Trump says stocks “want the tariffs” — but it might be Treasurys instead

The U.S. stock market often reacts sharply to political and economic news, and this week was no exception. President Donald Trump made headlines when he claimed that stocks “need tariffs” to perform well. His remarks came after a federal appeals court ruled that most of his tariffs were illegal — a decision that Trump has vowed to challenge in the Supreme Court.

But while Trump insists that tariffs are good for equities, history suggests otherwise. Instead, the real reaction may be happening in the Treasury bond market, where yields spiked on fears of declining tariff revenues and a rising U.S. deficit.

Trump’s Tariff Push and Court Battle

On Tuesday, just after Labor Day marked the unofficial end of summer in the U.S., Trump wasted no time returning to the spotlight. He announced that his administration would seek an “expedited ruling” from the Supreme Court to overturn the appeals court decision that struck down much of his tariff policy.

Trump argued that the court’s move directly hurt the stock market.

“The stock market’s down because of that, because the stock market needs the tariffs. They want the tariffs,” he said.

This statement highlights Trump’s ongoing belief that tariffs are not only a tool for trade negotiations but also a positive driver for U.S. financial markets.

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Do Stocks Really Want Tariffs?

Trump’s argument is controversial. Market data paints a different picture:

• April 2018 Shock: When Trump first unveiled his “reciprocal tariffs,” U.S. stocks tumbled, spooked by fears of a global trade war.

• Relief Rally: When tariff implementation was paused, equities surged, posting one of the strongest rallies in recent history.

• Investor Sentiment: Analysts note that tariffs tend to weigh on corporate profits by raising import costs and disrupting supply chains, which typically depresses equity valuations.

This makes it hard to accept Trump’s claim that “stocks want tariffs.” If anything, history shows that markets prefer stability and clarity, not trade barriers.

Treasurys: The Real Market Reaction

While equities showed skepticism, the Treasury bond market told another story. On Tuesday, the yield on the 30-year U.S. Treasury bond nearly touched 5%, its highest level in months.

Why the jump? Investors fear that if tariffs — a source of government revenue — are struck down, Washington will have an even harder time managing its fiscal deficit. With deficits already running high, lenders demanded greater returns for holding long-term U.S. debt.

In simple terms, Treasurys may be the real asset class “responding” to tariffs, not equities. Higher yields reflect both fiscal concerns and the expectation of persistent borrowing by the U.S. government.

Global Market Impact

Trump’s tariff battle did not just ripple through U.S. markets. Global stocks and bonds also reacted.

• U.S. Equities: Major indexes slipped Tuesday, with Big Tech stocks dragging the market lower.

• European Stocks: The Stoxx Europe 600 fell 1.5%, marking its worst single-day decline in a month.

• U.K. Bonds: British gilts saw yields rise to their highest in 27 years. The 30-year gilt yield jumped to 5.709%, while 2-year and 10-year yields also climbed.

• Currency Moves: The British pound fell 1.5% against the U.S. dollar, reflecting investor nervousness about political and economic uncertainty.

This highlights how trade and tariff policies can spark global reactions, not just domestic ones.

Key Corporate Developments

Beyond Trump’s tariff drama, markets digested several corporate headlines that added to the volatility.

Google Court Ruling

Google secured a win in court, as U.S. District Judge Amit Mehta ruled that Chrome could remain intact. However, the company cannot enforce exclusive preload contracts — meaning it cannot make Google Search the default on devices like Apple’s iPhone through restrictive deals.

Kraft Heinz to Split

Food giant Kraft Heinz announced it would split into two separate companies by 2026. The company, originally formed in a $46 billion merger, has struggled to meet growth expectations. Warren Buffett, whose Berkshire Hathaway played a key role in the merger, admitted he was “disappointed” with the outcome.

Tesla and Optimus

Tesla CEO Elon Musk made waves by declaring that most of Tesla’s future value would come from its humanoid robot Optimus, not cars. This comes as Tesla faces slowing sales and increased competition from rivals like Waymo and Baidu.

Nestlé Leadership Shift

Nestlé is undergoing a generational shift in leadership, appointing Philipp Navratil as its new CEO. While the company called it a “changing of the guard,” analysts voiced concerns about the abrupt transition.

Why Tariffs Matter for Investors

Tariffs may sound like a political tool, but for investors, they have direct consequences:

1. Impact on Corporate Earnings – Higher import costs can reduce profit margins.

2. Consumer Prices – Tariffs often lead to higher prices for everyday goods, affecting demand.

3. Government Revenues – Tariffs contribute to federal income, which can ease deficits.

4. Bond Market Effects – If tariff revenue declines, deficits widen, leading to higher Treasury yields.

This explains why Treasurys, not stocks, might be more sensitive to tariff changes.

Conclusion

Trump’s claim that “stocks want tariffs” may not align with market history. Equities have generally struggled under tariff pressure, while bonds — particularly Treasurys — reflect the fiscal reality of tariff revenues. With the U.S. deficit already large, the loss of tariff income has investors demanding higher returns, pushing long-term yields closer to 5%.

As global markets wobble and corporate headlines add to uncertainty, one thing is clear: tariffs remain a high-stakes issue not just in politics, but in markets worldwide.

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