Markets Bet Against Trump Tariff Win as Supreme Court Signals Doubts

Prediction markets swung sharply on Wednesday after U.S. Supreme Court justices — including several conservatives — voiced skepticism about President Donald Trump’s use of emergency powers to impose sweeping tariffs, raising doubts about whether the court will uphold his trade policy.

Contracts on Kalshi, tied to whether the Supreme Court would rule in favor of Trump’s tariffs, plunged to around 30% from nearly 50% before the hearing. A similar contract on Polymarket dropped to roughly the same level, down from more than 40% earlier in the week. The moves reflected traders’ growing belief that the justices could strike down the tariffs or significantly limit the president’s trade authority.

The case centers on Trump’s reliance on the International Emergency Economic Powers Act (IEEPA) to impose what he called “reciprocal tariffs” on goods from U.S. trading partners, and additional levies on products containing fentanyl from Canada, China, and Mexico. Lower federal courts previously ruled that the administration overstepped its legal authority, finding that the law did not grant the president the power to unilaterally reshape tariff policy — a power reserved for Congress.

During oral arguments, several conservative justices appeared unconvinced by the administration’s defense. They questioned Solicitor General D. John Sauer about the scope of Trump’s emergency powers under IEEPA, pressing him on whether the law could be stretched to justify tariffs that effectively act as a form of taxation.

Justice Neil Gorsuch and others reportedly raised concerns about the separation of powers, suggesting that allowing presidents to use emergency powers to impose trade measures might blur constitutional boundaries between the executive and legislative branches.

That skepticism sent ripples through the prediction markets. Traders, who closely parse every word and tone shift from justices during major hearings, quickly cut their bets on a favorable outcome for Trump.

Although prediction markets react to perceived signals from oral arguments, today’s tone was believed to be clearly cautious. Analysts note that the fact that conservative justices voiced similar doubts as the liberals gave traders reason to think the administration may not get the ruling it wants.

The Supreme Court is not expected to issue a decision immediately, and it remains unclear when a ruling will be announced. But Wednesday’s reaction showed how investors and traders are interpreting judicial sentiment as an early gauge of the likely outcome.

The case carries significant implications for Trump and his broader trade agenda. The tariffs — a central pillar of his “America First” economic policy — were presented as tools to pressure foreign governments and protect U.S. industries. A loss at the Supreme Court could weaken the administration’s ability to wield emergency powers for economic leverage and reshape global trade terms.

While the court’s final ruling will ultimately decide the legality of the tariffs, Wednesday’s hearing signaled that a majority of justices may be wary of upholding an interpretation of presidential authority that many see as too expansive.

Economists say a Supreme Court ruling against the tariffs would likely bolster the dollar in the medium term by reducing trade tensions and restoring confidence in the predictability of U.S. trade policy.

Since the tariffs were imposed, they have weighed on U.S. manufacturers and exporters, pushing up input costs and prompting retaliatory measures from key trading partners. The uncertainty has also unsettled global markets, driving periodic sell-offs in emerging market currencies and equities.

The Supreme Court is not expected to issue a ruling immediately, though analysts say a decision could come before the end of the year. Until the decision is issued, traders will continue to read between the lines — and, for now, they’re betting that Trump’s tariff gamble may not survive the Supreme Court’s scrutiny.