MW Trump suggests the stock market may fall if the Supreme Court throws out his tariffs. Is he right?

By Brett Arends

In his '60 Minutes' interview, the president said tariffs have pushed the stock market to record highs

Supreme Court hearings on President Trump's signature tariff policy begin this week

Donald Trump didn't exactly say that he thought the stock market would crash if the Supreme Court throws out his tariffs.

But he came pretty darn close.

"I think our economy will go to hell" if that happens, Trump told Norah O'Donnell on "60 Minutes."

"Because of tariffs, we have the highest stock market we've ever had," he argued.

Tariffs, the president said, were the reason 401(k) plans were hitting record levels.

If tariffs are the reason the stock market is up, it stands to reason that if the tariffs are thrown out, the market won't stay at the same elevated levels. Trump also said the forthcoming Supreme Court hearings on his tariffs were more important even than, say, the court's 1930s rulings upholding New Deal measures such as Social Security, the rulings of the 1950s and 1960s dismantling segregation, and rulings since - going both ways - on abortion. "I think it's the most important subject discussed by the Supreme Court in 100 years," he said.

The court's arguments begin on Wednesday.

Treasury Secretary Scott Bessent confidently predicted the Supreme Court, which has a 6-3 conservative majority, would back the president's tariff orders. Others aren't so sure. The Congressional Research Service points out that the Constitution gives Congress, not the president, all power to levy tariffs and other taxes, though it adds that Congress has delegated some of this authority to the executive branch. The president has announced, delayed and imposed tariffs seemingly on a whim so far this year, citing "emergency" and "national security" concerns. Such powers exist, the CRS says - but whether they can be applied broadly, over long periods and without any evidence of an emergency, is another matter.

The president hardly helped his case recently by threatening to raise tariffs on Canadian imports in a snit because he didn't like a commercial aired by the state of Ontario. If that is an "emergency," the word applies a lot more widely than anyone realized.

The Supreme Court begins its hearings after a federal appeals court struck down many or most of the tariffs in August. President Trump said that court was "highly partisan."

But how could it hurt the stock market if the Supreme Court were to throw out the tariffs?

First, there would presumably be some shock and some confusion - especially about the state of imports, and what happens to the tariff revenue already raised. Budget analysts at President Trump's alma mater, the University of Pennsylvania, calculate based on Treasury data that so far this calendar year, the federal government has collected $308 billion in tariffs, up from $162.2 billion last year. Returning some or all of that money - depending on what the Supreme Court decides - might well be a mess, as well as a bonanza for lawyers.

According to the Federal Reserve's financial accounts for the country, at the last count, U.S. nonfinancial businesses in total were on track to make $5.3 trillion in net income this year, which works out to $1.3 trillion a quarter. Handing back some or all of those tariffs would produce a measurable boost to their net incomes.

The second argument is that if the Supreme Court throws out the tariffs, it would hurt the federal budget, and this could cause another panic in the market for U.S. Treasury bonds. And if that happens, and long-term interest rates spike, stocks could be expected to fall. There's substance to this, but it shouldn't be overstated.

Tariffs in total account for about 7% of federal revenues at the moment, the University of Pennsylvania's Wharton School estimates. (Total tariff revenue of $308 billion so far this calendar year, compared to $4.22 trillion in total federal tax revenues net of refunds).

Economists at Yale's Budget Lab estimate that all tariffs will generate about $2.2 trillion over 10 years, and that if the Supreme Court rules against the Trump administration, the likeliest ruling - scrapping some tariffs but allowing others - would cut that figure in half. Wharton's figures are higher, but not by orders of magnitude. (Likely tariff boost to revenues, after accounting for economic costs, might be $2.5 trillion, the university's analysts say).

But losing $1.1 trillion or even, say, $1.5 trillion over 10 years is not going to make an enormous change to the federal government's crumbling finances. Last January, when the Trump administration took office, the Congressional Budget Office was already forecasting $22 trillion in deficits over the next 10 years, and the One Big Beautiful Bill Act signed into law this summer is expected to add another $3.4 trillion to that.

It is possibly hyperbole to say that because the U.S. government is heading toward fiscal disaster anyway, the net effect of tariffs either way isn't enormous.

The third argument connecting the Supreme Court hearings to the stock market is the claim that tariffs are reviving U.S. industry and the U.S. economy, and that's a major reason the stock market is booming. President Trump has promised a "golden age" for the U.S. economy.

The problem with this is that it's not endorsed by the facts. The main reason the stock market is booming is because of artificial-intelligence mania, which is why the key players are the so-called Magnificent Seven giant technology stocks such as Nvidia (NVDA) and Microsoft $(MSFT)$. These are global multinationals; their stocks are not highly sensitive to the economic conditions on Main Street, U.S.A., and if anything they would benefit from more and freer global trade.

While the Magnificent Seven stocks MAGS have risen 26.4% so far this year, the average stock in the S&P 500 RSP has risen just 6.6%.

FactSet data show that the Magnificent Seven alone have produced more than half - 54% - of the entire rise in the S&P 500's SPX value this year.

The iShares U.S. Consumer Discretionary exchange-traded fund IYC, which invests in companies that sell stuff U.S. households buy when they can afford it - luxury goods, vacations and so on - has risen 7.7% so far this year.

(The iShares U.S. Consumer Staples ETF IYK, which invests in companies that sell stuff U.S. households buy regularly - soft drinks, toiletries, household goods and so on - has risen a mere 1%).

If the stock market were booming because tariffs were unleashing a golden age for the U.S. economy, the stocks of midsize and smaller U.S. companies would be flying. They aren't: The S&P 400 MID index of midcap stocks has risen about 3% so far this year, while the S&P 600 SML index of small-cap stocks is up just over 1%, or less than inflation.

Regional banking stocks KRE, which economists and market strategists routinely cite as a key bellwether of the Main Street economy, are actually slightly down since January 1.

Ouch.

(And while it is probably far too soon for this to mean much, if anything, the number of manufacturing jobs in the U.S. has actually fallen so far this year).

Given the chaos unleashed on the stock markets in April, when President Trump announced his ill-fated "liberation day" tariff blitz, it seems questionable to suggest that tariffs are somehow helping the market. They don't seem to be.

Markets don't like uncertainty. If the Supreme Court were to throw out some or all of President Trump's tariffs, it certainly might cause a short-term selloff. (Nobody really knows, of course.) But there seems little reason to think tariffs have actually caused the stock market to rise, or that the lack of them would cause it to fall.

-Brett Arends

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November 03, 2025 13:03 ET (18:03 GMT)

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