Venezuela, Iran, Greenland, Gaza -- President Trump began 2026 by flexing his power. He also reminded the world of his limits.
For all the talk of a second-term president running roughshod over the Constitution and the liberal world order, Mr. Trump still faces guardrails. This doesn't make his excesses harmless. But he does have less room to maneuver than he'd like. The markets, the courts and Congress will shrink it further.
Consider Mr. Trump's attempt to acquire Greenland. He wants the strategically valuable island and was willing to ratchet up tensions with Denmark, the North Atlantic Treaty Organization and the European Union to get it. He wouldn't rule out military action. He warned he would act on Greenland, "whether they like it or not." He threatened a trade war against Europe, with escalating tariffs until "a Deal is reached for the Complete and Total purchase of Greenland." Asked how far he was willing to go, he replied: "You'll find out."
Then Mr. Trump blinked. Speaking to the World Economic Forum in Davos, Switzerland, on Wednesday, he said he still wants Greenland, but reassured the audience of business and political elites that he "won't use force" to get it. A few hours later, Mr. Trump called off the tariffs and announced that he and NATO Secretary-General Mark Rutte had formed the "framework of a future deal" on Greenland and the "entire Arctic Region." Crisis paused.
What changed? Financial markets. The day before Mr. Trump's Davos speech, stocks and bonds plunged on fears that he'd make good on his threats. The Dow Jones Industrial Average fell 1.8%. The Nasdaq composite had its worst day since October. Bond yields climbed. The dollar fell. Gold rose. Mr. Trump minimized the chaos as a mere "dip" in his speech. But it got his attention. Markets rebounded as soon as he said he wouldn't send the Marines into Nuuk.
This wasn't the first time markets have disciplined Mr. Trump. It happened in April when his "Liberation Day" speech, announcing reciprocal tariffs on nearly every country in the world, sent global markets into a tailspin. Stocks sank; bond yields rose. Trade between the U.S. and China stopped. Like a careless chef recoiling from a hot pan, Mr. Trump agreed to "pause" the tariffs for several months as trade negotiators worked on deals. Markets recovered.
Then came October, when Mr. Trump and China's Xi Jinping went toe-to-toe. After China imposed export controls on rare-earth minerals, Mr. Trump retaliated with crippling tariffs. Markets convulsed. The S&P 500 lost $1.5 trillion in value in one day. After meeting with Mr. Xi in South Korea, Mr. Trump relented. He removed the tariffs. Mr. Xi lifted some export controls and pledged to stop the flow of fentanyl into the U.S. A few weeks later, Mr. Trump said he'd visit Mr. Xi in China in April. Markets recovered again.
A pattern emerges. Mr. Trump drives the global economy to the brink of trade war; markets react sharply and the president retreats. Some call this dynamic TACO, or "Trump Always Chickens Out." But that description is too broad. Mr. Trump is testing institutional boundaries. Markets provide a real-time response. When the response is sharply negative, Mr. Trump goes in another direction.
The courts provide another check on Mr. Trump. As markets pressured him to soften his rhetoric on Greenland this week, the Justice Department announced that interim U.S. Attorney Lindsey Halligan, who had brought cases of dubious merit against Mr. Trump's enemies James Comey and Letitia James, was leaving her post. Ms. Halligan's tenure was slapdash, ineffective and ultimately unsustainable. A district court judge appointed by Mr. Trump criticized her for identifying as a U.S. attorney even though her temporary appointment had expired. The lawfare she oversaw is unlikely to succeed.
Many of Mr. Trump's executive orders are tied up in litigation. At this writing, plaintiffs have won more legal victories than the administration. Mr. Trump has won major Supreme Court cases on appointments and immigration. But his record isn't perfect. In December, the high court ruled that Mr. Trump's deployment of the National Guard to Chicago was unconstitutional. Mr. Trump withdrew troops from the Second City, as well as Portland and Los Angeles, to comply. Some dictator.
The Supreme Court could soon rule against Mr. Trump's attempted firing of Federal Reserve governor Lisa Cook as well as on his emergency tariffs and his ban on birthright citizenship. Asked how he'd respond if the high court struck down his tariffs, Mr. Trump said he'd try to reimpose them under authorities that would withstand legal scrutiny. That's exactly what Joe Biden did when the Supreme Court struck down his plan to use taxpayer money to "forgive" student loans unilaterally.
The markets and courts block Mr. Trump overtly. Congress restrains him more subtly, through inertia, delay and institutional tradition. My American Enterprise Institute colleague Yuval Levin points out that Mr. Trump has signed fewer laws in his first term than any other modern president. More than 50 of Mr. Trump's subcabinet personnel appointments have been withdrawn. Since his re-election, Mr. Trump has called on the Senate to go into recess, end blue slips that allow home-state senators to block nominees and abolish the legislative filibuster. The Senate hasn't moved.
House discharge petitions, which allow a simple majority of legislators to force a vote on a bill, have hurt Mr. Trump. Discharge petitions forced the Justice Department to release the Jeffrey Epstein files, repealed an executive order denying public-sector workers collective-bargaining rights and passed a bill extending ObamaCare subsidies for three years. Only the Epstein resolution passed the Senate. But the damage to Mr. Trump is real.
He'll have to get used to it. Democrats are favored to take the House in November. There's a growing chance they could take the Senate as well. A Democratic Congress wouldn't only impeach President Trump; it would end his legislative agenda and stall his executive and judicial appointments. To prevent that, Mr. Trump must understand that his reach doesn't extend as far as either he or his detractors would like to admit. Either way, he'll learn it soon.
Mr. Continetti is a Free Expression columnist at WSJ Opinion.