Trump Tariff Case May See Ruling as Early as Friday, Market Could Face New Turbulence

The next day the U.S. Supreme Court will issue legal opinions is Friday, and one of the most important pending cases concerns former U.S. President Donald Trump’s global tariffs. If the Court declares these tariffs invalid, bonds will be the most vulnerable assets, while stocks are expected to benefit.

First, there is no guarantee that a decision will be handed down on Friday. The Supreme Court does not announce in advance which cases will receive rulings, and the justices are also expected to issue opinions on February 24 and February 25. Therefore, we could get a ruling as early as Friday, but it may also come next week or at some point in the coming months.

If Trump’s highly controversial tariffs are overturned, long-term U.S. Treasuries will be hit the hardest, because without these tariffs, there will be a revenue shortfall of more than $130 billion. According to Bloomberg Economics, this gap could exceed $170 billion by Friday. The U.S. Treasury will have to issue more bonds to fill the deficit, putting upward pressure on yields. If any funds need to be refunded, it will only further increase market volatility.

On the other hand, stocks may see a rise, as the reversal of tariffs would remove a major shadow over profit prospects. This could inject new vitality into the struggling stock market and provide fresh momentum at a time when the cyclical rotation appears increasingly weak. The rally would not be limited to the United States, since lower tariffs would allow exporters to expand sales to the U.S., the world’s largest economy.

The initial reaction of the U.S. dollar is the hardest to predict. Some believe that with the removal of tariff pressure, brighter growth prospects will benefit the dollar; since Trump took office, the dollar has fallen by 9%. However, eliminating tariffs would also dampen inflation expectations and could open the door for further Federal Reserve rate cuts, which would weigh on the dollar. Meanwhile, some may believe that if the Court sides with Trump and maintains the tariffs, this could undermine confidence in U.S. institutions and reignite the policy risks that have plagued the dollar this year.

Nevertheless, the initial stress reactions will all be short-lived, as the White House will seek to restore these tariffs through other mechanisms. This alone will raise a new set of issues that could further disrupt markets beyond the initial shock. If one thing is certain, it is that volatility will rise.

Editor: Li Tong