Economy
Over 20 US states file lawsuit over Trump’s new global tariffs
About two dozen U.S. states filed a lawsuit Thursday challenging new global tariffs introduced by President Donald Trump after he suffered a major defeat at the Supreme Court.
The Democratic attorneys general and governors in the lawsuit argue that Trump is overstepping his power with planned 15% tariffs on much of the world.
Trump has said the tariffs are essential to reduce America’s longstanding trade deficits. He imposed duties under Section 122 of the Trade Act of 1974 after the Supreme Court struck down tariffs he imposed last year under an emergency powers law.
Section 122, which has never been invoked, allows the president to impose tariffs of up to 15%. They are limited to five months unless extended by Congress.
The lawsuit is led by attorneys general from Oregon, Arizona, California and New York.
“The focus right now should be on paying people back, not doubling down on illegal tariffs,” said Oregon Attorney General Dan Rayfield. The suit comes a day after a judge ruled t hat companies who paid tariffs under Trump’s old framework should get refunds.
The White House said Trump is acting within his power. “The President is using his authority granted by Congress to address fundamental international payments problems and to deal with our country’s large and serious balance-of-payments deficits,” said spokesman Kush Desai. “The Administration will vigorously defend the President’s action in court.”
The new suit argues that Trump can’t pivot to Section 122 because it was intended to be used only in specific, limited circumstances – not for sweeping import taxes. It also contends the tariffs will drive up costs for states, businesses and consumers.
Arizona Attorney General Kris Mayes pointed to a New York Federal Reserve Bank study that found Americans largely bear the cost of the tariffs, which has been estimated at $1,200 a year per household. “That is money out of the pockets of American families trying to buy groceries, pay rent and keep their small businesses afloat,” Mayes said.
Many of the plaintiff states also successfully sued over Trump’s tariffs imposed under a different law: the International Emergency Economic Powers Act (IEEPA).
Four days after the Supreme Court struck down his sweeping IEEPA tariffs Feb. 20, Trump invoked Section 122 to slap 10% tariffs on foreign goods. Treasury Secretary Scott Bessant told CNBC on Wednesday that the administration would raise the levies to the 15% limit this week.
The Democratic states and other critics say the president can’t use Section 122 as a replacement for the defunct tariffs to combat the trade deficit.
The Section 122 provision is aimed at what it calls “fundamental international payments problems.” At issue is whether that wording covers trade deficits, the gap between what the U.S. sells other countries and what it buys from them.
Section 122 arose from the financial crises that emerged in the 1960s and 1970s when the U.S. dollar was tied to gold. Other countries were dumping dollars in exchange for gold at a set rate, risking a collapse of the U.S. currency and chaos in financial markets. But the dollar is no longer linked to gold, so critics say Section 122 is obsolete.
Awkwardly for Trump, his own Justice Department argued in a court filing last year that the president needed to invoke the emergency powers act because Section 122 did “not have any obvious application” in fighting trade deficits, which it called “conceptually distinct” from balance-of-payment issues.
Still, some legal analysts say the Trump administration has a stronger case this time.
“The legal reality is that courts will likely provide President Trump substantially more deference regarding Section 122 than they did to his previous tariffs under IEEPA,” Peter Harrell, visiting scholar at Georgetown University’s Institute of International Economic Law, wrote in a commentary Wednesday.
The specialized Court of International Trade in New York, which will hear the states’ lawsuit, wrote last year in its own decision striking down the emergency-powers tariffs that Trump didn’t need them because Section 122 was available to combat trade deficits.
Trump does have other legal authorities he can use to impose tariffs, and some have already survived court tests. Duties that Trump imposed on Chinese imports during his first term under Section 301 of the same 1974 trade act are still in place.
Also joining the lawsuit are the attorneys general of Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Rhode Island, Vermont, Virginia, Washington, Wisconsin, and the governors of Kentucky and Pennsylvania.
Investment banking giant Morgan Stanley is set to eliminate roughly 2,500 positions as workforce reductions persist throughout the financial sector this year.
The layoffs accout for roughly 3% of the workforce of the investment bank, news agencies The Associated Press and Reuters reported.
The job cuts were across the bank’s three major divisions, investment banking and trading, wealth management and investment management, but do not affect its financial advisors, the reports said.
Morgan Stanley reported a banner year in 2025, with annual revenue hitting a record at the investment banking giant.
It also beat Wall Street estimates for fourth-quarter profit in January, fueled by a 47% jump in investment banking revenue as dealmaking surged and debt underwriting fees nearly doubled.
