The U.S. Supreme Court is set to rule this week on Trump's comprehensive tariff policy launched last April. The opening of this judicial door could cause significant tremors in both the U.S. stock market and U.S. bonds.

Let's review the current market situation. The recent surge in U.S. stocks has been very strong, with the S&P 500 reaching a new all-time high, up about 40% from the lows in April. Behind this rally are two main factors: one is the AI boom fueling optimism, and the other is the market’s expectation that Trump will decide to reduce some of the strict tariffs. Meanwhile, traders are betting that the Federal Reserve will continue to cut interest rates during an economic slowdown, causing U.S. Treasury yields to fall significantly from their mid-2025 highs.

But here’s the question: what if the Supreme Court rules that Trump’s global tariff policy oversteps its authority? That would be problematic. The White House might seek other legal grounds to reintroduce similar tax measures, which means long-term uncertainty has not truly dissipated.

From a market perspective, the immediate reaction is actually predictable: if the court abolishes the tariffs, corporate profit margins could improve, consumer burdens would ease, and the stock market would naturally benefit. However, caution is needed on the bond side—if tariffs are abolished, it could stimulate the economy, complicating the Fed’s rate-cut plans, and potentially increasing government budget deficits, putting pressure on the bond market.

Wall Street might get an answer as soon as this week. The Supreme Court has designated Friday as the opinion release day, which is not only the last chance this week but also marks that a critical window has opened. Wells Fargo Chief Equity Strategist Ohsung Kwon has previously predicted potential market reactions.