Moody's Zandi: Midterm Elections May Deter Trump from Tariff Reimposition Amid SCOTUS Review and Weak Jobs Market

The backdrop for Mark Zandi’s assessment is the Supreme Court’s pending decision on the legality of President Trump’s tariff authority under the International Emergency Economic Powers Act. As of January 14, 2026, the Court did not issue its ruling on what has been characterized as a landmark case that could reshape executive trade power, with expectations that a decision may arrive as early as next week’s opinion days [1][2]. Zandi’s core thesis posits that the political cost-benefit analysis shifts meaningfully when midterm elections enter the frame—if the Court strikes down the tariffs, Trump faces a strategic dilemma between legal defiance and voter backlash on affordability issues that have already demonstrably impacted labor market conditions [1].

The political deterrence mechanism Zandi describes operates through several interconnected channels. First, voter sentiment data consistently identifies economic affordability—including housing costs, household necessities, and general price levels—as a paramount concern heading into the midterm cycle [7]. Second, Zandi has documented the empirical relationship between tariff implementation and employment stagnation, noting that “there has been no job growth since Liberation Day last April” following the initial tariff announcements [3]. This creates a feedback loop where tariff reimposition risks compounding economic weakness at precisely the moment electoral accountability becomes operative. The administration’s own policy commitments, including the promised $2,000 “tariff dividend” checks targeted for mid-2026 delivery, further complicate the political arithmetic by creating expectations that legal setbacks could imperil [8].

Zandi’s emphasis on the weak jobs market as justification for continued Federal Reserve easing reflects a broader debate about the trajectory of monetary policy in 2026. While the unemployment rate declined modestly to 4.4% in December 2025, underlying labor market indicators suggest continued fragility, with hiring remaining modest despite aggregate headline improvements [4]. This assessment places Zandi in the camp of economists who believe the neutral rate of interest remains above current policy settings, necessitating further accommodation to support employment stabilization.

However, this view is not universally shared among market participants. JPMorgan’s economic team has articulated a contrary position, expecting the Fed to hold rates steady through 2026 rather than continuing its easing cycle [5]. The median Federal Reserve projections currently show only 25 basis points of easing anticipated for 2026, reflecting a more measured approach to policy normalization than market participants had previously priced in [6]. This divergence between market expectations, Fed guidance, and private sector forecasts introduces significant uncertainty into the rate trajectory and, by extension, the economic planning environment for businesses and investors.

The tension between the Trump administration’s apparent preference for a fed funds rate near 1% and Federal Reserve officials’ assessment of the neutral rate around 3.4% represents a nontrivial source of policy friction [6]. While Fed Chair Jerome Powell has demonstrated what some observers characterize as “defiant independence” in resisting political pressure, the macroeconomic stakes of achieving the right policy stance remain substantial, particularly given the lagged transmission of monetary policy decisions to real economic outcomes [4].

The Supreme Court’s anticipated ruling carries implications extending well beyond the immediate legal question of executive authority. Businesses engaged in international trade have operated under conditions of heightened planning uncertainty as the tariff regime’s legal status remains unresolved. The range of potential outcomes—from complete judicial endorsement of broad emergency tariff powers to categorical rejection of the administration’s legal theory—creates a wide variance cone for strategic planning purposes.

Market participants have priced significant probability mass into various ruling scenarios, with anticipation that a favorable outcome for the administration could trigger substantial equity market gains, while an adverse ruling might prompt meaningful repricing across multiple asset classes [3]. The video interview’s publication timing, coinciding with the January 14 SCOTUS opinion day, underscores the real-time nature of this uncertainty and the premium placed on timely analysis of emerging developments.

The Zandi analysis illuminates several cross-cutting dynamics that merit sustained attention. The interaction between judicial review, executive policy authority, and electoral incentives creates a multi-dimensional strategic environment where legal outcomes acquire immediate political salience. Should SCOTUS rule against the administration, Trump’s response—whether to defy the Court, accept the ruling, or seek alternative statutory authority—will be scrutinized through both legal and electoral lenses, with midterm implications likely weighing heavily in the calculus.

The labor market data cited by Zandi provides empirical grounding for the argument that tariff-induced trade disruptions have had measurable real economic costs. The absence of net job growth since April 2025 suggests that the " Liberation Day" tariff announcements and subsequent implementation created sufficient economic uncertainty and input cost pressure to offset any employment benefits from protective trade measures. This finding, if sustained in subsequent data releases, complicates the normative case for tariff-based industrial policy and underscores the trade-offs inherent in trade restriction approaches.

