Trump’s Tariffs Face a Legal Rewind

TL;DR

1. Trump’s tariffs: canceled, then uncanceled

2. Nvidia smashes Q1, but China policy shaves 10 points off margins

3. Neuralink valued at $9 billion as mind-control tech advances

4. Government gets golden share in $15B U.S. Steel buyout

Courts Clash Over Trump Tariffs: Key Duties Are Blocked, Then Reinstated Pending Appeal

Last Wednesday, the U.S. Court of International Trade blocked most of President Trump’s tariffs, ruling that the president had overstepped his authority. U.S. and international markets rallied as investors cheered what looked like a major rollback of his trade agenda. The decision invalidated key levies, including the baseline 10% tariff, the 20% duty on China tied to fentanyl policy, and the 25% tariff on Canada and Mexico.

However, by Thursday, a federal appeals court allowed the Trump administration to continue collecting tariffs while the decision is appealed. This reversal introduced renewed uncertainty and confusion, and the initial market rally faded. 

Stocks continued moving lower on Friday after President Trump floated broader tech sanctions on China and accused the nation of violating its trade agreement with the U.S.

Since the inauguration on Jan. 20, Trump administration officials have announced new or revised tariff policies more than 50 times.

• Markets are becoming less sensitive to the flip-flops: Tariff-related headlines now account for just over a third of the S&P 500’s daily fluctuations — roughly in line with the historical median for any single market-moving factor. That’s a sharp drop from early April, when they explained as much as 80% of the index’s movement.

The U.S. Court of International Trade (CIT) is a federal court that specializes in all things import, tariff, and trade law related. Located in New York, its job is to make sure U.S. trade actions are played by the constitutional and statutory rule book. That means reviewing whether presidents, agencies, and customs officials are staying in their legal lane when they impose duties or regulate cross-border commerce.

The Constitution is late to the party here, but it's a welcome guest. I found this really encouraging; the gears of justice grind slowly, but they do grind on. Our prediction all along has been that when all this nonsense is over, the tariff situation will look remarkably similar to when he took office — except our soft power, our reputation, will have been inextricably damaged.

Trump imposed these tariffs under the framework called the International Emergency Economic Powers Act — which works only if there’s an actual emergency. The law literally says it has to be in response to “an unusual and extraordinary threat.” And there wasn’t one. Trump pointed to the trade deficit, but that’s completely normal — not a threat. So I was glad to see a legal body finally say it.

Nvidia’s Record Quarter Highlights AI Demand — and Rising Risks From China Policy

Nvidia blew the doors off its first quarter earnings. The company reported $44 billion in revenue, up 69% YoY, and $19 billion in net income, up 26% YoY. The day after earnings were released, Nvidia briefly surpassed Microsoft to become the most valuable company in the U.S. by market cap.

• For context: Nvidia made more in three months than Netflix made in the past 12 months. 

• Nvidia hype hasn’t worn off: On Wednesday, searches for “Nvidia earnings” outpaced searches for tariffs and the NBA and NHL playoffs.

Data center revenues increased 73%, driven by strong AI demand. CEO Jensen Huang told investors that the amount of work AI systems are doing — measured by how many answers or “tokens” they generate — has grown 10x in one year.

The results would have been even stronger if not for chip export restrictions. On the earnings call, Huang said that China was a $50 billion market that had been “effectively closed to U.S. industry.” Gross margins for this quarter would have been 10 percentage points higher — 61% vs. 71% — if not for the China-related charges.

Huang criticized the restrictions, arguing that export controls only strengthen Chinese chipmakers and spur their domestic innovation. Tencent, Alibaba, Baidu, and other large Chinese tech firms have already pivoted to the AI chip offerings from Huawei. 

• “They have no choice,” Huang lamented. “One of the challenges of the changing regulations is the ability for markets to trust the Nvidia and ultimately American platforms. … It’s hard to rely on American technology at this point,” he said.

Huang is doing what every CEO does: He’s coming up with thoughtful, earnest reasons why he should be able to sell into bigger markets and get his stock higher. 

But I’m of two minds here. There’s a really solid argument for free trade: If we give them our chips and they don’t have the incentive to develop their own technology, they end up buying more of our stuff and they don’t develop technical equanimity.

On the other hand, by sequestering them from our most-advanced chips, we gave them a burning platform to create their own Manhattan Project around developing their own AI infrastructure. And in almost no time, they spun up something that’s 80% as good for less than half the price.

So the question is, do you do shareholders a solid in the short term going into China? 100%. But geopolitically, in terms of your own national security standing, do you really want to upskill China to the extent that, for example, Apple has upskilled them? 

Wouldn’t we be better off if Apple had made that same level of investment in, say, Mexico? Or countries that we have a less adversarial relationship with? Would that have been a better idea?

Huang opened the earnings call with a six-minute monologue, and for three of those minutes he was talking about China. He said the policy from the U.S. is wrong, and that it’s based on an assumption that is wrong. It came through loud and clear.

