Trump Trade War: Supreme Court Ruling Looms as S&P 500 Breaks Record Highs

President Trump’s tariff policy is getting its most important test as the U.S. Supreme Court considers the legality of his use of emergency powers to impose sweeping global duties. The result could ripple through presidency power over trade and lead to billions in possible refunds for US corporations.

At the same time, poor labor market statistics indicate a slowing economy despite financial market pressure to the upside. The disconnect between legal risk, economic softness and market optimism is getting more pronounced as S&P 500 breaks to fresh record highs. This article covers the legal challenge to Trump’s tariffs, the corporate and political response, the warning signs in the labor market and what this means for the bullish trend in S&P 500.

Supreme Court Reviews Trump’s Emergency Tariff Powers

President Trump’s sweeping tariffs are under the microscope. The U.S. Supreme Court is reviewing use of a 1977 emergency powers law to determine its constitutionality. This law was used by Trump as the excuse for global tariffs on important trade partners.

The court was to hand down a verdict last Friday. Instead it deferred the decision until Wednesday, January 14. Major retailers like Costco have filed lawsuits for refunds for import duties in case the tariffs are reversed.

Both conservative and liberal justices cast doubt on the legal basis of Trump’s actions. Their skepticism shows that the ruling may limit power of the executive on trade.

Corporate Pushback and Trump’s Defense

Businesses want their money back. Companies such as Costco claim that the tariffs were illegal. If the court agrees, massive refunds may have to be made by the U.S. government.

Treasury Secretary Scott Bessent admitted the possible cost. But he insisted the Treasury has enough money to do it. However he cast doubt on whether companies would pass on the refunds to consumers. He dubbed it a “corporate boondoggle.”

On the other hand Trump defended the tariffs aggressively. He said that they made the U.S. stronger and more respected.

Weak Job Data Underscores a Slowing Economy

Despite the legal fight economic data paints a worrying picture. The chart below illustrates that the U.S. only added 50,000 jobs in December. It was the eighth consecutive month of poor job growth.

On the other hand, the cyclical segments of the economy such as manufacturing, construction, and transportation lost more than 160,000 jobs since early 2025. These are industries that usually take lead in recession. These losses highlight the recession signals.

Moreover the average weekly hours fell to 34.2. Employers are also reducing temporary help services which is another indication that layoffs are coming. Even with the unemployment rate dropping to 4.4%, the job market is fragile.

S&P 500 Stays Bullish Despite Risks

S&P 500 continues to rally despite legal and economic uncertainty. The index broke above key resistance and is now making new highs. The daily chart for the S&P 500 shows that the index has been consolidating in an ascending broadening wedge pattern since July 2025.

The price formed an inverted head and shoulders pattern with a neckline at $6,900 and broke higher. This breakout is likely to take the index towards the $7,300 level. Similarly the 4-hour chart for the S&P 500 also indicates bullish price action before the breakout above $6,900. This bullish move indicates further upside in the S&P 500 in the short term.