The court found the 1977 International Emergency Economic Powers Act, which Trump has cited as his basis for ordering massive increases in import duties, does not authorise the use of tariffs.

A three-judge panel ruled on several lawsuits arguing Trump exceeded his authority, casting doubt on trade policies that have jolted global financial markets, frustrated trade partners and raised uncertainty over the outlook for inflation and the global economy. The Trump administration filed an appeal, and it was unclear if the White House will respond to the ruling by pausing all of its emergency power tariffs in the interim.

Many of Trump's double-digit tariff hikes are paused for up to 90 days to allow time for trade negotiations, but the uncertainty over their eventual outcome has stymied businesses and left consumers wary about what lies ahead.

“Just when traders thought they’d seen every twist in the tariff saga, the gavel dropped like a lightning bolt over the Pacific,” Stephen Innes of SPI Asset Management said in a commentary.

The ruling was, at the least, “a brief respite before the next thunderclap.”

Market boost in US and Asia-Pacific

The future for the S&P 500 was up 1.6% while that for the Dow Jones Industrial Average gained 1.2%.

Japan's Nikkei 225 index jumped 1.5% to 38,263.36. American's largest ally in Asia has been appealing to Trump to cancel the tariffs he has ordered on imports from Japan and to also stop 25% tariffs on steel, aluminum and autos.

The ruling also pushed the dollar sharply higher against the Japanese yen. It was trading at 146.06 yen early Thursday, up from 144.87 yen late Wednesday.

Australia's S&P/ASX 200 gained 0.3% to 8,418.90.

In South Korea, which like Japan relies heavily on exports to the US, the Kospi surged 1.4% to 2,707.77. Shares also were helped by the Bank of Korea's decision to cut its key interest rate to 2.5% from 2.75%, to ease pressure on the economy.

On Wednesday, US stocks cooled, with the S&P 500 down 0.6% at 5,888.55. It's still within 4.2% of its record after charging higher amid hopes that the worst of the turmoil caused by Trump’s trade war may have passed. It had been roughly 20% below the mark last month.

The Dow industrials lost 0.6% to 42,098.70, and the Nasdaq composite fell 0.5% to 19,100.94.

Trading was relatively quiet in the countdown to Wednesday’s main event for financial markets, the latest quarterly earnings release for Nvidia. That came after trading ended for the day. Before that, the AI darling’s stock slipped 0.5%. It jumped 4.9% in after-hours trading.