“With Tariffs Clouding the Economy, Trump Eyes Powell as His Fall Guy”

Donald Trump is showing why independent central banks are a good idea.

The president’s double tirade against Federal Reserve Chairman Jerome Powell on Thursday conjured another dark cloud over financial markets and an economy repeatedly traumatized by his tariff and trade-war chaos.

“If I want him out, he’ll be out of there real fast, believe me,” Trump told reporters in the Oval Office. “I’m not happy with him.”

Trump is furious that Powell has ignored his frequent demands for a swift lowering of interest rates that would potentially make it easier for Americans to borrow to buy homes and could improve consumer sentiment and boost stocks. The Fed made three consecutive rate cuts last year after bringing inflation nearly to target. But it has paused the strategy amid concerns over growing economic uncertainty, which have been exacerbated by Trump’s volatile leadership since taking office less than three months ago.

On Thursday morning, a short-tempered Trump appeared incensed over Powell’s warning a day earlier that the tariffs would likely cause inflation and higher unemployment and that some of their burden “would be paid by the public.”

Powell’s speech to the Economic Club of Chicago was the clearest statement yet by a key financial official about the potential impact of Trump’s policies. He was stating what almost every serious economist believes about the impact of tariffs. But his comments conflicted with the president’s quixotic belief in the almost mystical power of taxing imports and his insistence that such a strategy will not spike prices and pass higher costs on to consumers.

President Donald Trump speaks as he signs executive orders in the Oval Office of the White House on Thursday.
President Donald Trump speaks as he signs executive orders in the Oval Office of the White House on Thursday. Alex Brandon/AP
Trump is fuming over economic criticism
The context of Trump’s attack on Powell Thursday is also important.

It came amid an angry defense of his economic management, in which he blamed President Joe Biden multiple times – even though the economy was humming when the Oval Office changed hands – before he turned on the Fed chief. The president’s tetchy mood left a very strong impression that he was seeking out scapegoats in case his trade war strategy fails and he can’t secure deals with nations he’s targeted with tariffs.

“If things continue to go down and a deal is not made, he’s going to blame the downturn in the market on Jay Powell and say that it was because he didn’t cut the rates,” Wall Street trader Peter Tuchman told CNN’s Kate Bolduan on Thursday.

The president did nothing to dispel the impression that his criticism of Powell was designed to trigger interest rate cuts that would help his own political priorities and prospects. “He’s going to have a lot of political pressure. You know … I think there’s a lot of political pressure for him to lower interest rates,” Trump said.

Sen. Elizabeth Warren, the top Democrat on the Senate Banking, Housing and Urban Affairs Committee, is a frequent critic of Powell. But she argued on CNBC that it is important that the Fed chair stay in his post. “I have tangled with him on a regular basis about both regulations and interest rates but understand this: If Chairman Powell can be fired by the president of the United States, it will crash markets in the United States,” Warren said.

The Massachusetts senator, a former Harvard Law professor, argued that the strength of the US financial system relies on the idea that “the big pieces move independent of the politics.” She added: “If interest rates in the US are subject to a president who just wants to wave his magic wand, this doesn’t distinguish us from any two other two-bit dictatorship around the world where everyone knows that your big investment risk is: Will that dictator will wake up in the morning and have a tummy ache and decide to cause this problem or favor that friend?”

Trump’s anger at Powell was exacerbated because the European Central Bank just cut rates for the seventh time in a year, causing him to ask why the Federal Reserve is not being similarly aggressive. “He’s too late — always too late. A little slow. And I’m not happy with him. I let him know it,” the president said. Previously, in an early morning post on his Truth Social network, Trump raised expectations that he could fire Powell by saying his “termination cannot come soon enough.”

The president’s attacks, however, belie Powell’s record. His stewardship of the economy has been steady through a tumultuous period that included the Covid-19 pandemic and its subsequent financial crisis. And he steered inflation down from above 9% to its current rate of 2.4% without triggering widespread unemployment in a soft landing that many analysts did not believe was possible.

Powell became Fed chair in 2018 after he was nominated by Trump. He was reappointed by President Joe Biden in 2022. His current term ends in May 2026.

A trader works on the floor of the New York Stock Exchange during afternoon trading on April 9, 2025 in New York.
A trader works on the floor of the New York Stock Exchange during afternoon trading on April 9, 2025 in New York. Angela Weiss/AFP/Getty Images
Why an independent Fed is important
The Federal Reserve was set up by Congress in 1913 as an independent body to insulate it from the kind of political pressure that the president is imposing. Its mission is to secure stable prices and employment – a mission that sometimes puts it at odds with the short-term needs of lawmakers and presidents.

If Trump were to acquire the power to manipulate interest rates at will – through a proxy Fed chair or otherwise – he’d spark confusion on the financial markets, buckle confidence in the US economy and almost certainly spike inflation. And it would be a further sign that America’s global reputation as a rock of financial stability is quickly eroding in his second term.

Potential market turmoil – following wild drops and swings in share prices since Trump launched his tariff war this month – may be one factor in persuading Trump to leave Powell in place. The Wall Street Journal reported on Thursday that the president has talked about firing Powell but that senior officials, including Treasury Secretary Scott Bessent, have so far talked him out of it.

It is generally accepted in Washington that the president lacks the power to dismiss board members overseeing independent agencies without cause. But the administration is hoping the Supreme Court will overturn a 1935 legal precedent on which such assumptions are based.

Trump’s growing contempt for sound governance and the courts – and his constant efforts to expand presidential power on questionable terms – mean that Powell’s future is not certain. This is a White House that acts first and deals with the consequences of potential illegality later.

But there’s a chance the president is just venting. After all, he repeatedly complained about Powell’s caution during his first term. Forbes reported last year that he ordered Wilbur Ross to call the Fed chief and order him to lower rates, citing the former Commerce secretary’s memoir.

But Trump has also never been so unconstrained. In his new administration, he’s picked officials who are loath to temper his wildest instincts. Bessent is seen as a moderating influence. Earlier this week, he told Bloomberg that “monetary policy is a jewel box that’s got to be preserved.” But the Treasury secretary lacks significant political experience. And history shows that any subordinate who seeks to rein in the president could soon find themselves fired.

New uncertainty over Powell’s future comes with the economy reeling from successive shocks over Trump’s tariff policy – especially the 145% duties imposed on Chinese imports. The impact of this hardline approach could soon hit in the form of high prices and shortages of key consumer goods and other items. While Trump has frozen reciprocal tariffs on dozens of countries and says multiple governments are offering trade deals, it remains unclear whether he’ll be able to deliver on his goal of bringing back manufacturing and jobs in the short term.

Consumer confidence has meanwhile been tumbling, and companies are struggling to set expectations and budgets for the year ahead, raising more fears that the economy could soon slip into recession.

Even if Trump doesn’t try to dismiss Powell, but simply continues to talk about doing so, he could rattle investor confidence.

This is why most presidents understand interest rate policy – as infuriating as it may often be – is best left to the independent Fed.