruling, and the government intends to appeal to the Supreme Court. Given the latter’s demonstrated loyalty to Donald Trump, who appointed the judges, the likelihood of an overturning of the verdict is high. In light of the current market uncertainty, stock indices and the US dollar are expected to follow divergent paths. Uncertainty is exerting pressure on the S&P 500 index, while lower recession risks are favoring EURUSD bears.
In the minutes of the May FOMC meeting, the Fed outlined a stagflation scenario. According to the central bank, tariffs are expected to have a dual impact on the economy, increasing both inflation and unemployment. Therefore, the Fed intends to wait for the situation to become clearer. Its recent caution has been interpreted as a negative sign for the economy and the US dollar, prompting a “sell America” strategy. However, the International Trade Court’s ruling has dramatically altered the outlook.
ECB Deposit Rate Change
Source: Bloomberg.
Suppose the ECB maintains its cycle of monetary expansion due to the weakness of the eurozone economy and the reluctance of inflation to rise, and the Fed does not cut rates until September. In that case, the divergence will serve as a significant reason to sell the EURUSD pair.
The divergence in economic growth will likely have a significant impact on the major currency pair. In the first quarter, the currency bloc outperformed the US. This was due to the front-loading of US imports. The 0.3% contraction in US GDP can be attributed to a substantial decrease in net exports. The elimination of tariffs will return us to the starting point, including the concept of American exceptionalism.
Weekly EURUSD Trading Plan
However, the Supreme Court retains the authority to block the International Trade Court’s ruling. Even if it remains in force, it is unlikely that Donald Trump will back down from his goals, which will increase the risks of coordinated currency intervention in the Forex market to weaken the US dollar. For the time being, the 1.1225 mark is the critical threshold for the EURUSD pair. A rebound from this level will allow traders to open long trades, while a breakout will give a strong sell signal.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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