Six months ago, economists warned of severe macro consequences from President Trump's tariff agenda. Now the inverse is taking hold: fears about the fiscal fallout if most are rolled back.

Why it matters: Financial markets came to terms with a new reality: that tariffs of the scale now in place are on track to generate significant revenue over time, improving the nation's gloomy fiscal outlook.

• That is now far from a sure thing as global trade enters a new phase of chaos, with the potential that the government might ultimately have to return the billions in tariff revenue collected thus far.

Driving the news: Late Friday, an appeals court ruled that Trump exceeded his authority when he took the unprecedented step to impose tariffs under the International Emergency Economic Powers Act.

• The ruling said that tariffs affecting roughly 70% of imports — over $2 trillion worth of goods — are illegal, though the court said they would stay in place through Oct. 14 while the government files for an appeal.
• Trump confirmed the government's plan to appeal to the Supreme Court, though the ultimate fate of tariffs might remain uncertain for months to come.

What they're saying: The Trump administration has staked out an argument that such a rollback would be a catastrophe for the U.S. economy.

• "If these Tariffs ever went away, it would be a total disaster for the Country. It would make us financially weak, and we have to be strong," Trump said on Truth Social following the ruling.

By the numbers: Economists outside the administration reject the idea that tariffs returning to their January levels would cause some calamity. But there's little doubt that tariffs are helping the fiscal outlook in a world in which investors have less patience for exploding deficits.

• The Congressional Budget Office estimated last month that Trump's tariffs would lower deficits by $4 trillion over the next 10 years — "and I would expect that that number could go up from here," Treasury Secretary Scott Bessent said during a cabinet meeting last week.
• Bessent said that the government had collected almost $30 billion in tariffs through Aug. 22, matching the sum for the previous month.
• Tariff revenue has topped $135 billion through July, up from the $63 billion in the same period last year.

Zoom out: In effect, the president has rewired U.S. fiscal policy through unilateral, emergency action with no congressional vote.

• Courts have not yet definitively ruled on the legality of that action. In the meantime, the multitrillion-dollar bond market is pricing in the expectation that one way or another, the tariff revenue will make its way into federal coffers.

That deficit impact helps explain why bond market dynamics have shifted from last spring.

Flashback: In April, when Trump announced the "Liberation Day" tariffs that sent financial markets reeling, yields on government debt soared.

• It reflected a judgment on financial markets that higher tariffs would result in higher inflation that would keep rates higher — and that made the United States a less appealing destination for capital.

The intrigue: That pattern has inverted. Now, the ruling that emergency tariffs are illegal has triggered a bond market sell-off and driven up longer-term yields.

• The bond market is grappling with the potential disappearance of that revenue, with the yield on the 30-year Treasury bond moving up 0.05 percentage point this morning — nearly hitting 5% for the first time since early summer.

The bottom line: If Trump is forced to roll back tariffs, it might be good news for GDP growth and inflation — but Americans could pay for it in the form of higher long-term interest rates due to wider deficits.