From the warming drawer to the freezer: Tariffs, the Supreme Court and housing

As someone who’s spent decades in the mortgage trenches—and as one of the owners of a $1 billion independent mortgage banking company—I’ve seen a few sunrises and sunsets in this industry. The 2008 crisis. Conservatorship. Waves of QE. Worsening LLPA’s. Adverse market fees. The pandemic housing chaos. Two percent refinances. The fastest rate spike in modern history. Record low affordability. 

But this? This is a special kind of spectacular.

When your own team blitzes you

During recent arguments, Chief Justice John Roberts—one of the conservative justices Trump presumably thought would have his back—questioned the authority behind the tariffs, stating the “vehicle is imposition of taxes on Americans, and that has always been the core power of Congress.” Justice Sonia Sotomayor twisted the knife further, challenging the administration’s semantic gymnastics: “You want to say that tariffs are not taxes, but that’s exactly what they are.”

And then Justice Neil Gorsuch—another conservative appointee—delivered what might be the legal equivalent of a pick-six, asking what happens when a president simply vetoes legislation trying to take these powers back. It was the judicial version of “you thought we were friends?”

All things considered, not the President’s best day. A conservative court that he stacked didn’t exactly wrap him in assuring arms. At stake: potentially, the single-biggest loss ever by the United States government in court.

And more. Much more.

The irony is stark: tariffs that were supposed to strengthen America’s economic position could, if ruled illegal, force a debt issuance shock that raises borrowing costs across the economy—hitting homebuyers, businesses, and the federal government itself with higher interest expenses for years to come. For housing professionals like me, this represents yet another headwind for an industry that has been languishing in recession for three consecutive years.

The $750 billion question (give or take)

The federal government has collected approximately $90 billion in revenue from the challenged tariffs as of late September. To put that in perspective, that’s roughly the GDP of Ecuador, or about what Americans spend on pizza in a year and a half. But Treasury Secretary Scott Bessent warned in a September court filing that the U.S. might have to refund $750 billion or more if the Supreme Court ruled the tariffs illegal and waited until next summer to issue that ruling.

Let me repeat that: $750 billion.

That’s not a typo. That’s not hyperbole. That’s the potential of what could happen if this legal challenge succeeds and the government keeps collecting tariffs while the case drags on.

Tariffs have become a major source of revenue for the federal government, estimated to raise $2.8 trillion over the next decade, according to the Committee for a Responsible Federal Budget. This revenue stream has been factored into deficit projections like a gambler counting winnings from a hand that hasn’t been played yet. Making a Supreme Court loss potentially catastrophic for fiscal planning is like saying Auburn’s season was “disappointing”—technically accurate but woefully inadequate.

Who actually gets paid back? (spoiler: not you)

Should Trump lose, the refund process would be complex and unprecedented. According to legal experts, refunds would go to businesses that paid the tariffs, not consumers. This is crucial because while businesses would receive a cash infusion, American households shouldn’t expect direct relief. Sorry, folks—no tariff stimulus check is coming your way.

Think of it this way: you paid $500 extra for that couch because of tariffs. The furniture company gets a refund. You get… the couch. And the pleasure of knowing your tax dollars will now fund the refund to the company while simultaneously paying interest on the bonds issued to fund said refund. It’s the circle of fiscal life, Simba.

One could effectively view those business refunds as economic stimulus, potentially fueling inflation that has yet to settle back to the Fed’s target rate of 2%. So, we’d be borrowing money to refund tariffs that were supposed to help the economy, but the refunds might overheat the economy, forcing the Fed to keep rates higher, which makes the borrowed money more expensive. If you followed all that, congratulations—you’re ready for a career in economic masochism.

Treasury market impact: Or, how to make Bond vigilantes very angry

Here’s where it gets interesting for those of us in the mortgage sector, and by “interesting” I mean “pass me that bourbon.”

The government would almost certainly need to issue substantial new debt to fund these refunds. Ed Mills of Raymond James wrote that “if this ruling is upheld, refunds of existing tariffs are on the table which could cause a surge in Treasury issuance and yields.”

Let me translate from Wall Street to Main Street: The government would need to flood the market with bonds to raise cash for refunds. When supply increases and demand stays constant (or worse, decreases), prices fall and yields rise. And when Treasury yields rise, mortgage rates follow.

The bond market reaction reveals several concerns:

1. Supply shock: The government could need to issue hundreds of billions in additional Treasuries at a time when the deficit is already elevated. Recent projections from the U.S. Department of the Treasury show deficits of $1.940 trillion in FY2026 and $2.052 trillion in FY2027, and these figures assumed continued tariff revenue. Remove that revenue stream and add a massive refund obligation? That’s like planning your budget around a Christmas bonus and then getting fired on December 23rd—except the budget is the entire United States government.

