The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin

WASHINGTON, April 17 (Reuters Breakingviews) - Beyond advantages in geography, resources and demographics, the United States’ economic might depends upon the predictable rule of law. Key to its function is the co-equal status of the executive branch, legislature and judiciary. By flouting a unanimous Supreme Court ruling that it return a wrongfully deported man, U.S. President Donald Trump’s administration threatens that framework. If this pushes further, global investors holding trillions of dollars’ worth of U.S. assets face a grave capital quandary.

Federal Judge Paula Xinis lambasted government lawyers during a Tuesday hearing dedicated to the case of Kilmar Abrego Garcia, a Maryland resident whom prosecutors admitted was mistakenly deported to a detention center in El Salvador. By a 9-0 vote, the Supreme Court largely upheld Xinis’s order to “facilitate” his return. Yet the judge noted that “to date, what the record shows is that nothing has been done.”

President Trump and Salvadoran President Nayib Bukele, in an Oval Office meeting on Monday, claimed that returning the imprisoned man was impossible. On Wednesday, a judge in a separate deportation case found “probable cause” to hold officials in contempt.

Officials assert that any directive must not overstep deference due to the president in foreign affairs. In a statement to Breakingviews, White House spokesperson Harrison Fields said that “these radical judges will soon learn that denying the Chief Executive his constitutionally granted authorities is a gross infringement of the law and will not stand on appeal.”

This is a crisis for U.S. governance, where each branch is supposed to check the other’s excesses. It's not clear how markets can price in fractures in that system. Court oversight guarantees the sanctity of contracts and protects property and people from arbitrary caprice. The Trump administration has pulled back from white-collar prosecutions, discarded some regulatory enforcement, and dismantled congressionally authorized agencies upon which businesses rely.

Foreign consumers already appear leery. Forecaster Tourism Economics now predicts a 9% decline in foreign visitors to the U.S. this year, down from a projected 9% increase in December. Goldman Sachs estimates that, combined with boycotts of U.S. exports, this could amount to a 0.3% hit to GDP.

A pullback among investors would be more material. Between equities, U.S. Treasuries and corporate credit, overseas investors own $30 trillion of the country’s assets, according to Apollo Global Management’s Torsten Slok. Despite recent lurches, the S&P 500 Index still trades at a premium to its historical average, government debt auctions continue, and global investors are highly allocated to the United States. There simply are not ready alternatives to markets of this scale and depth. Whether the administration will bend the law in a way that impairs this value is unclear, but no longer impossible to contemplate.

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CONTEXT NEWS

Trump administration officials on April 14 said that they are unable to return Kilmar Abrego Garcia, a Maryland resident deported to El Salvador, citing unsubstantiated M-13 gang ties. The U.S. Supreme Court on April 10 largely upheld an order from District Judge Paula Xinis to “facilitate and effectuate” his return.

El Salvador President Nayib Bukele said during an Oval Office meeting on April 14 that he would not release Abrego Garcia, calling him a “terrorist.”

Separately, U.S. District Judge James Boasberg said on April 16 that he had found “probable cause” to hold administration officials in contempt of court for ignoring a March 15 order barring the government from deporting alleged gang members to El Salvador under the 1798 Alien Enemies Act.

(Editing by Jonathan Guilford and Jeffrey Goldfarb and Maya Nandhini)

((For previous columns by the author, Reuters customers can click on RUBIN/gabriel.rubin@thomsonreuters.com))