Trump’s renewed pressure on fed sparks market turbulence

Department of Research and Strategic Studies and International Relation 22-04-2025

U.S. stock markets took a notable hit this week amid escalating tensions between former President Donald Trump and Federal Reserve Chair Jerome Powell. Trump’s intensifying public criticism of Powell, whom he recently labeled a “major loser,” has added volatility to financial markets already uneasy over new tariff threats.

Posting on social media, Trump called on the Fed to take immediate action, urging Powell to slash interest rates to counter the potential economic drag caused by his latest tariff initiatives. Referring to Powell as “Mr. Too Late,” the former president warned of economic slowdown unless the central bank responds swiftly.

Trump’s renewed criticism appears to stem from his desire to see interest rates lowered in hopes of stabilizing the markets following the announcement of sweeping tariffs. Despite these demands, Wall Street has largely brushed off Trump’s push, with many investors viewing his attacks as a threat to the central bank’s independence. The markets reacted negatively, with the Dow Jones Industrial Average falling 2.5%, the Nasdaq Composite dropping over 2.5%, and the S&P 500 retreating 2.4%.

Key technology stocks, including Tesla and Nvidia, were among the hardest hit, while the U.S. dollar weakened significantly against several major global currencies. Earlier market gains, which had followed Trump’s temporary pause on the proposed tariffs, were wiped out as investor confidence was shaken by his repeated assaults on Powell.

Despite Trump’s pressure, Powell has remained consistent in his messaging. Known for his cautious communication style, Powell has recently voiced concern over the inflationary effects of tariffs. In mid-April, he cautioned that the new trade barriers could complicate the Fed’s efforts to balance economic stability, potentially resulting in temporary or even prolonged inflation.

U.S. inflation, which had surged to 9% in June 2022, has since been brought under control, now standing at approximately 2.4%. The Federal Reserve’s long-standing goal is to maintain inflation around 2%, a target that Powell has pursued while also keeping unemployment relatively low, currently near 4%.

The Fed operates under a dual mandate: to maintain price stability and promote maximum employment. Adjustments to interest rates are a primary tool to achieve these goals, but any major policy changes must be weighed carefully against potential downsides, such as job losses.

Trump has also floated the possibility of firing Powell, a move that would be highly unusual and possibly unconstitutional. Powell’s current term does not end until May 2026, and legal experts question whether a president has the authority to remove a Federal Reserve chair without cause. The Supreme Court is currently considering a broader case related to presidential powers over federal officials, but its outcome and implications for the Fed remain uncertain.

Powell, for his part, has reaffirmed the legal independence of the central bank. Speaking last week, he emphasized that the Fed is protected by long terms and operates under federal law to ensure impartiality.

Nevertheless, Trump’s allies within the administration have suggested they are exploring legal avenues to dismiss Powell, an idea that, if pursued, could send further shockwaves through financial markets.