President Trump has never let political norms, legal challenges, or media slow him down. With a Republican-controlled Congress backing everything that he does and a judiciary which is in his favor making laws, he has more freedom than ever to govern on his own terms. But, even though he has a lot of political dominance, one force remains beyond his control—the financial markets.
Markets don’t argue with anyone and they don’t make deals. They just react. And when Trump makes choices that is a threat to economic stability, investors react fast and severity that even he can't ignore them.
Last Thursday, Trump started his tariff war again. And this time he says that Canadian and Mexican gets a %25 on imports, because he claims that they had failed to curb drug trafficking. Few hours later, he puts 10% more tariff on Chinese goods too, making trade tension worse that had already rattled global supply chain. What happened to markets was swift. The S&P 500 fell to 1.6%, losing all its gains it made for the year. The NASDAQ dropped 2.8%, and this made it go down to almost 4% in 2025. Investors who were excited when Trump got back to the White House are now facing the volatility that defined his first term.
Every time he uses his executive power against other countries for trade, it triggers market instability. Same thing happened in February when he signed three executive orders to implement tariffs. Stocks went down real bad the next morning and he had to take back what he said days later.The market was simply telling him No and despite his tough rhetoric, Trump backed off.
The Market as the Final Guardrail
Normal ways to keep executives in check don't work so good under Trump’s leadership. The media can't change what people think anymore because many of Trump’s supporters say that most reporting is biased. Congressional opposition can't stop him because his party always agrees with him . Even the courts, which was once used to keep the presidential power in check , now mostly rules in his favor.
But market don't care about political loyalty. Investors use their brain not feeling and they make choices based on numbers, risk and returns.
Trump’s time being president is more connected to stock market than any other President in modern history. Since his first term, he used the Dow Jones and S&P 500 as personal scorecards and he takes credit when they go up and scrambling to deflect blame when they go down. His need to make himself look as the architect of economic success ties him directly to market performance. When Wall Street pushes back, he listens and this is not because politics say so but because his legacy depends on it
History Repeats on Wall Street
The current wave of market instability reflects what happened during Trump’s first term. In 2018, when he decided to impose 25% tariffs on Chinese imports it resulted to a steep market decline with the S&P 500 losing almost 5% in just one week. By 2019, the trade war got worse sending shockwaves through world markets. But when the economic toll got too big to ignore, Trump softened his stance and signed a trade agreement with China in early 2020.
It is happening again now. Despite initial market excitement after Trump won the election again, the cracks in investors confidence are becoming more visible. Bitcoin, which went up after election, now dropped 20% from its highest point showing a lot of people uncertainty about what Trump is doing with economic policies.
Moody’s chief economist Mark Zandi recently said that Trump changed his mind during the first trade war because of financial pressure. When market lose too much, he adjusts his strategy. The same thing is happening again now.
Wall Street’s Influence Over Trump
Even though he acts like an outsider, Trump has always been connected to Wall Street. He grew up in Queens, New York and he spent years vying for approval from Manhattan’s financial elite. But, now he hangs out with billionaires, hedge fund managers and corporate executives who tells him what to think about the economics.
This connection was clear in December when Trump rang the bell to open New York Stock Exchange, standing proudly in front of his 2024 Time "Person of the Year" cover. It was a symbolic moment a businessman-president coming back to the heart of American finance. But behind all the show, Wall Street is still the one institution that can put him into course correction when the economic consequences become too bad.
The Bond Market as a Greater Threat
Stock market reactions often capture headlines but the real financial check on Trump is in the bond market. The $36 trillion U.S. national debt requires new loans and bond investors who lend money to the government prioritize stability over politics.
Global markets showed how fast bond investors can punish economic mismanagement. In 2022, British Prime Minister Liz Truss introduced a bold tax-cutting plan without a clear financial plan. Bond market’s reaction was fast and mean. UK bond prices crashed down, yields went way up and the British pound hit worse ever low point. The financial panic made the Bank of England to intervene three times to stabilize the market. In few weeks, Truss gave up her plan and resigned.
American might not have exactly same scenario but the idea remains the same. If Trump’s policies make government borrow too much or cause financial instability, bond yields will go up fast, making borrowing more expensive across the economy. Mortgage rates, corporate debt and even Treasury securities could become more expensive. This can results to an economic pressure that even Trump can't ignore.
The Economy Trump Inherited
For now, Trump is getting help from the good economy that Biden administration left behind. Between 2021 and 2024, GDP growth was about 3.6%, better than Trump’s 1.5% average annual growth during his first term as President. Unemployment remains low, and inflation, has stabilize not as bad as after the Covid-19 time.
Mortgage rates, which went up over 7%, have slightly eased to 6.76%, but housing affordability remains an issue. Investors are watching closely, knowing fully well that if an economy goes down under Trump, there could be market chaos similar to the volatility seen in 2020.
Markets Have Always Forced Presidential Hands
When economic crises strike, financial markets often make President do things and it override political resistance. In 2008, during the financial collapse, Congress initially said No to the $700 billion Troubled Asset Relief Program (TARP). The market’s reaction was severe, and the S&P 500 falling almost 9% in just four days. The panic made lawmakers to change their minds and pass the bailout just days later.
During Trump’s first term as President, the COVID-19 pandemic made him say its not a big problem . But when markets fell more than 30% in weeks, Trump and Congress, pushed through $5 trillion in stimulus and this ensured economic survival.
The Market as the real Check on Trump
Trump’s still has lots of power over political institutions but financial markets don't care about party loyalty. Investors only care about financial realities and their decision is final.
Wall Street rewards stability and punishes unpredictability. Market going down has made Trump to alter his approach and now in his second time being President , this is still true and remains unchanged. Political games may grant him unchecked authority in government but when markets speak, he listens because he has no choice but to listen.