The Pinnacle: May 2025

Written By TallRock Capital

May 2 0 2 5 • I S S U E 53

Global Trade in Flux: Navigating Tariffs, Talks, and Legal Challenges

As U.S. tariffs face legal setbacks and trade talks falter, global economies reassess cooperation and risk exposure—reshaping investment priorities.

 

Global trade is once again in a period of transition. While leaders sit down for negotiation, the underlying legal disputes and tariff adjustment are reshaping the global landscape. In the first half of 2025, the US has adopted a firmer stance on trade, with policies aimed at reinforcing domestic industry and manufacturing resilience. This shift is triggering a wave of strategic responses from Europe to Asia and creating new considerations for capital markets.

 

U.S.–European Union: Temporary Reprieve, Deeper Unease

On 25 May, President Trump extended the deadline for imposing a 50% tariff on EU goods to 9 July 2025. The move provided a temporary reprieve and restarted high-level dialogue on key sectors such as autos, LNG, and defence manufacturing.

European Commission President Ursula von der Leyen welcomed the extension, but officials in Brussels remain uneasy. use The EU argues that Washington’s of unilateral tariffs undermines multilateral frameworks and predictability. A recent U.S. court ruling challenging the legality of these tariffs (explored below) is now subtly shifting the balance of power in negotiations—giving the EU a potential legal and diplomatic opening.

 

U.S.–China: A Reset Framed by Fragility

In May, the U.S. and China agreed to a 90-day “reset period,” lowering tariffs to 30% and 10%, respectively. It was a symbolic step, designed to ease tensions and create space for renewed dialogue.

While momentum in the negotiations has slowed, Treasury Secretary Scott Bessent admitted that talks had reached a temporary standstill with negotiators waiting on direct engagement between Presidents Trump and Xi. Tensions rose further after Trump accused China of violating export agreements on critical minerals—prompting threats to double U.S. tariffs on steel and aluminium to 50%.

Meanwhile, India is seizing the moment.
New Delhi has proposed deep tariff cuts on industrial goods while defending agricultural protections, hoping to finalise a trade pact with the U.S. before the July deadline. According to the Financial Times, Indian exporters in pharmaceuticals, textiles, and gems are preparing for a breakout moment—bolstered by investor sentiment seeking supply chain alternatives to China.

 

A Legal Curveball: U.S. Court Questions Presidential Tariff Powers

A pivotal development came on 28 May when the U.S. Court of International Trade ruled that the Trump administration exceeded its authority under the International Emergency Economic Powers Act (IEEPA). The court ruled that the president cannot unilaterally impose sweeping tariffs without Congressional oversight—a judgment that could reshape the legal foundation of U.S. trade policy.

The administration filed an immediate appeal, and a higher court has temporarily reinstated the tariffs while litigation proceeds. Still, the case is being closely watched by trading partners who crave predictability and procedural clarity.

 

Markets and Capital Flows React

Investor caution has grown in step with the geopolitical drama. Equity markets in Asia pulled back in late May, with the Nikkei 225 and Hang Seng Index both posting losses. In the Gulf, most regional exchanges ended lower, except for Qatar, which saw gains on localised factors.

Amid the fog, one insight stands out: if the court ruling on tariffs is upheld, it could meaningfully reduce inflationary pressures. 

 

Trade diplomacy in 2025 is anything but conventional. Legal risks now rival political ones, and supply chains are realigning in response not only to costs but to credibility and consistency.

The emergence of legal constraints on presidential tariff powers in the U.S. may set the stage for more institutional checks and greater transparency, offering a potential path toward more stable trade governance.

TallRock Capital continues to monitor these developments closely helping clients position portfolios for resilience and opportunity amid a shifting global order. 

 

Trade Tension Tracker – At a Glance

  • EU tariff deadline: 9 July 2025

  • U.S.–China tariff reset: 90 days at reduced rates.

  • Private equity deal activity: –16% QoQ (Bain & Co.)

Global Market Recap – May 2025: Trade Tensions Ease, Markets Rebound

May 2025 demonstrated how swiftly market sentiment can shift when policy uncertainty begins to ease. Global equities regained their footing after a volatile start to the quarter, supported by a pause in trade tensions, resilient earnings, and measured optimism across both developed and emerging markets. Investors were reminded once again that short-term volatility often masks longer-term opportunities, especially when underpinned by sound fundamentals and diversification.

