Tariff refunds started this week. The first tranche totals $166 billion — the largest repayment program in history. Large corporations and thousands of small businesses will receive some of the money they shelled out in unconstitutional tariffs. However, American consumers will once again receive the short end of the stick.

 

Trump's "Liberation Day" tariffs were struck down by the Supreme Court in February. Anyone with knowledge of the U.S. Constitution knew that the president's use of the International Emergency Economic Powers Act (IEEPA) was illegal. Certainly, our trading partners knew this. It was only here in America that there was any question at all. Wonder why?

 

I believe it was one of the chief reasons that foreign nations targeted by Trump did not retaliate with their own salvo of triple-digit tariffs. They knew it was simply a waiting game. While they waited for the Supreme Court to do its job, they appeased Trump by "promising" to invest "trillions" in the U.S.

 

But promises are worth little without legal, signed documents to back them up. Few nations inked any kind of legal agreements. Nonetheless, it gave the president a never-ending conga line of photo ops and daily bragging rights. See how many countries are falling over themselves to invest in America, he chortled over and over again. In the meantime, prices on everything rose, supply chains were disrupted, and almost daily changes in tariffs, driven by presidential whims, left businesses worldwide in chaos.

 

The administration gave almost a weekly tally of how much was collected. The proceeds were used to reduce the U.S. deficit. On several occasions, Donald Trump suggested he would give the proceeds to voters in the form of a check. Then there was the oft-repeated argument that tariffs could replace the income tax. Now all that rhetoric has disappeared as refunds will return the deficit to its former highs.

 

Readers are aware that I was and still am dead set against tariffs. They are a tax, pure and simple, in my opinion, regardless of what anyone claims. The administration taxed American businesses and consumers, called it tariffs, and then used the proceeds to reduce the nation's burgeoning deficit. Thanks to the law of the land, that process now needs to be reversed.

 

In March, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund the money collected under the unlawful tariffs, citing the Supreme Court's decision and its mandate. More than 330,000 importers could receive refunds. Over 56,000 importers have already completed the necessary steps to apply for refunds online, with current claims totaling $127 billion. Following the launch of the refund process, the president stated he would "remember" companies that did not seek a refund — implying potential future benefits for those that complied, which some view as a questionable use of executive influence.

 

For large corporations like Costco or FedEx, lawsuits have already been filed, and refunds should be issued post haste (within 60 to 90 days). It is among small businesses that refunds could be problematic. Over the past year, the small-business community has been hit hard by these tariffs. Owners' jubilation at Trump's election gave way to a change of attitude. Their companies were already operating on tiny margins of profitability. Tariffs devastated many bottom lines.

 

What's worse, these owners do not have large legal departments or the resources to navigate the labyrinth of government legislation. For many, a single company accountant, unskilled in government paperwork, is being asked to file eligibility claims for refunds. Add to that the tight timeframe required to apply for eligibility at the newly created Consolidated Administration and Processing of Entries (CAPE) department, and you have a typical governmental recipe for disaster.

 

There may also be the added uncertainty of delay if the Trump administration decides to appeal the court-ordered refund in its entirety. That would lock up the process for possibly years to come as appeals move through the judicial system. But what of the consumer? Where are their refunds?

 

The CNBC Chief Financial Officer Council quarterly survey, released on Monday, indicated that CFOs at companies across multiple sectors have no plans to pass along the billions of dollars in refunds consumers are owed, while acknowledging that their customers bore the brunt of tariff increases over the past year.

 

If the refunds actually do go through, it becomes clear that American consumers are left with the bill for Trump's tariffs. The burden is not on foreign nations, as the president claims, nor on corporations or small businesses. Instead, consumers, including you and me, will bear 100 percent of that bill.

 

What is even worse? The Trump administration is planning on hosing you yet again, this time with the aid of a Republican majority in Congress. Their Plan B is to reinstate these tariffs. Some of them are already in place. No one can stop them unless, of course, consumers reconsider what is best for them in November.

