President Donald Trump is addicted to policies that create serious risks for the American economy. He thought he could goose growth with $1 trillion in tax cuts for wealthy Americans and pots of money for defense and homeland security, use preemptory tariffs to control deficits and interest rates by generating billions in revenue, and intimidate countries into investing trillions in the United States.
But tariffs were the most important element of his economic program—and last week, the Supreme Court blew it up.
The Court’s ruling invalidated about half of those tariffs and their revenues, specifically those applied to trading partners who haven’t cut a deal with Trump, including Canada, Mexico, Brazil, Thailand, and Israel. So, it punctured his fantasy that tariff revenues would contain budget deficits, lower long-term interest rates, and bolster growth. Following his rebuke from the Court, including two of the three justices he appointed, the president has threatened to impose new, 15 percent worldwide tariffs under Section 122 for 150 days, as the law allows. But those revenues will be considerably less and temporary, increasing the pressure on interest rates as the deficit swells.
The other half of Trump’s original tariffs involves countries that cut deals superseding those tariffs, including South Korea, China, India, Great Britain, and the countries of the European Union (EU). Even so, the Court’s ruling tacitly upended those deals. Trump’s tariffs were a gun pointed at those countries’ heads during negotiations. Now these mammoth trading partners know it was loaded with blanks, so their commitments to invest trillions of dollars more than they otherwise would have are unlikely to come to fruition—and already, the EU has hit pause on implementing its deal.
So, the Court’s ruling also punctures Trump’s fantasy that an investment boom fueled by foreign companies will keep the economy humming. “We’re the hottest country in the world,” he plaintively keeps insisting, citing ever larger claims of foreign investment.
The Supreme Court’s evisceration of Trump’s tariffs comes amid a stream of discouraging economic news. Last Friday, the Bureau of Economic Analysis (BEA) reported that GDP grew at an anemic 1.4 percent in the final quarter of 2025 and 2.2 percent for the year, compared with 2.8 percent in 2024. And the Bureau of Labor Statistics had already reported that job growth slumped from 1,460,000 in 2024 to 181,000 in 2025.
The BEA data also show that real disposable income was flat through the second half of 2025, and the agency’s favored gauge for inflation, the personal expenditure index or PCE, rose steadily since the second quarter of last year, when Trump imposed his tariffs.
Pull it all together, and the ruling’s impact on revenues, deficits, and interest rates, along with steadily rising inflation, weakening job growth, and flat disposable incomes, has almost certainly punctured any fantasy Republicans had that a strong economy would stave off big losses in the midterm elections.
Trump could undo some of the damage by graciously accepting the Court’s decision—I know how ludicrous that sounds—and returning the tariff revenues to the companies that paid them. The claim that refunding the payments would be a Herculean task, a White House canard echoed by Justice Brett Kavanaugh, is nonsense. The Treasury issues nearly 100 million tax refunds annually without fuss, including millions to companies. And the data required to refund tariff payments is easily available, since every company that pays a tariff declares it as a business expense or “cost of goods” in its tax filings.
To be sure, likely, American consumers would never see much of it. But the refunds would flow into the economy through purchases and investments by the businesses and their shareholders.
Beyond the myriad ways that Trump’s signature initiatives weaken growth and make life less affordable, the tariffs continue to upend the global trading system we established after World War II as the world’s dominant economic and military power. Unsurprisingly, our design has always favored us. As Japan, East Asia, Germany, and now China have become economic powers over the past 80 years, the United States has remained the world’s largest trading power. In 2024, U.S. imports and exports totaled $7.36 trillion, still $150 billion more than China’s total trade.
Our enormous trade flows rest on a complex, organic network of interdependencies, managed by the rules and operations of hundreds of multilateral and bilateral agreements, all bearing our fingerprints. And those agreements involve not only trade, but also investment flows, taxation, banking, regulation, government financing, and economic innovation through intellectual property protections. Our economy’s long-term growth and stability, and the tacit assumptions most of us make about the security of our material lives, depend on our multifaceted economic interrelationships with the rest of the world.
Trump’s reckless tariff war against the world has breached hundreds of agreements with our partners and rivals and threatens to unravel the system. The Supreme Court offered him the opportunity to restore global faith that the United States will stand behind its commitments. But that’s not how Donald Trump rolls. Heedless or ignorant of the risks, he has chosen to raise the stakes, doubling down on tariffs. Over time, we will all pay the price.
