A US federal trade court invalidated sweeping import duties on Wednesday night, throwing markets another curveball in the ever-changing quarrel over tariffs. The White House is expected to appeal the ruling, which applies to the Trump administration’s April 2 reciprocal tariffs but not industry-specific levies such as those placed on cars and steel. The court’s decision raises new questions over the path ahead for US trade policy and high-stakes negotiations already underway. Just this week, the European Union pledged to jumpstart talks after President Donald Trump threatened last Friday to impose a 50% tariff on the bloc.

While the risk of higher tariffs still hangs over the economy, recent breakthroughs—including a deal with the UK and a truce with China—have given investors reasons to be optimistic that businesses and consumers can emerge from the trade spat largely unscathed. The US economy contracted by 0.2% on an annualized basis in the first quarter, according to a revised estimate published on Thursday. Current forecasts put the economy on course to rebound in the second quarter. Economists also anticipate another tame inflation report on Friday, estimating that the personal consumption expenditures (PCE) price index was up 2.2% year-over-year in April after a 2.3% increase a month earlier. PGIM Fixed Income’s Robert Tipp, Chief Investment Strategist and Head of Global Bonds, discusses the implications of recent market moves and the broader outlook for bond markets in a new video