Will the Bond Market be the Supreme Court’s Enforcement Tool in any Showdown with Trump?

Democratic political strategist James Carville is famous for many things but perhaps nothing tops his statement about the bond market: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope [may Pope Francis rest in peace] or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.”

That statement comes to mind against the recent backdrop of the unprecedented tanking of the market for US Treasury bonds market during the recent stock market selloff. Up to now, when stocks go south, investors have flocked to Treasuries as a safe haven, especially when recessions loom, as one does now, driven by the costs and uncertainties of Trump’s tariff war. But this historic pattern between stock and bond prices has not held up during the past few weeks: even as stocks have generally declined (with some dead cat bounces along the way), investors have been running from bonds, sending their prices down and interest rates up. It has been widely reported that the bond market’s unusual gyrations were the main reasons why Trump put a 90 day pause on implementing his reciprocal tariffs (though leaving his 10% across-the-board tariff and other previously announced tariffs in place). And both stock and bond prices, along with the foreign exchange value of dollar, have been gyrating wildly this week so far (it’s only mid-day April 22 as I write this) over Trump’s threats to sack Fed Chair Powell.

Might the bond market, or the fear of what it could do, also play a major role in Trump’s showdowns with the Supreme Court? The first test is likely to be how the Supreme Court handles the Administration’s likely appeal of the 4^th Circuit’s decision last week affirming a lower court ruling implementing the Supreme Court’s order that the Administration “facilitate” the return of Kilmar Abrego-Garcia to the U.S. so that he can challenge the Administration’s deportation of him. In a highly unusual opinion, especially coming from a such a highly respected conservative jurist, Judge Harvie Wilkinson found the Administration’s foot dragging about bringing Abrego-Garcia back to the US to receive his constitutionally protected due process rights to be “shocking.” https://storage.courtlistener.com/recap/gov.uscourts.ca4.178400/gov.uscourts.ca4.178400.8.0.pdf. Even if the Administration does not appeal the 4^th Circuit’s ruling in this case, it likely will have opportunities in numerous other cases – not just in the other deportation matters now in the federal judicial system, but in other cases (those relating to the Executive’s authority over spending, the lawfulness of the Administration’s agency shutdowns, its legal authority to impose tariffs unilaterally, and on and on) – to test the breadth of Executive Power before the Court.

In all these cases, one question looms above all: Will Trump at some point ignore one or more Supreme Court rulings? Up to now, I had been assuming that the only enforcement tool the Court had at its disposal would be to cite Trump officials (but not Trump himself, given the Court’s presidential immunity decision) for contempt of court, and delegate prosecution of such an order to an “independent” prosecutor (since AG Pam Bondi could be one of the individuals, among many, cited for contempt). But all prosecutors, even those appointed by a court, must still report to DOJ. Likewise, if the Court ordered prosecution for criminal contempt, and assuming a conviction followed, the Court would have to rely on the US Marshall’s Service to arrest the convicted individual(s). But guess who the US Marshalls report to you? You guessed it: DOJ. And if all else fails for Trump, he can always pardon anyone charged with contempt. Seems like the Court is toothless….with no means of “forcing” a recalcitrant President to obey its rulings.

But wait. I was reminded over the weekend by a close friend and law school classmate that if Trump were to thumb his nose at any Supreme Court ruling, his doing so could trigger another, potentially even more devastating meltdown in the bond (and stock) markets. It’s far from a crazy worry. Foreign investors (not just in US Treasuries but in all kinds of other US assets) up to now have assumed that the US is bound by the rule of law, and no individual is above it. A constitutional crisis triggered by a refusal by a President to obey a Supreme Court decision, even more so than the Administration’s upsetting of the global economic order thus far, could really send foreign investors (and maybe many domestic ones too) over the edge. https://www.reuters.com/breakingviews/defiance-us-supreme-court-is-tricky-price-2025-04-17.

At a minimum, presidential non-compliance would reduce or eliminate the “safe harbor premium” US bonds and other assets command because of the soundness of its legal system. https://budgetlab.yale.edu/sites/default/files/2024-05/The%20Budget%20Lab%20Safe%20Harbor%20Analysis%202024_0.pdf. Relatedly, a constitutional crisis here would create the kind of political instability that historically has substantially reduced GDP in other countries and at other times where it has occurred. https://www.imf.org/external/pubs/ft/wp/2011/wp1112.pdf.

A Trump refusal to obey a Supreme Court ruling, if that were to happen in the near term, could not come at a worse time. The US is facing the need to refinance 1/3 of its Treasury debt over the next 12 months. https://www.jec.senate.gov/public/vendor/_accounts/JEC-R/debt/mdu/Monthly%20Debt%20Update%20February%202025.pdf. A refusal by foreign investors to purchase the new US debt, except at sharply higher interest rates, not only would send the US economy into recession, but could trigger a larger, global financial crisis not seen since the pandemic, or the 2008 financial crisis. And for this reason, the bond market’s reaction to any Trump defiance of the Court could be the one thing that could change his mind.

Of course, the Supreme Court itself could try to circumvent the need to rely on the bond market as an enforcement tool in some settings, thus avoiding a showdown between itself and any President. The Court could do this by overruling its 1935 decision in Humphry’s Executor v. United States, which sharply limited the President’s ability to remove any member of an independent commission – in that case, the FTC. Two cases now before the Court, involving President’s recent removal of members of the National Labor Relations Board and the Merit Protection Board, raise the prospect that the Court will overrule Humphrey’s Executor. Or the Court could limit any cutback of Humphrey’s Executor to certain agencies and retain its holding of independence for members of the Fed and the FCC. To do otherwise could put our economy and democracy at risk, as my long-time friend and occasional co-author, Simon Lazarus, has recently highlighted. https://newrepublic.com/article/193836/supreme-court-crash-economy-nlrb. For these reasons, Lazarus argues, persuasively in my view, that the high Court will blink from subjecting Fed and FCC members to the whims of any president. If that is the case, then the bond market will have succeeded in imposing its discipline in another way, by influencing the outcome of a Court decision itself.

Whatever happens with the various cases before the Court and whatever Trump decides to do about complying with the Court’s rulings, can you imagine the Founder’s (let alone James Carville’s) surprise about the notion that the bond market may be the Court’s sole effective means of enforcing its decisions against a President? The US bond market didn’t exist in 1787! It’s a crazy situation where the bond market today may be even more powerful a political force than when Carville wrote about it, but then why is it any crazier than many of the things that have happened so far in Trump’s less than first 100 days in office?