 

Stocks held firm this week. That was quite a feat, given the conflict and shaky ceasefire. Headlines will continue to drive markets, but strong earnings should provide some support.

 

First-quarter earnings are running at an 80 percent "beat" rate, but guidance matters more than everything else. Companies that beat but neither raised nor beat estimates were taken to the woodshed. Those who offered cautious guidance, however, really got smacked.

 

Next week, on Tuesday, four of the big mega caps report (Microsoft, Google, Meta, and Amazon), and all but Microsoft are expected to be strong. On the same day, the Federal Open Market Committee meets again, but expectations are that they will keep "on hold" until the data suggest otherwise.

 

Chairman Jerome Powell will be departing next month, and the new chair, Kevin Warsh, will take the reins at the Fed. There had been some question of exactly when Warsh would take over. One U.S. senator, Thom Tillis, had vowed to vote against his nomination unless the Department of Justice backed off their criminal case against Powell. The DOJ did just that on Friday, abandoning its Trump-directed case concerning cost overruns of the new Fed building.

 

Warsh, who spoke this week before the Senate Banking Committee, denied there was any quid pro quo between his appointment and the president's desire to reshape the Fed or loosen monetary policy further. I ignored the whole circus. Given the nature of today's politics, did anyone expect Warsh to say anything different?

 

To me, the whole affair was just another TACO moment. It can be chalked up to a president who delights in pursuing one simple strategy — Attack, Deny, and then claim Victory. Whether that works or not in fighting a war remains to be seen.

 

As it stands, traffic through the Straits of Hormuz is now locked in a double blockade. One conducted by the Navy and another by the Iranian Revolutionary Guard navy (that was supposed to be "totally destroyed" but isn't). Every day this continues is another day when the world's oil supply is diminished, and as it does, the price of oil creeps higher.

 

Markets were cheered this week when the Israelis and Libyans agreed to a ceasefire. It was supposedly a precondition of the ceasefire with Iran, according to the third-party negotiators and Iran (but subsequently denied by both the U.S. and Israel). So, two weeks later, another Kabuki performance is inked. I would expect a White House photo op shortly as both presidents join Trump in a kumbaya moment.

 

Of course, no one dared to mention that the party Israel is actually fighting, Hezbollah, was not included in the negotiations. Riddle me this, Trump man, how does this resolve the conflict, if at all? Hezbollah is still an independent, Iran-sponsored terrorist body, roaming at will throughout Lebanon. But heck, what do I know about it?

 

In any case, rather than selling off hard, equities consolidated this week. It is one of two ways that an overbought market can correct or work off that condition. The longer the consolidation, the higher the probability that markets will regain the primary trend. That trend is still up, so until something negative happens on the geopolitical front or next week's earnings disappoint, stay the course.

 

"In the meantime, our great military is Loading Up and Resting, looking forward, actually, to its next Conquest. AMERICA IS BACK."  — President Donald Trump, posted on Truth Social, April 8, 2026

 

America, as the president posted, is back. But the critical question is: Back to what? For the first time since Vietnam, we are entering a wartime economy — a shift with vast consequences, the most significant of which is inflation.

 

As the president prepares the armed services for his next conquest, estimates are that the Iran War costs the U.S. about $1 billion per day. This amount does not include other economic costs, such as higher energy prices and fertilizer costs.

 

The serious consequence of a wartime economy will be rising inflation. History is clear: war is always inflationary. Enormous fiscal spending and monetary expansion guarantee price spikes, worsening when the economy is already expanding. This, combined with our $38 trillion national debt, magnifies the economic challenge ahead.

 

My experience of a wartime economy during the Vietnam era ended in crazy inflation. President Lyndon Johnson refused to raise taxes to fund the war. He also spent billions to expand his Great Society program. This "guns and butter" strategy led to double-digit inflation and years of stagflation.

 

Aside from inflation, if history is any guide, unemployment would fall, especially if the U.S. instituted a draft next year, which looks increasingly likely. Employment might rise across the labor force if there are enough recruits to fill the military's quotas and if there are enough workers to replace them.