Banking executives had struck an optimistic tone for 2026 on the back of healthy pipelines for mergers and acquisitions as well as initial public offerings.
Meanwhile, volatile markets amid worries of AI disruption to legacy technology businesses and geopolitical turmoil continue to boost trading desks as clients reposition portfolios to hedge against risks.
The cuts are based on strategy and individual performance, and the bank intends to add headcount in other areas, Reuters said.
Like other firms, Morgan Stanley aggressively hired during the pandemic, going from 60,000 employees in 2019 to 82,000 employees by year end 2022. The company had 83,000 employees at the end of 2025.
Tens of thousands of job cuts have already been made just two months into the new year, many of them white-collar. The financial sector has not been immune.
Citigroup and Blackrock have reportedly trimmed back their headcounts, and last week, financial technology company Block, which owns Cash App and the point-of-sale company Square, announced it would lay off 40% of its workforce.
While Block founder Jack Dorsey cited productivity gains in AI as the reason for the layoffs, industry observers noted that Block effectively tripled its workforce from 2019 to 2025, from 3,800 workers to 12,000.
The Wall Street Journal first reported the layoffs at Morgan Stanley on Thursday.
Türkiye welcomed the announcement of the European Union’s long-awaited industry policy aimed at strengthening its capabilities across strategic sectors, which would allow Ankara’s inclusion due to its customs union agreement, describing it as “a positive and constructive decision.”
Trade Minister Ömer Bolat said on Wednesday that the legal confirmation of Türkiye’s inclusion in the “Made in EU” policy marks “a significant step for trade relations.”
The European Commission unveiled earlier in the day a legislative proposal to strengthen Europe’s industrial base by introducing “Made in EU” and low-carbon requirements for strategic sectors.
The measure, also known as the Industrial Accelerator Act (IAA), targets industries, including steel, cement, aluminum, automobiles and net-zero technologies, while allowing for future expansion to energy-intensive sectors such as chemicals.
The new rules aim to bolster the bloc’s industries against fierce competition from China, in a push held up for months by wrangling over the scope and details of measures some see as protectionist.
Concerning strategic sectors including cars, green tech and steel, the proposal is a key part of a European Union drive to regain its competitive edge, reduce its dependencies and stave off job losses.
The draft regulation states that countries with an agreement creating a free-trade area or customs union with the EU would be considered local. That implies countries in the European Economic Area (EEA), such as Norway and Iceland, and also Türkiye, which has a customs union with the EU.
“It is a change in doctrine – one that was unthinkable just a few months ago,” EU industry chief Stephane Sejourne told a news conference.
Broadly, the rules aim to ensure that public and foreign investments support manufacturing inside the 27-nation bloc, explained an EU official. To that end, they say companies that want public money must meet minimum thresholds for EU-made parts and subject large investments from dominant foreign firms to conditions, including employing EU workers.
The European Commission said the package aims to bring manufacturing’s share of the EU’s gross domestic product (GDP) to 20% by 2035, up from about 14% in 2024.
Initially expected last year, the measures strongly backed by France were pushed back several times due to disagreements, with some arguing they run counter to the EU’s pro-free-trade spirit.
Much of the discord revolved around the geographical scope of “Made in Europe.”
Sceptics, including the EU’s largest economy, Germany, argued trade partners should be included in the definition under a “Made with Europe” approach.
Brussels settled for a compromise based on the principle of reciprocity.
Countries that have deals with the EU allowing for European companies to access public money on a par with local firms in the sectors concerned would be brought into the fold.
‘Important step’ for trade relations
Bolat said on social media that recognizing the existing customs union within the framework of the new industrial policy is a constructive decision for the continuity of investments and the competitiveness of European value chains.
“We are pleased that the intensive and constructive diplomatic engagements we have conducted in recent times with the European Union, based on mutual understanding in economic and trade matters, have yielded positive results,” he said in a post on X.
“As a result of the consultations conducted with the EU, the legal basis enabling the ‘EU origin’ requirement in the most recently published draft to encompass our country in principle within the framework of the customs union has been confirmed with the Industrial Acceleration Act, constituting an important step for our trade relations.”
Türkiye has a customs union with the EU dating back to the 1990s, and the two are major trading partners, with bilateral trade volume at over $200 billion yearly.
Of particular concern was the inclusion of Türkiye in the initiative due to its strong automotive base, where the country, in recent years, surpassed $40 billion in exports – large chunk of which is directed to European markets, such as Germany, France, Italy, Romania, and others.