The monetary policy debate highlighted by Zandi’s comments reflects deeper uncertainty about the neutral rate and the appropriate stance of policy given mixed incoming data. With inflation having shown moderation in recent months—December 2025 CPI data revealed nuanced patterns across categories that merit careful parsing—the case for continued easing finds some support in price dynamics even as labor market indicators present a more complex picture [7]. The Fed’s challenge lies in calibrating policy to support maximum employment while ensuring that inflation remains durably anchored at target.

: Until SCOTUS issues its ruling, tariff policy remains in legal limbo, creating operational challenges for businesses with international supply chains or customer relationships. Companies should maintain scenario planning capabilities for multiple outcomes and avoid over-committing to assumptions about the ruling’s direction or timing.

: The anticipated SCOTUS decision carries significant event risk for financial markets. Historical precedent suggests that major Supreme Court rulings on economically consequential issues can trigger substantial short-term price movements, potentially in both directions depending on the specific holding and market interpretation.

: The gap between the administration’s apparent policy preferences (lower rates, tariff-based trade policy) and independent institutional assessments (Fed’s neutral rate estimates, judicial review of executive authority) may create periods of uncertainty and potential friction. Market participants should monitor communications from all relevant policy institutions for signals about the resolution of these tensions.

: The affordability concerns that Zandi identifies as politically salient also represent real economic headwinds for household spending power. Continued attention to consumer price indices, wage growth dynamics, and household balance sheet conditions remains warranted given their implications for both economic growth and electoral outcomes.

: Regardless of the Supreme Court’s ultimate holding, the ruling will provide valuable clarity that enables more confident business planning. Companies that have maintained flexible postures and contingency plans will be positioned to adapt more effectively to the post-ruling environment.

: For investors and businesses sensitive to interest rate movements, the ongoing debate about appropriate Fed policy stance creates information gathering opportunities. Monitoring FOMC communications, dissenting views, and incoming economic data will enable more informed positioning as the policy path becomes clearer.

: The midterm elections introduce a political economy dynamic that may constrain or reshape policy approaches. Tracking voter sentiment, polling on economic issues, and campaign messaging will provide signals about the political constraints facing incumbent policymakers.

This analysis synthesizes Mark Zandi’s January 14, 2026 commentary on the intersection of tariff policy, political timing, and monetary policy, contextualized within the broader landscape of Supreme Court deliberation and labor market conditions. Zandi, as Chief Economist at Moody’s Analytics, offers the assessment that midterm electoral considerations may deter President Trump from reimposing tariffs should the Supreme Court rule them illegal, on the theory that affordability concerns affecting voters would outweigh policy preferences. The analysis is grounded in observed labor market weakness, with Zandi noting the absence of net job growth since April 2025’s tariff announcements, which supports his view that the Federal Reserve should continue monetary easing through 2026. The Supreme Court did not issue its anticipated ruling on January 14, 2026, leaving markets and economic planners awaiting a decision expected in the coming week. The analysis draws on multiple news sources for verification of context, including coverage of SCOTUS activities, Fed policy debates, and economic data releases.

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[0] Ginlix Analytical Database – Market data, technical indicators, and analyst synthesis

[1] Bloomberg – “Supreme Court Does Not Rule on Trump’s Tariffs on Wednesday” (https://www.bloomberg.com/news/articles/2026-01-14/supreme-court-doesn-t-rule-on-trump-s-tariffs-on-wednesday)

[2] Yahoo Finance – “Trump says we’re screwed if Supreme Court rules against his tariffs” (https://finance.yahoo.com/news/live/trump-tariffs-live-updates-trump-says-were-screwed-if-supreme-court-rules-against-his-tariffs-152657650.html)

[3] Nasdaq/The Motley Fool – “The Stock Market Will Soar on Wednesday If This Happens” (https://www.nasdaq.com/articles/prediction-stock-market-will-soar-wednesday-if-happens)

[4] Yahoo Finance/Los Angeles Times – “Defiant independence from the Federal Reserve catches Trump off guard” (https://finance.yahoo.com/news/defiant-independence-federal-catches-trump-222644654.html)

[5] New York Post – “JPMorgan makes prediction on potential Federal Reserve interest rate cuts in 2026” (https://nypost.com/2026/01/14/real-estate/jpmorgan-makes-prediction-on-potential-federal-reserve-interest-rate-cuts-in-2026/)

[6] Scotsman Guide – “Wall Street dials back rate-cut predictions with Fed independence under fire” (https://www.scotsmanguide.com/news/wall-street-dials-back-rate-cut-predictions-with-fed-independence-under-fire/)

[7] CNBC – “Here’s the inflation breakdown for December 2025” (https://www.cnbc.com/2026/01/13/cpi-inflation-december-2025-breakdown.html)

[8] AOL Finance – “Trump Now Says $2000 Checks Are Coming by Mid-2026” (https://www.aol.com/finance/trump-now-says-2-000-125505938.html)