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3 Jun 2025 | 4 minutes to read
A good week for
A bad week for
Court in the middle
The US Court of International Trade struck down most of President Donald Trump’s sweeping trade tariffs in a ruling made last Wednesday. The federal court found the President to have “overstepped his authority”, halting both his blanket “liberation day” tariffs and the separate set of tariffs imposed on China, Mexico and Canada, ostensibly to curb drug trafficking and illegal migration. Tariffs typically need to be approved by Congress, but Trump has avoided this requirement by invoking economic emergency legislation. Tariffs which have been imposed on specific goods like autos, steel and aluminium fall under different legislation and are therefore not in scope of the ruling.
The following day, a US federal appeals court granted Trump’s tariffs a temporary stay while it considers the White House’s appeal. President Trump promptly took to social media to label the US Court of International Trade “wrong and political”, stating that “the Supreme Court must put an end to this”. Ultimately, depending on how things proceed, the case could indeed eventually progress to the Supreme Court. Global financial markets’ initial reaction cheered the trade court’s ruling. However, whatever the eventual outcome, it is unlikely to spell the end of Trump’s tariff agenda. While this changes the dynamic somewhat, tariffs are a signature part of Trump’s economic policy and trade negotiation, and other avenues to their implementation could be explored.
“Megafunds” to make Britain great?
Chancellor Rachel Reeves last week further outlined plans for significant pension reform, including moves to consolidate smaller pension schemes into larger “Megafunds” of at least GBP 25bn by 2030. These super-sized funds would be required to allocate a portion of assets to UK investments in a bid to reverse the long-term decline in domestic investment. The initiative aims to unlock billions of pounds for long-term UK priorities such as infrastructure, clean energy, housing and high growth and fledgling businesses, while also boosting returns for pension savers.
The plan would see the merging of 86 local authority pension schemes into a far smaller cohort of large asset pools, while a vast number of smaller, multi-employer, defined contribution schemes will also be consolidated. Seventeen of the UK's largest pension providers agreed to these reforms in principle under a voluntary agreement, known as the Mansion House accord, announced earlier in May. The plans seek to follow the example set in Australia and Canada, where larger pension funds have helped revive domestic investment. According to the Treasury, the reform could unlock more than GBP 50bn worth of investment into UK assets and potentially add some GBP 6,000 to the average worker’s pension pot over time. Nevertheless, any arrangement which could effectively see the government dictating how and where pension investments are made is not without controversy.
US growth revised
Economic growth over the first quarter of 2025 was revised slightly higher than initially estimated, though the economy remained in contractionary territory for the quarter. The second estimate of Q1 2025 US GDP saw the print revised to -0.2% from the -0.3% originally reported in April. A surge in imports is likely to have impacted the calculation, with many businesses front-loading orders before President Trump’s “liberation day” tariff announcement on 2 April.
In a potentially welcome sign for the US Federal Reserve (Fed), early reports suggest that Trump’s trade policies have thus far had minimal impact on inflation. The Core Personal Consumption Expenditures (PCE) Price index - the Fed’s preferred measure of inflation which excludes volatile components like food and energy - rose by +0.1% in April, in line with expectations. On a year-on-year basis, the index rose by +2.5%.
However, US consumers are seemingly becoming slightly less optimistic. The latest readings for personal income and spending suggested consumer spending slowed despite a rise in personal income. Policy uncertainty may well have driven a slow-down in personal spending from +0.7% month-over-month in March, to +0.2% in April. Disposable personal income increased +0.8% month-over-month in April, compared to the +0.3% increase expected.
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