Supreme Court Tariff Hearing: Prediction Markets Signal 30% Approval Probability as Trade Policy Uncertainty Grows

This analysis is based on the CNBC report [1] published on November 5, 2025, which documented a significant shift in prediction market sentiment following Supreme Court oral arguments on President Trump’s tariff authority.

The Supreme Court hearing on November 5, 2025, marked a critical juncture in the legal challenge to Trump’s sweeping tariff program. Prediction markets responded dramatically to the oral arguments, with Kalshi contracts showing the probability of Court approval slipping from nearly 50% to around 30% [1]. Polymarket showed a similar decline from over 40% to about 30% [2]. This 20-percentage-point drop represents a substantial shift in market expectations, particularly given that prediction markets have historically been accurate in forecasting Supreme Court outcomes when showing such decisive movements during oral arguments.

The legal challenge centers on whether Trump exceeded his authority under the International Emergency Economic Powers Act (IEEPA) to impose reciprocal tariffs on imports from many U.S. trading partners and fentanyl tariffs on products from Canada, China, and Mexico. Lower federal courts have already ruled that Congress, not the president, has the power to enact such tariffs [1][2]. During the hearing, both conservative and liberal justices expressed skepticism about the administration’s legal justification, questioning whether tariffs are “regulatory… not revenue-raising tariffs” as the administration argued [2].

Despite the negative sentiment in prediction markets, U.S. equity indices demonstrated remarkable resilience. The S&P 500 climbed 0.84% to 6,826.73, the NASDAQ Composite gained 1.13% to 23,622.84, the Dow Jones Industrial Average added 0.58% to 47,368.90, and the Russell 2000 surged 1.47% to 2,464.95 [0]. This positive performance suggests investors may have viewed the potential rejection of tariffs as beneficial for trade relations and corporate earnings, or that the outcome was already priced in.

Sector performance revealed clear patterns related to trade policy expectations. Energy stocks led with a 3.33% gain, while industrials rose 2.75% [0]. These trade-sensitive sectors would likely benefit most from reduced tariff barriers. Healthcare (+1.39%) and financial services (+1.30%) also performed strongly. In contrast, consumer defensive stocks (+0.18%), real estate (+0.13%), and basic materials (+0.28%) lagged behind [0].

: The sharp decline in approval probabilities from ~50% to ~30% following oral arguments is particularly significant because prediction markets have shown strong predictive power for Supreme Court outcomes. Such decisive movements during hearings often correlate with final rulings.

: The divergence between pessimistic prediction markets and optimistic equity markets suggests either that investors believe tariff rejection would be economically beneficial, or that the potential ruling was already priced in. The strong performance of trade-sensitive sectors (energy +3.33%, industrials +2.75%) supports the former interpretation.

: Individual stock responses varied significantly. Caterpillar (CAT) surged 3.91% to $569.00, potentially benefiting from reduced trade tensions, while Boeing (BA) declined 0.60% to $196.87 despite being a major exporter [0]. This suggests company-specific factors may be outweighing trade policy considerations for some stocks.

: The tariffs at stake are substantial, starting with a 10% baseline on many nations and reaching as high as 50% on goods from India and Brazil. These measures are estimated to generate $3 trillion in extra revenue for the U.S. over a decade [2], representing a significant fiscal consideration alongside the trade policy implications.

The analysis reveals several risk factors that warrant attention:

1. Extended Regulatory Uncertainty
   : The period between oral arguments and the Supreme Court’s final decision creates prolonged uncertainty for businesses engaged in international trade. Companies must plan for multiple scenarios without knowing the timeline for resolution.

2. Supply Chain Disruption Costs
   : Companies that have restructured supply chains around the current tariff regime may face significant transition costs if the Court strikes down the tariffs. These adjustments could impact profitability and operational efficiency.

3. Retaliatory Trade Measures
   : Major trading partners including China, the EU, Canada, and Mexico may implement their own trade measures regardless of the Supreme Court outcome, potentially escalating trade tensions.

4. Market Volatility Risk
   : The final ruling could trigger significant sector rotation and increased market volatility, particularly in trade-sensitive industries that have positioned themselves based on current tariff structures.

1. Trade-Sensitive Sector Benefits
   : Energy and industrial companies may benefit from reduced tariff barriers, with the sector performance on November 5 suggesting market anticipation of these benefits.

2. Supply Chain Flexibility Advantage
   : Companies maintaining flexible sourcing strategies may be better positioned to capitalize on whatever trade environment emerges from the ruling.

3. Strategic Planning Lead Time
   : The extended timeline before the Court’s decision provides businesses with an opportunity to develop comprehensive contingency plans for different outcomes.

The Supreme Court case represents a fundamental test of presidential power under IEEPA, which gives presidents authority to “deal with any unusual and extraordinary threat” to national security, foreign policy, or the economy [2]. The administration’s argument that tariffs are regulatory rather than revenue-raising faced sharp questioning from justices across the ideological spectrum.

For businesses and investors, the key considerations include monitoring the Supreme Court’s decision timeline, watching for any indications from individual justices about their thinking, tracking corporate guidance on trade policy impacts, and assessing international responses from major trading partners. Companies with significant international exposure should develop contingency plans for different ruling outcomes, while investors should monitor sector rotation patterns, particularly in trade-sensitive industries.

The $3 trillion in potential tariff revenue over a decade [2] underscores the significant economic stakes involved, making this ruling potentially one of the most consequential Supreme Court decisions for U.S. trade policy in recent history.