 

The administration has already raised the maximum recruitment age to 42 from 35. There is also a plan to make registering with the Selective Service mandatory for all Americans of draftable age by the end of this year. Manpower may still be a problem unless Trump relaxes his immigration policies to find new recruits for the military and the labor force.

 

And who will fight these wars? Look no further than the younger generations. The sad fact is that the young have always provided the cannon fodder for nations at war. Incentives are growing. It was no accident that service members received a $1,777 after-tax present from the president last Christmas. He also wants to increase wages for those in the lower echelons of the military.

 

As for other areas of the economy, labor might see an uptick among defense contractors, arms manufacturers, cybersecurity firms, and energy exporters, but AI would likely significantly reduce the workforce required. The administration has already asked several manufacturers to increase their roles in military production. General Motors, Ford, GE Aerospace, and Oshkosh are just some of the companies asked to divert more of their output to the wartime economy.

 

I date the Russian invasion of Ukraine during the Biden administration as our entry into a war economy. Until now, the great powers — the U.S. and China — have used proxy wars rather than face-to-face conflict. Ukraine, our proxy, has received trillions of dollars in U.S. aid. Russia (China's proxy) now spends over 7 percent of its GDP fighting them. Since then, American war spending has spread worldwide. This now includes money for Lebanon, Gaza, Syria, Israel, Venezuela, Iran, Ukraine, and soon Cuba. That is only a partial list.

 

Europe is also entering a wartime economy. NATO members have pledged to spend 5 percent of GDP on arms and security. As in the U.S., this requires deep cuts to social welfare and health care. It also crowds out private investment.

 

Over the last year, a strategic plan has also been forming within the EU for a new European-only NATO ( excluding the U.S.). Germany and France, among others, are already preparing their own military conscription programs. Germany, for example, is switching from cars to cannons and reinventing itself as a weapons manufacturer.

 

In this wartime economy in the U.S., American taxpayers and consumers will likely bear the greatest burden. Purchasing power, already reduced by higher prices — especially for fuel — is slowly declining. Expect more of the same. As for investments, protection will come from owning assets that benefit from wartime and inflation.

 

The bulls had their day in the sun this week. In a historic move, equity indexes roared back on a 13-day run that has wiped out all this year's losses and then climbed to new highs.

 

The move has been straight up since the lows of March 31. It was one of the fastest V-shaped recoveries the stock market has experienced since the 1950s. Those chart technicians who advised clients to wait for a pullback before committing money were blindsided.

 

I had warned skittish investors that a cease-fire or progress in ending this war would be a catalyst for an upside explosion. "The bounce should be breathtaking, and if you are not invested, you will miss it. There won't be an opportunity to chase," were my words written in my March 20th column. I hoped you listened.

 

I will call it the "Great Escape" and the fastest short-covering rally since 1950. The fact that there is no peace treaty but only a truce that expires in one more week means little. Why? Because at this point, financial markets have now gleaned that there is a huge difference between what the president says and what he does or does not do. You don't have to be political to recognize this.

 

The "blockade" of the Strait is more words than actions. Yes, ships are passing through, but traffic is heavily restricted and limited to vessels from a few nations. Nine tankers carrying crude and other cargoes have passed through unmolested. That is 90 percent less than when the conflict started. Supposedly, negotiations with the Iranians are ongoing, but no date has been set for further talks.

 

Israel and Lebanon have agreed to a 10-day ceasefire, and the two countries' leaders are scheduled to meet in Washington next Wednesday. That gives Trump the opportunity to show progress, if not with the Iranians, at least with the Lebanese. Of course, the Hezbollah are not included. Who are the Israelis fighting? You can't make this up. In any case, the announcement sent crude oil plummeting.

 

The decline in oil remains critical to the stock market's fortunes. I have advised readers to watch oil prices as a guide for stock direction. By mid-morning Friday, West Texas Intermediate (WTI) is trading down 12 percent at $83.33/BBL, while Brent crude is at $89 a barrel. Is it any wonder the S&P 500 is up 1.3 percent?

