A Supreme Court ruling that strikes down Trump’s tariffs would be the fastest way to revive the stalling job market, top economist says

Moody’s Analytics chief economist Mark Zandi warns U.S. labor market is stagnating and attributes large part of the weakness to President Trump’s tariffs, citing payrolls up just 50,000 in December and a 2025 net gain of only 584,000 jobs versus 2 million in 2024; unemployment stands at 4.4%. Trade-exposed sectors have fallen sharply — manufacturing has lost roughly 70,000 jobs since April and tens of thousands more were shed in mining, logging and warehousing — and Zandi argues a Supreme Court ruling that invalidates IEEPA-based reciprocal tariffs could materially ease hiring, though other tariff authorities and partial rollbacks complicate the outlook.

Analysis

Market structure: Tariff uncertainty has directly punished manufacturing, transportation/warehousing and mining (manufacturing down ~70k since April) while concentrating hiring in health/social services; import-dependent retailers and logistics providers see margin squeeze and lower hiring. If the Supreme Court strikes down IEEPA tariffs, expect a rapid re-pricing of domestic cyclicals (industrial ETF XLI and railroads) as input-cost uncertainty drops, but gains will be paced by hiring lags of 6–12 months and ongoing alternative tariff routes.

Risk assessment: Immediate catalyst is the Supreme Court ruling (days); short-term (weeks) will be volatility spikes and positioning flows; medium-term (quarters) is whether alternate statutes or new tariffs are introduced (30–90 days) — a tail risk is the Court upholding IEEPA which could trigger a 8–15% hit to cyclicals and a rotation into commodities and defensive sectors. Hidden dependency: hiring decisions are more correlated with trade-policy clarity than near-term demand signals, so sentiment shifts may overshoot fundamentals.

Trade implications: Tactical trades should be conditional on the ruling — favor 2–3% pro-cyclical exposure (XLI, UNP, IYT) on a strike-down, with 3-month call option overlays to capture rapid moves; if upheld, rotate into commodities (steel/agriculture) and long-duration Treasuries as disinflation/lower growth dichotomy forms. Use pair trades (railroad long vs air-freight/express short) to isolate trade-policy beta and hedge broader market moves.

Contrarian angles: Consensus treats a Court win as binary relief, but administrations can re-route tariffs under other statutes and negotiate selective rollbacks — historical parallel: 2018–19 trade shock rallies faded as supply-chain rebuild takes 6–12 months. Therefore stagger entries, expect a 20–40 bps swing in 10y yields on decisive news, and avoid full conviction until 30–90 days of implementing guidance from Treasury/Commerce.

Key Decisions for Investors

• Establish a 2.5% long position in XLI within 48 hours if the Supreme Court strikes down IEEPA tariffs; target +12–18% in 3–9 months, set a hard stop at -7% to limit policy reversal risk.
• Purchase UNP 3-month at-the-money calls sized to 1% of portfolio as a leveraged play on domestic freight re-acceleration; take profits at +50% or roll if implied volatility collapses after initial 10–20% move.
• Implement a pair trade: long UNP (1% capital) / short FDX (1% capital) to capture relative relief for rail vs international air freight on a tariff rollback; rebalance after 4–8 weeks or when the spread moves >5%.
• Prepare a contingent hedge: if the Court upholds tariffs, rotate 2% of portfolio into TLT (or 10y futures) and 1–2% into steel/agri commodity exposure (SLX, DBA) within 3 trading days; execute if 10y yield rises >15 bps intraday or if administration signals new non-IEEPA tariffs within 30 days.