News: Trump Delivers Record-Long State of the Union — Tax Cuts, Tariff Defiance, and Iran Warnings Dominate a Speech Aimed at Anxious Voters

Trump devoted the largest portion of his address to the economy, declaring it was "roaring like never before" and claiming credit for historic employment levels and falling inflation. He pointed to the consumer price index rising 2.4% in January from a year earlier — the lowest in over four years — and claimed inflation was "plummeting."

However, CBS News fact-checked the president's claim that "more Americans are working today than at any time in the history of our country" as misleading, noting that while the raw number of 158.6 million employed is a nominal record, economists measure labor market strength by participation rates, which have remained flat at 62.5%. The unemployment rate has actually ticked up to 4.3% from 4.1% in December 2024.

The president also claimed he had secured "$18 trillion" in new investment commitments, a figure CBS News rated as false, finding the administration's own documented list totaled $9.6 trillion, with some of those commitments predating his administration. Trump blamed former President Joe Biden and Democrats in Congress for high prices, declaring "You caused that problem" while pointing at the Democratic side of the chamber.

The economic messaging matters for markets because midterm election dynamics could reshape Congress. Democrats held a polling lead heading into November, and if they recapture either chamber, Trump's legislative agenda — including further tax cuts and deregulation — would face significant obstacles.

The most concrete market-moving announcements involved fiscal policy. Trump called for a new round of personal and corporate tax cuts to be advanced through a second budget reconciliation bill — the same mechanism Republicans used to pass last year's "one big beautiful bill."

However, advancing tax legislation through reconciliation faces significant headwinds. Republicans hold only a 218-214 majority in the House — effectively a one-vote margin — meaning near-unanimity is required. Any Republican defection could doom the effort, and deficit hawks within the party have previously expressed concerns about further tax reductions without offsetting spending cuts.

Trump also unveiled a government-backed retirement savings plan for workers whose employers don't offer 401(k) matching. The plan would provide a government match of up to $1,000 annually for eligible workers, leveraging the existing "Savers Match" tax credit enacted under the bipartisan Secure 2.0 Act of 2022. "We will match your contribution with up to $1,000 each year," Trump said, framing it as ensuring "all Americans can profit from a rising stock market."

The retirement proposal drew applause from both sides of the aisle, though details on eligibility thresholds and funding mechanisms remain sparse. If implemented, it could funnel billions of new dollars into equity and bond markets from previously uninvested workers — a long-term structural tailwind for asset prices, though the scale depends on participation rates.

Perhaps the most market-significant segment of the speech concerned tariffs. Just four days before the address, the Supreme Court struck down Trump's broad tariff authority in a 6-3 decision, ruling that the president had exceeded statutory bounds with his global levy. Trump called it "an unfortunate ruling" — drawing applause only from Democrats — and vowed to use "alternative" legal authorities to reimpose tariffs.

"Congressional action will not be necessary," Trump declared, though legal analysts across the political spectrum have noted that blanket tariffs under the authorities he's likely referencing face a 150-day statutory limit that would require congressional approval to extend.

Trump continued to claim that tariffs are "paid by foreign countries" and argued they are "saving our country." This assertion contradicts the consensus among economists that import tariffs are primarily borne by domestic consumers and businesses through higher prices. NBC News noted that Trump's new tariff approach would still require congressional approval beyond the initial 150-day window.

Governor Spanberger hammered the tariff issue in her Democratic response: "Even though the Supreme Court struck these tariffs down four days ago, the damage to us, the American people, has already been done. Meanwhile, the president is planning for new tariffs — another massive tax hike on you and your family."

For investors, the tariff uncertainty remains a key variable. The Supreme Court ruling removed one source of trade policy risk, but Trump's pledge to find alternative legal mechanisms means businesses and supply chains face continued uncertainty about import costs.

Trump's remarks on Iran were brief but carefully watched by energy markets. "We are in negotiations with them. They want to make a deal, but we haven't heard those secret words: 'We will never have a nuclear weapon,'" Trump said. "My preference is to solve this problem through diplomacy. But one thing is certain, I will never allow the world's number one sponsor of terror, which they are by far, to have a nuclear weapon."

The comments came as two U.S. aircraft carriers have been dispatched to the Middle East and the USS Gerald R. Ford docked at Souda Bay in Crete. Iran, producing more than 3 million barrels of crude daily and a member of OPEC, has conducted military drills in the Strait of Hormuz and joint naval exercises with Russia in the Gulf of Oman.

U.S.-Iran talks are set to resume in Geneva on Thursday. Iranian Foreign Minister Abbas Araghchi said his country would participate "with a determination to achieve a fair and equitable deal — in the shortest possible time," reiterating that Iran would "under no circumstances ever develop a nuclear weapon" while insisting on its right to peaceful nuclear technology.

Analysts were divided on the implications. George Pollack of Signum Global Advisors told CNBC he expected Thursday's meeting to "likely be a success and bring about some more diplomatic opportunities," viewing Trump's rhetoric as prioritizing "optics" over substance. But strategists at Dutch bank ING warned that Trump's 10-to-15-day deadline for Iran points to early March, and "this uncertainty means the market will continue to price in a large risk premium."

Brent crude traded at $71.13 a barrel on Wednesday morning, up 0.6%, while West Texas Intermediate rose to $66.02 — both near seven-month highs. The 10-year Treasury yield stood at 4.03% as of February 23, down from 4.08% earlier in the week, as investors continued their flight to safety.

The speech was punctuated by confrontations between Trump and Democratic lawmakers that highlighted the intensifying partisan divide ahead of November. Representative Al Green of Texas was ejected from the chamber for the second consecutive year, this time for holding a sign reading "Black People Aren't Apes" — a reference to a racist video Trump's social media account recently shared. Representatives Ilhan Omar of Minnesota and Rashida Tlaib of Michigan repeatedly shouted "You have killed Americans" and "You are a murderer" at the president, referencing two U.S. citizens killed by federal immigration officers in Minneapolis earlier this year.

Trump goaded Democrats by asking lawmakers to stand if they agreed that the government's first duty is "to protect American citizens, not illegal aliens." When most Democrats remained seated, Trump responded, "You should be ashamed of yourselves." He later pointed at Democrats and said, "These people are crazy," prompting Vice President JD Vance and House Speaker Mike Johnson to stand and applaud.

Governor Spanberger's Democratic response focused squarely on affordability — the issue Democrats believe is their strongest weapon in November. She attacked Trump's tariffs, federal government cuts, and immigration enforcement, framing them as reckless policies driving up costs for working families.

Conservative commentators praised the speech. Senator John Kennedy of Louisiana said Trump delivered exactly what voters needed: "What I was hoping he'd do would be to talk about the things moms and dads worry about when they lie down at night to sleep and can't. And he did." Fox News described the speech as a "home run" that sparked conservative praise online.

The contrasting reactions underscore how markets should interpret the midterm landscape: a competitive election cycle where control of Congress — and by extension the trajectory of tax policy, trade policy, and regulation — remains genuinely uncertain.