There are compelling arguments on both sides. But, ultimately, we’re talking about national security threats. That’s what we’re all worried about. And to me, the only real solution is that we have to be friends with China. We’re pinching pennies trying to work around a chip strategy when the reality is, if China is an existential threat to the U.S., we’ve got much bigger problems. Whether or not we’re shipping Nvidia chips to China, the focus has to be turning down the temperature in the relationship.

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Neuralink Raises $600M at $9B Valuation, Aims to Turn Sci-Fi Brain Tech Into Medical Reality

Elon Musk’s brain-interface startup Neuralink has raised $600 million at a $9 billion valuation. The round, led by Peter Thiel’s Founders Fund and other investors, comes as the company pushes ahead with early human trials aimed at restoring basic functions for people with severe disabilities.

The Neuralink chip is about the size of a coin and, after being implanted beneath the skull, allows patients to control a computer or smartphone with only their mind. Three people with paralysis have received Neuralink implants. The first, Noland Arbaugh, made headlines when he challenged himself to “telepathically” play a computer game for 72 hours straight while livestreaming on X. 

The most recent recipient, a nonverbal ALS patient, is using the device to write messages and then play them out loud using an AI-replica of his old voice. The chip currently costs around $10,500 for patients, not including long-term care or device replacement.

There are about 175,000 quadriplegics in the U.S., but widespread adoption of Neuralink is at least a decade away. Ultimately, the endgame could go far beyond medical use: Advances may one day make implants appealing to the able-bodied chasing cognitive enhancements.

This is the version of Elon Musk people want to see — someone with the vision and influence to attract capital toward solving major problems. Kara Swisher calls it “good Elon.”

The promise of Neuralink is incredibly exciting. But like many moonshot technologies, it will likely take much longer to materialize than people expect. Still, it gives people something to believe in, and that matters.

From Security Risk to Partnership: Trump Flips on Nippon’s $15B U.S. Steel Acquisition

More than 17 months after it was first announced, Nippon Steel’s nearly $15 billion acquisition of U.S. Steel is finally moving forward. President Trump gave it his stamp of approval, calling the deal a “partnership,” rather than an acquisition. He also noted that Nippon will invest another $14 billion in U.S. Steel over the next 14 months.

The deal initially faced strong opposition from both Trump and Biden due to national security risks — despite the fact that no reports actually found security risk. More likely, both Trump and Biden were hoping to win over steel union voters who opposed the deal.

Trump is now letting the deal go through — after the addition of a “golden share” provision. This sweetener gives the U.S. government power to approve key board appointments and prevent cuts to production levels.

Political pandering aside, U.S. Steel needed a buyer. In the decade before 2020, U.S. Steel lost money, put off necessary manufacturing upgrades, cut more than 14,000 jobs, and returned -80% while the market rose almost 200%. The Nippon deal, which 98% of shareholders approved in April 2024, will create over 70,000 jobs and revitalize the company’s older steel mills.

This isn’t without precedent. The U.S. government has owned stakes in companies before. In 2008, the government bought a 92% stake in AIG. In 2009, they bought stakes in GM and Chrysler.

But in these cases the reason the government intervened was to prevent some sort of structural collapse in the economy. This is a very different situation where there’s no real crisis at hand. The only hot button issue here is manufacturing jobs, and we’re talking about relatively small numbers.

This is a mix of jingoism and racism. If Canada or Denmark had wanted to buy the company, there wouldn’t have been nearly the pushback. There’s no strategic threat here: We produce 4% of the world’s steel, but we consume roughly 5% of it. We’re not in the business of manufacturing — a lot of our cities are already built out. China produces half the world’s steel, but it also consumes half the world’s steel. And we’re not reliant on China: We import the most steel from Canada and Mexico. If we all of a sudden need to make tanks overnight, fine; Japan has been our close ally for 80 years. 

This golden share thing — to decide that Stephen Miller or Peter Navarro knows how to run a f*cking steel conglomerate — is the definition of socialism. That just shows that in some ways the Trump administration is much more socialist than any Democrat out there. If you want laws or input into how an industry or private business behaves, you pass laws that apply to everyone.

We called this last year — that the deal would eventually go through because at the end of the day, markets win.

Robert Armstrong, a U.S. financial commentator and our guest on the Markets pod this week, coined the TACO phenomenon, which stands for Trump Always Chickens Out. Trump makes aggressive tariff threats but rarely follows through, and the market is starting to ignore his bluster. We will continue to see exaggerated claims about massive tariff increases that should make certain stocks crash, but they simply will not.

Listen to Scott’s conversation with Patrick McGee, an award-winning journalist who spent years covering Apple for the Financial Times. They discuss how Apple trained millions of Chinese workers, sent thousands of engineers overseas, and spent hundreds of billions building the world’s most-advanced supply chain — only to make itself dependent on a rival superpower.

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