Trump’s Tariff Ruling Lands Today: Market to Rise or Fall — The Decision Will Tell

TradingKey - Global financial markets demonstrated strong performance at the beginning of 2026, fostering an optimistic atmosphere for early-year trading; however, this upward trend may face its first real test today.

The U.S. Supreme Court is set to rule this Friday on a tariff mandate issued by the Trump administration last April, a measure that briefly rattled market sentiment upon its announcement. Now, the judicial verdict regarding its legality will become a key variable influencing the next phase of U.S. stock and bond market movements.

This high-profile litigation centers on two core issues.

First is whether the administration exceeded its authority in imposing tariffs—specifically, whether Trump had the power to initiate such measures under the International Emergency Economic Powers Act (IEEPA).

Second, if the action is deemed illegal, whether the federal government should refund tens of billions of dollars in tariff payments to companies that have already paid.

Current market expectations suggest that if the court strikes down these tariff measures, it could drive stock prices higher, fueled by bullish factors such as rebounding corporate earnings expectations and lower consumer costs. However, such an outcome could also exacerbate fiscal deficit concerns, trigger a correction in the bond market, and complicate the Federal Reserve's monetary policy path.

Although investment firms have generally envisioned a binary outcome, the actual direction may be more neutral—meaning the court might acknowledge the government's limited taxing authority while requiring a partial refund of accumulated fees. Furthermore, the possibility remains that the court could use other technical means to "soften" the market impact of its ruling.

Notably, even if the final ruling is unfavorable to the White House, the U.S. executive branch can still maintain the relevant policy framework using other trade tools without relying on IEEPA authorization. For instance, equivalent measures could be implemented using Section 301 of the Trade Act of 1974 or Section 232 of the Trade Expansion Act of 1962.

U.S. Treasury Secretary Bessent stated publicly on Thursday that he expects the court to lean toward a "middle-ground" ruling. He noted, "From the perspective of overall fiscal capacity, we are fully capable of maintaining current collection levels." He added that a greater concern is that if the President loses the flexibility to deploy tariffs in international negotiations, it would impose long-term constraints on national security and strategic bargaining power.

Economic Impact of Tariff Policies

Morgan Stanley stated that even if the U.S. Supreme Court reviews the reasonableness of the tariffs, the overall policy is unlikely to change significantly. If the court does not completely overturn the current practices, the current average import tariff of around 16% is likely to persist at least through the end of 2025.

The investment bank estimates that such tariff levels have a relatively limited impact on U.S. inflation (specifically core consumer spending metrics), adding approximately 0.7 percentage points to price increases—an effect that has already been reflected in data from previous years.

Even if the court rules that adjustments are necessary—such as lowering taxes for specific industries—the stimulus to the overall economy would be quite limited. For example, if the government opts to refund a portion of previously collected tariffs (e.g., a 40% refund) in installments starting in 2027, national economic growth would only increase by a marginal 0.08 percentage points. Conversely, reduced government revenue would expand the budget deficit to 6.2% of GDP, thereby increasing fiscal pressure.

If the government decides to accelerate the pace, such as by issuing a one-time refund of all tariffs, it could provide a slightly stronger boost to economic growth of about 0.17 percentage points. Nevertheless, overall U.S. trade policy is expected to remain conservative.

Bullish Factors for the Stock Market

Ohsung Kwon, Chief Equity Strategist at Wells Fargo, stated that if tariff policies are overturned, EBIT for large U.S. companies could potentially increase by approximately 2.4% in 2026.

James St. Aubin, Chief Investment Officer at Ocean Park Asset Management, remarked that the event is likely to serve as a "catalyst for a modest rally."

Industries with the strongest expectations for gain are those with less control over import costs, such as consumer durables like apparel, toys, and furniture. Companies such as Nike, Mattel, Crocs, and Under Armour, whose supply chains are heavily dependent on Asian markets, have faced significant pressure under current tariff policies; the removal of these restrictions would create substantial room for cost relief.

Furthermore, the industrial equipment manufacturing and transportation logistics sectors also show potential for positive impact. Large manufacturers with multinational operations, such as Caterpillar and Deere, are expected to benefit directly from potential import tax refunds and new orders. Additionally, transportation companies like UPS and FedEx are projected to improve operational efficiency and performance as the pace of cross-border trade recovers.

However, not all sectors will benefit equally.

Some sectors that previously benefited directly from protectionist policies, such as domestic materials suppliers, commodity vendors, and regional manufacturers, may face a narrowing of their premium advantages and consequently underperform. Harris Khurshid, Head of Investment at Karobaar Capital, noted that these "moat-based" profit models could be undermined once the competitive landscape reopens.

Haris Khurshid, Chief Investment Officer at Karobaar Capital, pointed out that materials, commodities, and U.S. domestic producers that benefited from trade protectionism may lag in performance.

U.S. Treasuries Under Pressure

In contrast to the optimism in the stock market, the U.S. Treasury market may face pressure.

Looking back at the past year, U.S. Treasuries performed strongly, with a full-year return exceeding 6% in 2025, marking the best record since 2020.

The supporting force behind this was primarily driven by strong investor expectations for Federal Reserve rate cuts. However, if the court rules current tariffs invalid and orders their cancellation, it would directly hit federal fiscal revenue, thereby reigniting investor concerns over a widening budget deficit.

Jay Barry, a strategist at JPMorgan, noted in a research report that if the authorities lose some of their ability to obtain funding through trade measures, long-term interest rates could face upward pressure, and the yield curve risks steepening.

Morgan Stanley also stated that if the government is required to refund large amounts of previously collected import taxes, the pace, size, and even pricing strategies for Treasury bill issuance will be affected. The uncertainty surrounding refund amounts is prompting institutions to reassess duration management and reallocation strategies for short- and intermediate-term bond portfolios.

However, the bank's analysts also cautioned that rather than expecting a one-time sharp adjustment, it is better to focus on "second-level reactions"—namely, the structural operations market participants will undertake after fully digesting the ruling.

For example, once the initial sell-off levels out, some long-duration Treasuries might see capital inflows driven by a "bad news priced in" logic, which could trigger a "buy the fact" rally at any time, pushing yields lower once again.