Bolat expressed satisfaction with the positive results of the intensive and constructive diplomacy conducted with the EU on economic and commercial issues.
The minister emphasized that Türkiye is an inseparable and reliable part of European value chains in many critical sectors, particularly the automotive industry.
“This development is expected to further deepen sectoral integration between Türkiye and the EU, while accelerating the green and digital transformation of our value chains,” he added.
“The goal is to further strengthen Türkiye’s position within the European industrial ecosystem and to advance economic integration with the EU, including the modernization of the customs union. We would like to thank everyone involved, especially our trade minister, Mr. Ömer Bolat, for their great efforts in this process,” said Rifat Hisarcıklıoğlu, the president of the Union of Chambers and Commodity Exchanges of Türkiye (TOBB).
Strategic sectors push
The “Made in Europe” requirements, which also seek to boost industrial decarbonisation, would apply to “strategic sectors,” namely: steel, cement, aluminium, cars, and net-zero technologies.
Governments putting money behind infrastructure projects will have to ensure they include a minimum share of European low-carbon steel, cement and aluminium, among other provisions.
Electric-vehicle (EV) manufacturers will have to make sure at least 70% of their cars’ components are made in the EU to access public money.
Similar rules will apply to batteries, solar, wind, and nuclear.
The proposal, formally known as the “Industrial Accelerator Act,” also aims to ensure foreign companies partner with European firms to set up shop in the bloc.
To do so, it imposes conditions on foreign investments of over 100 million euros ($116 million) in “emerging strategic sectors” such as batteries and EVs.
Commercial shipping traffic through the Strait of Hormuz has dropped as much as 90% amid escalating conflicts in the Middle East, forcing global maritime trade to reroute around the Cape of Good Hope, located at the southern tip of the Cape Peninsula, about 50 kilometers (31 miles) south of Cape Town in South Africa.
After Tehran’s closure of the critical energy and oil waterway in response to joint U.S.-Israeli attacks on Iran, the U.K. Maritime Trade Operations (UKMTO) Center raised the security risk in the transport corridor to critical, prompting insurers to immediately cancel war coverage policies for vessels in the region.
Only four ships transited through the strait on March 3, marking a 90% drop versus the previous seven-day average, according to real-time tracking data from Windward.
The strait has historically handled an average of 138 vessels per day.
Oil tanker traffic also saw a similar 90% plunge compared to pre-attack levels, data from MarineTraffic showed.
Major firms suspend Gulf passages
Meanwhile, Cape of Good Hope transit saw 94 vessels on March 3, up 35% versus the route’s seven-day average.
Major shippers like Hapag-Lloyd, CMA CGM and Maersk suspended all Gulf transits and rerouted around the southern tip of Africa, which adds 10-20 days to delivery times and inflates transport costs.
Hapag- Lloyd told Anadolu Agency (AA) in a statement that the firm’s fleet has not transited through the Red Sea since December 2023, and the firm extended this decision in light of the current situation in the region and the related threats from Iranian-backed Yemeni Houthis.
French shipper CMA CGM announced it instructed all its ships in the Gulf and bound for the region to seek shelter, while passage through the Suez Canal has been suspended until further notice.
Maersk suspended voyages for vessels passing through the Suez Canal via the Bab el-Mandeb Strait, while rerouting all voyages from the Middle East and India to the Mediterranean and from the Middle East and India to the east coast of the U.S. around the Cape of Good Hope.
The Strait of Hormuz is a strategically vital waterway positioned at the mouth of the Persian Gulf. The transport corridor connects Middle Eastern oil and liquefied natural gas (LNG) production to global markets via the Arabian Sea and the Indian Ocean.
The waterway handles the transit of around 20 million barrels of oil and petroleum products per day while accounting for roughly one-third of all crude oil transported by sea.
China alone consumes 5.3 million barrels of crude oil transited through there, while India consumes 2 million barrels, Japan and South Korea 1.7 million barrels each, and other countries receive a combined 4.2 million barrels via the Strait of Hormuz, according to S&P Global data.
At the same time, Saudi Arabia is the largest exporter using the strait with 5.1 million barrels of crude oil shipped per day, followed by Iraq with 3.3 million barrels, the United Arab Emirates with 2.6 million, Iran with 1.7 million, Kuwait with 1 million, and other regional producers totaling 1 million barrels.
