The tariffs, which include a general 10% import tax and were reinstated by the Trump administration in April 2025, had been struck down last month by a lower court for being unlawful. However, the Federal Appeals Court has suspended that decision, allowing the tariffs to remain in place until the appeals process is concluded. 

The court emphasized the “extraordinary importance” of the cases, stating: 

“Both sides have presented strong arguments regarding the disputed tariffs. These cases involve matters of public interest that require swift and thorough adjudication.” 

The lawsuits were brought by various state governments, trade associations, and importers. Plaintiffs argue that Trump’s tariffs violate the Constitution and Trade Law. One of the groups involved in the lawsuit, the Liberty Justice Center, responded to the court’s ruling with the following statement: 

“The lower court clearly found these tariffs to be illegal. The Federal Court’s decision to suspend that ruling is troubling in terms of economic freedom.” 

Meanwhile, the appeals hearing is scheduled for July 31, 2025. Until then, Trump’s tariffs will remain in effect. The final decision will rest with the Federal Appeals Court. 

Economic Impact 

Trump’s tariffs directly affect imports from China, Canada, Mexico, and Europe. Small and medium-sized businesses are particularly vocal about rising import costs. The White House defends the tariffs as measures to protect “America’s economic sovereignty and border security.” Trump supporters also frame the tariffs as part of his broader “economic nationalism” and “border protection” policies. 

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Fed Holds Interest Rates Steady, Warnings Draw Attention 

The U.S. Federal Reserve (Fed), in its May 7, 2025 meeting, kept the interest rate steady at the 4.25%-4.5% range. The Federal Open Market Committee (FOMC) highlighted growing threats to economic growth and employment. Fed Chair Jerome Powell, in a press conference, stated, “Large tariff increases could slow the economy, prolong inflation, and increase job losses.” Powell’s remarks were interpreted as criticism of the Trump administration’s trade policies. 

The Fed’s decision to maintain rates heightened market uncertainty. Powell’s tariff warning prompted investors to adopt a cautious stance. Despite this, alternative assets like Bitcoin saw an upswing. 

President Donald Trump, on the same day, emphasized that tariffs on China would not be lifted. Although talks with Chinese officials were scheduled for the weekend in Switzerland, Trump showed no signs of compromise. This escalated global trade tensions. Trump stated, “Our trade policies will strengthen the U.S. economy,” reaffirming his commitment to his approach. 

U.S. stock markets experienced volatility following the Fed’s decision and tariff tensions. The S&P 500 rose by 0.2%. The Dow Jones gained 200 points, or 0.5%, driven by gains in banking stocks. However, the Nasdaq fell 0.4% due to losses in technology stocks. Notably, Alphabet dropped 6% amid rumors of a new AI-focused search engine. Apple also lost 1% in value. While banking stocks rallied, the technology sector underperformed due to tariff concerns. 

Bitcoin Surge and Profit-Taking 

Following the Fed’s decision, Bitcoin rose 2%, approaching $97,000. According to CoinGecko data, Bitcoin gained over 20% in the past week. CryptoQuant’s analysis indicated that investors accelerated profit-taking. Daily realized profits exceeded $1 billion, signaling an advanced stage of the bull market. 

CryptoQuant noted that high profit-taking could increase the risk of a pullback. However, if profit-taking slows, Bitcoin could enter a new upward trend. The Fed’s interest rate policies indirectly influence crypto markets. JPMorgan analysts predict that the Fed’s cautious stance may sustain volatility in crypto markets. 

Post-Fed Decision Outlook 

Powell warned that tariff increases could fuel inflation and slow growth. “We won’t rush into rate cuts,” Powell said, emphasizing a focus on economic data. Analysts predict the Fed could implement two rate cuts in 2025. However, Trump’s policies may alter these expectations. Goldman Sachs forecasts a potential rate cut in June 2025, though tariff policies’ impact on inflation could delay this timeline. 

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Pressure on the Chinese Yuan is Increasing

This decision was made after the Chinese currency, the yuan, has been under serious pressure recently. In particular, the high tariffs that the US has started to impose on Chinese goods and Beijing’s reactions to these have had a significant impact on financial markets. The yuan has started to lose value following these developments, and this has prompted the Chinese authorities to take action.

“Window Guidance” from the PBOC

Three different sources who provided information on the subject stated that the People’s Bank of China reached out to major state banks this week with a method called “window guidance”, which is an unofficial way of guiding the market. Within the scope of this guideline, banks were asked to limit dollar purchases made through proprietary accounts (transactions made by the bank for its own portfolio).

This type of window guidance is known as one of the ways the People’s Bank of China provides indirect control instead of directly intervening in the market. Such moves can have direct effects on foreign exchange reserves, exchange rate stability and general economic expectations.

Intervention in Foreign Exchange Markets?

This development can be interpreted as China’s attempt to indirectly intervene in the foreign exchange market. While the authorities want to prevent the yuan from losing value further, they may also be aiming to control capital flight. Because in large economies like China, exchange rate imbalances can seriously affect not only the domestic market but also global investor perception.

What Does It Mean?

This step by China is seen as a result of the US-China trade tension reflected in financial markets. Such measures show that China wants to maintain control over the exchange rate and is especially prepared for short-term speculative pressures.

Such policies are critical as limiting the yuan’s depreciation will affect not only import costs but also investor confidence. China’s tightening of its foreign exchange policies could lead to more volatility in Asian markets in the coming days.

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