A research note from BCA Research highlights the risks of a potential policy reset in U.S. trade and economic strategy if President Donald Trump resumes his tariff program beyond 2027, a period that could coincide with heightened political volatility ahead of the 2028 elections. Trump’s initial tariff rollout in April 2025—dubbed ‘Liberation Day’—triggered a 10.5% drop in the S&P 500 over two days, pushing it into correction territory, before a 90-day pause stabilized markets. The Supreme Court later struck down the tariffs in February 2026, citing an overreach under the International Emergency Economic Powers Act (IEEPA), though Washington has since circumvented that ruling through alternative legislative measures.
The analysis suggests Trump’s tariffs, if extended through 2027, could provoke greater global retaliation, particularly from China, given prior escalations. While Trump’s approval rating on economic management remains negative at 27%, independent voters still support tariffs at 17%. BCA analysts Matt Gertken, Yushu Ma, and Jesse Kuri caution that the next phase of tariffs could intensify market volatility, especially if China and other trading partners respond with retaliatory measures. The timing of these moves—during Trump’s final two years in office—also raises concerns about his ability to sustain aggressive policies without undermining his economic legacy or market outlook.
Analysts note that Trump’s initial tariff rollout was softened after market turbulence, and he is unlikely to raise tariffs to levels that could destabilize the bull market or economy in 2027–2028. Instead, they expect him to adjust rates as markets and Treasury yields react. However, the political landscape shifts significantly in 2028, with Democrats expected to gain control of Congress in the midterms, potentially reversing Trump-era trade policies. Democratic economic priorities favor sectors like homebuilding, green energy, and health equipment over healthcare and cyclical consumer goods, according to BCA’s projections.
The note also underscores that while election years historically see slightly weaker stock market returns, the current bull market has remained resilient. However, tactical volatility is anticipated around the November 2028 election, particularly if tariffs remain elevated. BCA’s data shows that when a single party controls both chambers of Congress post-midterms, market returns tend to outperform in the subsequent year, suggesting a potential rally if Democrats secure majority control.
The analysis concludes that investors should monitor Trump’s tariff strategy closely in the coming years, as its evolution could shape global trade dynamics and economic policy for years to come.