Meanwhile, the UAE and Saudi Arabia are the top exporters of 5 million barrels of refined petroleum products transiting the waterway daily, making up for 1.26 million and 1.04 million barrels per day, respectively.
Oil tankers began to divert to the Port of Yanbu on Saudi Arabia’s western coast, while loadings at the port surged to 2.44 million barrels per day so far in March, way above its six-month daily average of 650,000-940,000 barrels.
The Iraqi Oil Ministry halted production at the Rumania complex in Basra on Tuesday due to severe tanker constraints preventing vessels from entering the Gulf basin, pushing crude oil levels at domestic storage facilities to critical maximums.
Iraq’s Basra Port, which normally boasts a daily capacity of 3.5 million barrels, handled zero crude oil on Monday.
JPMorgan analysts say that major regional oil producers will be forced to shut down facilities if the disruption in the Strait of Hormuz persists for 21 days.
Tehran actively targeted regional oil and natural gas production plants by drone-striking Saudi Aramco facilities in the eastern Saudi city of Ras Tanura in retaliation for the U.S.-Israeli joint operation.
State-owned QatarEnergy reportedly halted production at its massive LNG facility in Ras Laffan after drone strikes on Monday, deepening global fears of a severe market tightening.
LNG competition between Asia, Europe may ramp up
Ross Wyeno, head of LNG short-term analysis at S&P Global, told AA that supply is insufficient to compensate for the massive imbalance caused by production halts in Qatar and the UAE.
Wyeno stated that the U.S. boasts the largest flexible LNG source in the world, so the freely loaded American LNG will go to Asia, where prices are the highest.
He said shipments from the U.S. will become more and more scarce if the situation does not improve, potentially impeding Europe’s efforts to fill its storage facilities and tighten the gas balance.
A recent development reflects this, as an LNG tanker originally bound for Europe reportedly changed course on Wednesday due to the price hike and was now headed for Asia on Thursday.
Türkiye has activated a special “sliding scale” system that adjusts the special consumption tax (ÖTV) on fuel products in line with changes in oil prices to prevent excessive price increases, according to a decision published in the country’s Official Gazette on Thursday.
According to the decision, in the case of a surge in refinery exit prices of fuel products, the ÖTV amount can be reduced by up to 75% of the increase, and in the case of decreases in prices, it will be increased by the same rate.
The decision comes amid concerns over rising global energy prices following the U.S.-Israeli war on Iran and its aerial response targeting key infrastructure across the Gulf nations, major producers of crude and natural gas. It also aims to limit the impact of rising oil prices on inflation and to reduce their effects on citizens.
The regulation will be based on the domestic refinery exit prices used as the basis for fuel dealer sales prices announced by the Energy Market Regulatory Authority (EPDK) as of March 2.
Increases in the ÖTV rates cannot exceed the ÖTV rate applied on March 2.
“To limit the impact of geopolitical developments on the economy, we have taken an important step by prioritizing disinflation in public finances. To mitigate the impact of the oil price shock, which we consider temporary, we are temporarily activating the sliding scale system and covering up to 75% of fuel price increases through taxes,” Treasury and Finance Minister Mehmet Şimşek said in a post on X.
“We will continue to support disinflation without compromising fiscal discipline,” he added.
Annual inflation rate in Türkiye ticked up slightly in February to 31.5% while monthly inflation cooled to 2.96%, compared to the higher-than-expected 4.84% increase in January, official data showed earlier this week.
Brent was up 3.2% at $84.01 per barrel early Thursday, while West Texas Intermediate rose 3.6% at $77.38 per barrel, extending gains over the past week.
China on Thursday set out a five-year roadmap to turbocharge scientific breakthroughs and embed AI across its industrial economic machine, framing technological dominance as a core national security goal in its sharpening rivalry with the U.S.
In its 15th strategic plan since adopting Soviet-style quinquennial policy cycles in the 1950s, Beijing has outlined a bet that technology – not consumption – will drive its next phase of development despite growing structural pressures.
The objectives reflect President Xi Jinping’s vision of developing “new productive forces” to escape the middle-income trap, counter the demographic downturn, and enhance self-sufficiency to insulate China from U.S. export controls.
At the opening of the annual parliament meeting, Premier Li Qiang praised China’s ability to withstand U.S. President Donald Trump’s tariff hikes, but said “multilateralism and free trade are under severe threat,” announcing 7% increases in the defense budget, as well as in research and development.
Li acknowledged an “acute” imbalance between strong supply and weak demand and risks from a worsening property sector crisis and high local government debt.