 

We also kicked off the first-quarter earnings season, and although it's early, results from financial companies and some other major companies have been strong. Next week, almost 20 percent of the S&P 500 are set to report. More importantly, Google, Amazon, and Tesla will test the market's newfound optimism.

 

Technology — especially semiconductors, AI darlings, and most of the MAG 7 — has led this bull run. Once again, current quarterly earnings and sales matter less than management's guidance about the future.

 

On Friday of last week, I wrote: "I need to see the NASDAQ's QQQ ETF decisively break above 615 to get more bullish." That happened on Monday. The Qs are now sitting at 648 while the S&P 500 is trading at 7,133. A fully extended rally could take us as high as 7,250 in a blow-off late-stage rally. I could be dreaming because this "V" has already pushed the limits, but let's ride it while we can.

 

Remember, this whole move can still turn on a dime with just one launched missile. We are still in the hope stage, and hope is not an investment strategy.

 

In April, the White House asked Congress for $1.5 trillion more in defense spending for 2027. This is a 40 percent increase over the Pentagon's spending in fiscal year 2026. Half the funding will come from cuts to education, housing, and health programs. Welcome to the war economy.

 

While the stock market celebrates another two-week extension of a cease-fire between the U.S. and Iran, the wars are not over. There will be more, in my opinion, and preparing for them will cost money. The Pentagon needs $4.5 billion to replenish its Tomahawk cruise missile stockpile. The Navy wants more boats, and the $250 million in planes and helicopters we lost rescuing two downed flyers need to be replaced.

 

As more military resources disappear, the need to replace them grows. That never-ending story fuels a wartime economy. The money earmarked for defense may not be enough. At a private lunch last week, according to the New York Times, the president said we need to prioritize military protection. Otherwise, he said in a since-deleted video, the country could not continue to shoulder the financial burden of services including day care, Medicare, and Medicaid.

 

For those, like my daughter, who vaguely remember the term "wartime economy" from their history books, let me start with a definition. A wartime economy is an economic system that is reorganized by a nation to prioritize military production and resource allocation during periods of armed conflict.

 

What that means is that all the resources, including production, distribution, and financial systems, are adjusted to support military efforts while maintaining overall economic stability. If you are old enough to remember, it can and did mean rationing, price controls, centralized planning, inflation, and deficit spending here in the U.S.

 

For Americans, World War II is usually the go-to example of a wartime economy. Defense spending surged from 1.6 percent of Gross Domestic Product (GDP) in 1940 to over 40 percent four years later. By the end of the war, that number climbed to 119 percent of GDP. Non-military auto production was halted. Steel, rubber, and aluminum were rationed. Price controls artificially suppressed inflation, and black markets in everything from food to fuel proliferated.

 

Historians say this wartime economy pulled the U.S. out of the Great Depression. It sped up GDP growth and built the military-industrial complex. The war and draft created a job boom. By 1944, unemployment fell below 1 percent, the lowest ever. Women joined the workforce in large numbers. War also sparked major advances: radar, jet engines, computers, medicine, and the nuclear bomb.

 

All this is true; however, that is not the whole story. Under the hood, both private consumption and investment lagged badly. Civilian living standards were lower during the war than in 1940. That was before rationing and quality deterioration.

 

Much of wartime economic growth came at the private sector's expense. Tanks, ammunition, ships, and planes — many lost in combat — could have built schools, hospitals, housing, or consumer goods. Instead, Americans waited in line for basics like gasoline, meat, and shoes. The national debt more than doubled as a share of GDP during the war.

 

Could we see the same results 80 years later? It seems doubtful. War may not deliver the benefits people expect. War spending gives an output boost, and we may fight for a "good cause," whatever that means now. Yet do not expect the same job gains as before.

 

Next week, I will address the inflationary fallout from wartime economies and how countries worldwide are being forced to alter their own economies due to shifting post-war strategic alliances and geopolitics.