While courts delayed tariffs, Nvidia’s boom continued
The Court of International Trade threw a curveball at the White House this week, blocking the 10% baseline tariff and other country-specific duties enacted under the International Emergency Economic Powers Act (IEEPA). While the ruling is a setback, it’s not a knockout. The administration still has tools to reimpose tariffs within days. But legal uncertainty has crept in, and with the 10-day compliance clock ticking, markets are watching to see whether the administration replaces the tariffs quickly or pivots toward more sectoral penalties. Bottom line: the tariff machine isn’t stopping, but the legal road is looking bumpier.
The second estimate of first-quarter U.S. gross domestic product (GDP) came in with a 0.2% contraction, slightly better than initially reported. We don't usually talk much about these revisions here but we saw something interesting in the report: consumer spending was revised sharply lower (to the weakest it’s been since mid-2023). Personal consumption, the backbone of the economy, contributed less than expected, while inventories did most of the heavy lifting. In other words, businesses were stockpiling to avoid the effects of tariffs, but consumers didn't show up as much as expected. However, as we head into the second quarter, the consumer rebound is likely, and we anticipate a stronger Q2 reading considering the data we’ve received so far.
To close us off this week, the last important day of earnings for Q1 is now behind us as, with the final report coming in from the last highly relevant company. Nvidia once again blew past expectations, with data-centre revenue climbing and demand for its Blackwell chips exploding. Yet, even in a blockbuster quarter, the elephant in the room was China. Export restrictions cost Nvidia $2.5 billion in missed sales last quarter, and the White House has now asked chip software firms like Cadence and Synopsys to halt certain business with Chinese clients. Nvidia still sees China as a $50 billion opportunity, but one it can’t currently access. Nvidia CEO Jensen Huang warned that the U.S. is ceding strategic ground by forcing Chinese developers to turn to domestic alternatives. For now, cloud giants like Microsoft and Amazon are keeping Nvidia’s momentum alive, but geopolitical risk is now an issue for the sector.
Next week kicks off a new month, which means fresh manufacturing data to digest, which is always a key read on economic momentum. However, the spotlight will also be on the Bank of Canada. Markets have sharply repriced the odds of a rate cut down to just 25%, making Governor Macklem’s tone and comments even more crucial than usual. With inflation pressures still lingering and growth looking uneven, expect every word to be closely scrutinized.
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