These challenges have pushed Beijing to set a slightly lower growth target of 4.5%-5% for 2026, down from last year’s 5%, which was met largely through a one-fifth surge in its trade surplus to a record $1.2 trillion.
As widely expected, the five-year plan also pledged a “notable” increase in household consumption, without specifying figures, dampening expectations for demand-side reforms.
Last year’s trade punches with the Trump administration, which briefly escalated to embargo-like conditions of triple-digit tariffs, showed the importance of its supply chain dominance as leverage.
China vowed to maintain its competitive edge in rare earths.
The U.S. and its allies are still years away from breaking their reliance on China for these materials vital to everything from AI chips to defense systems.
“China’s government remains laser-focused on spurring technological breakthroughs and high-tech investment,” said Fred Neumann, chief Asia economist at HSBC. “In part, this is motivated by competition with the United States for control over the technologies of the future.”
“Many international observers may be left disappointed, therefore, by slower progress in rebalancing the economy away from investment towards consumption.”
China invests 20 percentage points of GDP more than the global average, while its households spend roughly 20 points less – a state-controlled, debt-driven development model that analysts say creates industrial overcapacity and fuels trade tensions abroad and deflationary pressures at home.
“The rebalancing challenge that China faces, and that will take years to achieve, is implicitly acknowledged by a weaker growth target for the coming year,” Neumann added.
The five-year plan aims to raise the value-added of “core digital economy industries” to 12.5% of GDP and roll out new policies for an integrated national data market, AI adoption across the full supply chain, and an AI security system.
Ambitions span biomedicine, quantum tech, atomic-scale manufacturing, hyper-scale computing clusters, nuclear fusion, brain-computer interfaces and even commercializing AI-powered humanoid robots.
“Beijing is trying to manage a ‘controlled glide’ in growth while building a new economy based on technology rather than property,” said Andy Ji, Asian FX & rates analyst at ITC Markets.
“It is a high-stakes rebalancing where the government is betting the house on AI and advanced manufacturing.”
State-owned enterprises were enrolled to create demand for made-in-China semiconductors and drones.
The 141-page plan name-checks AI over 50 times, envisioning robots plugging labor shortages and factories operating with little human oversight. It builds on a breakout year for Chinese developers – led by DeepSeek – who rapidly closed the gap with U.S. leaders such as OpenAI and Gemini.
But the five-year plan also lists bigger ambitions in areas China already dominates: it accounts for 85% of the world’s electric vehicle charging stations, but still aims to double their number within three years.
Economists say a lower growth target allows Beijing to experiment with cutting overcapacity in low-value added industries, but cautioned that this did not mean a departure from its production-focused growth model.
The U.S. Supreme Court’s decision to strike down some of Trump’s tariffs and expectations that a meeting between the two countries’ presidents later in March could stabilize relations in the short-term bode well for such adjustments.
Dan Wang, China director at Eurasia Group, said Beijing appeared to take advantage of “the trade truce” to absorb the job market pressure created by any production curbs.
Stimulus-wise, China plans a budget deficit of 4.0% of GDP and has set special debt issuance quotas at 1.3 trillion yuan ($188.5 billion) for the central government and 4.4 trillion yuan for local authorities – all unchanged from last year.
China pledged to raise minimum monthly pensions by 20 yuan per person and basic medical insurance subsidies for rural, non-working people by 24 yuan – marginal, rather than structural, moves. It said it wants to increase education spending, subsidize childcare and reform public hospitals, acknowledging the demographic downturn.
Yuan Yuwei, fund manager at Trinity Synergy Investment, warned that China’s growth and policy aims for this year – prepared at the end of 2025 – do not take into account the U.S.-Israeli attacks in Iran.
“That’s very negative for China, which counts the Strait of Hormuz as a crucial trade route,” said Yuan.
Brazil’s parliament has ratified the free trade agreement between the European Union and the Mercosur states including Argentina, Brazil, Paraguay and Uruguay.
Senate President Davi Alcolumbre said on Wednesday lawmakers had acted in the interest of society after the treaty cleared its final parliamentary hurdle in the Senate. Uruguay and Argentina have already ratified the deal.
The agreement was signed earlier this year in Paraguay after more than 25 years of negotiations. It is expected to create a new free trade area covering more than 700 million people.
By reducing tariffs and other trade barriers, the pact aims to boost the exchange of goods and services between the two regions.
The European Commission has said it plans to apply the agreement provisionally, despite a pending review by the European Court of Justice.
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