 

U.S. Markets

U.S. equities closed the month on solid ground. The S&P 500 rose 6.3%, marking its best May performance in 30 years. The Nasdaq Composite gained 9.6%, and the Dow Jones Industrial Average rose about 4%. Much of this recovery came after President Trump postponed a planned 50% tariff on European imports, helping calm markets rattled by April’s “Liberation Day” trade announcements.

Tech stocks led the rebound, buoyed by strong quarterly earnings from key AI and cloud computing firms. Additionally, a drop in the 10-year Treasury yield to 4.41% pointed to receding inflation worries, giving further support to equities.

For investors, the takeaway was clear: despite policy noise, U.S. fundamentals remain intact, with earnings resilience and sector leadership continuing to anchor market performance.

 

Eurozone

Across the Atlantic, European markets responded positively to the thaw in transatlantic trade tensions. The STOXX Europe 600 climbed 4.02% in May, driven by strong showings in industrials and consumer goods. Germany’s DAX rose 0.6%, reaching a record high of 24,161.15 points.

Trade stability wasn’t the only catalyst. Corporate earnings outperformed expectations, and the European Central Bank maintained its supportive policy stance. European companies are expected to report an average 2.4% rise in first-quarter earnings, data showed, better than the 2.3% rise analysts had estimated. Of the 278 STOXX 600 companies that have reported, 59% have beaten expectations for the period.

As one fund strategist in Frankfurt noted, “The data doesn’t just surprise to the upside—it tells a story of an economy adapting well to shifting global dynamics.”

 

UK Markets

Meanwhile, the UK FTSE All-Share has gained 4.1% in May, reflecting renewed investor confidence in the UK’s resilience and global positioning. Supporting the rally were recent trade developments with the U.S. and India, alongside a deferral of EU tariffs that boosted multinational sentiment.

The IMF upgraded the UK’s 2025 GDP forecast to 1.2%, citing a strong Q1 performance and resilient consumer demand. British industrials, particularly Rolls-Royce, gained on renewed global defence orders and aerospace investment, adding depth to the FTSE’s rally.

However, headwinds remain. UK grocery price inflation rose to 4.1%, reflecting persistent cost-of-living pressures. But for now, markets are looking past those challenges, focusing instead on earnings strength and Britain’s re-engagement on the global trade stage.

 

Asia Emerging Markets

In Asia, emerging markets held their ground amid a more constructive global trade backdrop. 

India’s Nifty 50 posted a 1.7% gain, supported by robust infrastructure spending and upbeat bank earnings.Taiwan’s TAIEX total return index climbed to 47,332.56, bolstered by semiconductor demand, while South Korea’s KOSPI was flat, as investors assessed local inflation pressures.

Asia’s performance reinforced a broader theme: while these markets remain sensitive to global macro shifts, their domestic demand and structural reforms are becoming increasingly important drivers of investor flows.

 

Commodities

Gold prices moderated in May after a historic rally in April. Spot gold ended the month near $3,311 per ounce, down from April highs. Easing geopolitical risk and a firmer U.S. dollar contributed to the pullback, though gold remains a preferred hedge amid longer-term uncertainty.

Oil continued to stabilise after a steep April selloff. Brent crude hovered around $67. Early-month weakness tied to U.S. tariff shocks and demand fears began to reverse as trade headlines softened and inventory levels normalised.

Copper, a barometer for global growth, remained rangebound as traders weighed cautious optimism on global manufacturing recovery with the reality of slowing construction activity in China.

 

Conclusion

May reaffirmed a timeless truth in investing: markets often rally not when all uncertainties vanish, but when risks become more manageable and narratives shift from fear to focus. U.S. indices rebounded, Europe regained momentum, the UK surged on stronger global ties, and Asia’s resilience continued to shine. Commodities cooled but remain relevant for portfolio diversification.

For long-term investors, the path forward will still carry volatility—but it will also carry opportunity. At TallRock Capital, we remain committed to helping clients navigate these cycles with a steady hand, diversified strategies, and clarity of purpose. 

TallRock Capital https://www.tallrockcapital.com
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The Pinnacle: April 2025