Trump Defends Tariffs as Markets Signal Fed Caution

President Donald Trump has renewed his defense of tariffs, arguing they are generating “great wealth” for the United States and strengthening both the economy and national security. In a recent post on Truth Social, Trump claimed that tariffs have helped reduce the trade deficit, boost economic growth, and support confidence without creating inflationary pressure. He also framed tariffs as a tool that has restored global respect for the U.S. and reinforced its strategic position.

Trump’s comments come at a time when economic policy expectations continue to shape market sentiment. Reports suggest the U.S. government is exploring updates to the existing Trump-era tariff framework, reinforcing the former president’s view that trade policy remains a central economic lever. From Trump’s perspective, rising growth and renewed confidence signal that tariffs are working as intended.

Market data, however, reflects a more cautious outlook. Polymarket odds tied to the Federal Reserve’s January 2026 meeting show only a 14% chance of a rate cut, while traders assign roughly an 85% probability that interest rates will remain unchanged. Expectations for deeper cuts remain minimal, highlighting investor concern about inflation risks and broader economic uncertainty rather than optimism about rapid easing.

This contrast between political messaging and market expectations is notable. While Trump emphasizes economic strength and policy success, traders appear focused on the likelihood that borrowing costs will stay elevated for longer. Similar dynamics were seen earlier when crypto markets rallied after Trump floated the idea of a $2,000 tariff-funded dividend for eligible Americans, underscoring how policy signals can drive short-term market reactions.

Adding another layer of uncertainty, recent reports indicate the White House is preparing contingency plans in case the Supreme Court rules against the administration’s authority to impose certain tariffs. Legal challenges have already led Polymarket traders to sharply reduce the odds of a favorable ruling for Trump, contributing to renewed volatility and a Bitcoin rally driven by uncertainty.

Overall, while Trump remains confident that tariffs are fueling growth and stability, market sentiment suggests investors remain wary, balancing inflation concerns, legal risks, and expectations that financial conditions will stay tight in the near term.