Trump affirms no early shift for Federal Chair Powell's tenure, claims in media chat, with his term set to wind up in 2026.
Having a Ball with Trump and Powell's Cat-and-Mouse Game
Washington D.C., USA: President Donald Trump tossed a curveball at Jerome Powell, the Federal Reserve Board Chairman, stating he has no plans to dump him before his term ends in 2026. Trump, known for his sharp tongue, called Powell a "total stiff" and repeated his plea for the Fed to slash interest rates.
In a laid-back chat with Meet the Press with Kristen Welker on NBC News, airing this Sunday, Trump voiced his views on Powell. Taped in Florida on Friday, the interview revealed Trump expects the Fed to eventually lower interest rates, despite Powell's perceived dislike for Trump.
When interrogated about possibly dropping Powell before his chairman term wraps up in 2026, Trump gave his most firm denial, quipping, "No, no, no. That was a total - why would I do that? I get to replace the person in another short period of time."
Wall Street stocks experienced a steep nosedive last month following Trump's continuous attacks on Powell, triggering worries about the Fed's autonomy and stirring up market chaos. After the plunge, Trump tempered his stance somewhat.
*Trump plays it cool: Powell stays*
The insights unveiled during this chat suggest that Powell will remain in his post, offering a welcome boost to markets that have been on edge due to Trump's actions to disrupt the global trade system with a barrage of tariffs.
On April 2, Trump levied a 10% tariff on most countries, alongside higher tariff rates for many trade partners temporarily suspended for 90 days. He has also slapped 25% tariffs on autos, steel, aluminum, 25% tariffs on Canada and Mexico, and whopping 145% tariffs on China.
Trump's administration is locked in negotiations with over 15 countries to strike trade deals that could dodge the higher tariffs. According to officials, the first deal could be announced shortly.
During his NBC News interview, Trump hesitated to rule out making some of the tariffs permanent. "No, I wouldn't do that because if somebody thought they were going to come off the table, why would they build in the United States?" he agreed.
Trump conceded he had been "very tough with China," almost severing trade ties between the world's two giant economies, but expressed that China now wants to seal a deal.
"We've gone cold turkey," he commented. "That means we're not losing a trillion dollars ... because we're not doing business with them right now. And they want to make a deal. They want to make a deal very badly. We'll see how that all turns out, but it's got to be a fair deal."
Taking Stock
Trump's ongoing spat with Powell poses several significant economic implications:
- Economic Swings: The tug-of-war between Trump and Powell over interest rates could create market volatility, as investors anxiously await potential shifts in monetary policy.
- Fed Autonomy: Trump's attempts to unseat Powell raise questions about the Federal Reserve's independence. The appearance of political pressure on the Fed could undermine its credibility and effectiveness.
- World Trade: Trump's policies, including tariffs, significantly impact global trade. As the Fed's monetary policy can influence trade by affecting the U.S. dollar, political meddling in the Fed's decisions could complicate international trade negotiations further.
In the long run, potential instability and loss of faith in the U.S. economy could lead to dwindling investment and trade flows. Misaligned monetary policy decisions may also contribute to suboptimal economic outcomes, with implications rippling through the global economy.
- Stocks took a sharp dive last month due to President Donald Trump's continuous attacks on Jerome Powell, the Federal Reserve Board Chairman, causing investors to worry about the Fed's autonomy and leading to market chaos.
- The trading world has been attentive to the cat-and-mouse game between Trump and Powell, with Trump repeatedly pleading for the Fed to lower interest rates.
- As Trump's ongoing spat with Powell contributes to economic instability, the migration of investments and capital may increase, with a focus on countries with more stable monetary policies.
- The Defi (decentralized finance) sector, which relies on independent algorithms and smart contracts for financial activities, could potentially benefit as investors seek alternative investment avenues outside traditional stock markets.
- In light of the political pressures on the Fed, policy-and-legislation measures may be introduced to strengthen the institution's independence and ensure its decisions are driven by economic considerations rather than politics.
- The increase in accidents, fires, and crimes, connected to the social upheaval fuelled by economic uncertainty, becomes a cause for concern as funds meant for public services get diverted due to the loss of revenue from trade and investments.
- The ongoing war-and-conflicts between nations could be further exacerbated, as an unstable U.S. economy reduces its ability to act as a global stabilizer, potentially leading to an increase in regional disputes and geopolitical tensions.