2. Loss of expected revenue: Bond investors had been “heartened by the revenue raised from the duties,” with tariffs set to bring in $172.1 billion in 2025 according to the Tax Foundation. Ed Yardeni of Yardeni Research warned that “the Bond Vigilantes might start acting up again if they can no longer look forward to a significant reduction in the federal deficit attributable to tariff revenues.”

For the uninitiated, “bond vigilantes” isn’t a cool superhero name. These are bond market investors who punish fiscal irresponsibility by demanding higher yields (interest rates) on government debt. They’re like the financial market’s version of your disappointed mother, except instead of guilt, they wield trillions of dollars and the ability to tank your borrowing costs.

3. Timing concerns: Justice Samuel Alito suggested resolving the refunds matter sooner rather than later since waiting would only increase the amount of tariff revenue collected and the complexity. However, a quick resolution could mean a more sudden debt issuance shock—like ripping off a band-aid, except the band-aid is attached to the U.S. Treasury market and the wound underneath is measured in hundreds of billions of dollars.

Mortgage rate implications: The part where I lose sleep

The connection to mortgage rates is direct and mechanical. Mortgage rates typically run about 1.8% to 2.4% higher than the 10-year Treasury yield.

Currently, the 10-year Treasury yield finished November 7 at 4.11% with mortgage rates at 6.22%. If Treasury yields spike by 50-75 basis points due to increased issuance needs and deficit concerns—a reasonable scenario based on the September market reaction—mortgage rates could climb from the low 6% range back toward 7% or higher.

Let me paint you a picture: I’ve got clients who’ve been waiting two years for rates to drop so they can refinance out of their 7% mortgages from 2023. They’ve been patient. They’ve been hopeful. They check rates like I check Auburn scores—compulsively and with diminishing optimism. And just as we’re finally seeing some relief, along comes a potential Supreme Court ruling that could send rates right back up. Tough to blame the Court. If the tariffs are illegal, they’re illegal. But the cosmic forces at work against the housing market are undeniable at this point.

The damage assessment: A table I wish I didn’t have to create

Generally, about 60–80% of a move in the 10-year yield is passed through to 30-year fixed mortgage rates, due to MBS spreads, servicing value, and hedging costs. Here’s what different refund scenarios could mean for your mortgage rate.

Tariff Refund Obligation	Estimated Increase in 10-Yr Treasury Yield	Estimated 30-Yr Fixed Mortgage Rate Impact	Explanation
$25 billion (small refund)	+10–15 bps	+5–10 bps	Minor issuance impact; market absorbs easily
$50 billion (moderate)	+20–30 bps	+10–20 bps	Slight pressure on bond supply, yield curve steepens slightly
$100 billion (large)	+35–50 bps	+25–40 bps	Notable deficit increase; market reprices debt issuance risk
$200 billion (very large)	+50–80 bps	+40–60 bps	Major fiscal shock; heavy bond issuance pushes up long-term yields
$500B–$1T (extreme/unlikely)	+100–150 bps	+75–100+ bps	Severe disruption; could trigger full repricing of US fiscal risk, affect housing market broadly

For context, every 50 basis points (0.50%) increase in mortgage rates costs a buyer about $300 per month on a $500,000 loan. That’s $3,600 per year, or $108,000 over the life of a 30-year mortgage. Multiply that across millions of potential homebuyers and you start to understand why this matters beyond the Beltway.

What this means for the real world

As a mortgage originator in Atlanta—a city where housing affordability was already stretched thinner than my patience in rush hour traffic—this scenario keeps me up at night. We had finally begun to witness steady purchase activity as rates dipped into the low 6% range. Refinance pipelines were building. There was even a faint whiff of optimism until the last Fed meeting in October. Chair Powell, the human equivalent of a flat tire, put an end to that with his unnecessarily hawkish comments, contradicting the Fed’s own dot plots from mid-September.

But now we’re staring at a potential Supreme Court decision that could – inadvertently – shove the housing market out of the warming drawer back into the freezer. 

The really maddening part? The tariffs were supposed to be an economic strength play. “America First” and all that. Instead, we might end up with:

• The government borrowing hundreds of billions to refund tariffs
• Higher interest rates across the entire economy
• Reduced housing affordability just as the market was healing
• Increased deficit and debt burden
• Inflation risk from business stimulus refunds
• Years of elevated borrowing costs for the federal government

The bottom line

The Supreme Court’s decision timeline remains uncertain, but markets will certainly begin to price risk, particularly if the chorus of critics at the highest court in the land continues to grow. For those of us in housing, we should be prepared that the light at the end of the tunnel may not be daylight. 

Mark Milam is the CEO of Highland Mortgage.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: zeb@hwmedia.com.