Trump Trade War: Can the S&P 500 Rally Survive Legal and Policy Risks?

US markets remain positive despite ongoing economic and political uncertainties. The S&P 500 marked a new record high last week at the 6,920 level and is consolidating above the 6,750 support level. However, the consolidation following the bullish chart patterns comes with growing concerns that Donald Trump’s trade policies could challenge the rally beneath the surface.

Supreme Court to Decide Fate of Trump’s Tariff Powers

The Supreme Court will hear arguments this week about Trump’s use of emergency powers to impose global tariffs. The case could define whether the International Emergency Economic Powers Act (IEEPA) can be used as a long-term tariff tool. While lower courts have rejected this approach, some believe the conservative majority on the bench could reverse that ruling. A decision in Trump’s favour would expand executive authority and lock in a more aggressive trade stance.

The S&P 500 (SPX) is highly sensitive to global trade dynamics. Tariffs increase input costs for companies, disrupt supply chains, and affect forward guidance. Moreover, technology, industrials, and consumer goods sectors face the most exposure. If Trump’s authority to impose broad tariffs is upheld, investor confidence may start to shift. Markets could then begin to price in higher operational risks for multinational firms.

On the other hand, the U.S. dollar is rebounding from its key support level at 96. Strong resistance remains at 100.50, and a break above this level would maintain a positive trend.

Gold is consolidating above $4,000, while energy prices remain firm as OPEC+ signaled a pause in production increases, adding to inflation concerns. All of this feeds into S&P 500 valuations, which are sensitive to earnings expectations and monetary policy signals.

S&P 500 Technical Analysis: Bullish Structure Holds

The 4-hour chart for the S&P 500 shows that the index has been trading within an ascending channel pattern. It has found strong support at the 6,550 level, which triggered a sharp rebound. The key resistance level remains at 7,100. However, a break below 6,550 would invalidate the ascending channel and could lead to a deeper correction.

The daily chart for the S&P 500 shows a strong bullish structure in 2025. This structure is supported by the formation of an inverted head-and-shoulders pattern, with the head formed in April 2025. The index broke above the 6,000 level in June 2025, confirming the pattern. After the breakout, it has been trading in a positive trend and shows no apparent signs of a correction.

Final Thoughts

In short, the Trump trade war remains a wildcard. A favourable court ruling could lead to broader use of tariffs, putting pressure on corporate earnings and weighing on the S&P 500’s outlook. The market is riding a wave of optimism, but legal and political risks could quickly shift the tone.

On the other hand, the S&P 500 remains in a strong bullish structure, supported by technical patterns and recent market momentum. Short-term charts indicate that key support levels are holding, while long-term charts confirm an upward trend with no immediate signs of weakness. This supports the idea that investor sentiment remains intact despite policy risks.