Gardner Analysis: Trump Tariff Case Market Mispricing and Small Business Risk

This analysis is based on the CNBC interview [1] published on November 4, 2025, featuring Brian Gardner, Chief Washington Policy Strategist at Stifel, discussing prediction market mispricing of Trump’s tariff case and implications for smaller businesses.

Brian Gardner’s assessment highlights a significant discrepancy between prediction market pricing and his analysis of Trump’s Supreme Court tariff case prospects. According to Polymarket data [2], prediction markets show only a 39% probability that the Supreme Court will rule in favor of Trump’s tariffs, which Gardner considers an undervaluation. This case, scheduled for oral arguments on November 5, 2025, involves Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping global tariffs with enormous economic and constitutional implications [1].

The market reaction on November 4, 2025, reflects investor uncertainty about this high-stakes case. Major indices showed modest declines: S&P 500 (-0.44%), NASDAQ Composite (-0.49%), Dow Jones (-0.76%), and Russell 2000 (-0.40%) [0]. More telling is the sector rotation pattern, with defensive sectors outperforming significantly: Consumer Defensive (+1.39%), Healthcare (+0.43%), and Consumer Cyclical (+0.27%), while Communication Services (-2.97%), Basic Materials (-2.05%), and Technology (-0.74%) underperformed [0]. This defensive positioning suggests investors are bracing for potential downside risk from the tariff ruling.

The economic stakes are substantial. Treasury data indicates IEEPA tariffs have contributed $118 billion to net customs receipts in fiscal 2025, helping offset rising government spending [3]. Yale’s Budget Lab estimates tariffs could generate approximately $2.2 trillion over 10 years, with a Supreme Court ruling against Trump potentially cutting that figure in half [3]. Gardner’s warning about smaller firms struggling under sustained tariffs aligns with real-world impacts, as companies like OTC Industrial Technologies have reported supply chain disruptions and increased costs [3].

The legal framework presents complex dynamics. The case tests the “major questions doctrine” established in recent Supreme Court decisions including West Virginia v. EPA (2022) and Biden v. Nebraska (2023) [2]. Lower courts have consistently ruled that Trump exceeded IEEPA authority, with the Federal Circuit describing the tariffs as both “unheralded” and “transformative” [2]. However, conservative justices may face tension between supporting Trump’s agenda and maintaining traditional congressional authority over taxation.

A critical insight emerges from the refund process implications. If the Court rules against Trump, the refund process for tariff collections would be “unprecedented at this scale” and could take years, creating severe cash flow challenges for smaller importers [3]. Academic studies show importers have largely absorbed tariff costs, reducing profit margins while limiting consumer price increases [3], suggesting small businesses bear disproportionate burdens.

The federal budget has become “addicted to tariff revenue,” making it harder for future administrations to reduce duties regardless of court outcome [3]. This creates structural economic dependencies that extend beyond the immediate legal question, potentially influencing long-term trade policy regardless of the ruling.

1. Constitutional Crisis Risk
   : A ruling against Trump could trigger constitutional confrontation over executive authority, potentially affecting broader policy areas beyond trade [2].

2. Revenue Dependency Risk
   : The federal budget’s reliance on tariff revenue creates structural constraints on future trade policy flexibility [3].

3. Supply Chain Disruption Risk
   : Companies that have adapted to current tariff structures may face significant costs if forced to rapidly reconfigure supply chains [3].

4. Small Business Vulnerability
   : Extended refund processes and cash flow challenges could disproportionately impact smaller importers and manufacturers [3].

1. Prediction Market Arbitrage
   : Gardner’s assessment suggests potential mispricing in prediction markets for those who share his analysis [1, 2].

2. Defensive Sector Positioning
   : Current market rotation toward defensive sectors may provide opportunities for risk management [0].

3. Supply Chain Resilience
   : Companies with flexible supply chains may benefit from uncertainty resolution regardless of outcome.

• Justice questioning patterns during November 5 oral arguments
• Treasury contingency plans for replacing IEEPA tariff revenue
• International trade partner reactions and potential retaliation scenarios
• Option market implied volatility leading up to and following the decision
• Small business indicators including surveys and bankruptcy filings

The Supreme Court decision timeline creates extended uncertainty windows: oral arguments on November 5, 2025, with a likely decision by June 2026, though any ruling would take effect immediately [2]. The case represents a fundamental test of executive power boundaries with $2.2 trillion in potential revenue implications over 10 years [3].

Current market positioning reflects defensive sentiment, with Consumer Defensive stocks significantly outperforming while technology and communication services lag [0]. Gardner’s analysis suggests prediction markets may be undervaluing Trump’s chances at 39% probability, creating potential information asymmetry for market participants [1, 2].

The refund process complexity presents particular challenges for smaller businesses, with academic evidence showing importers have absorbed most tariff costs through reduced profit margins rather than passing costs to consumers [3]. This dynamic suggests small business vulnerability may be underestimated in current market pricing.