A fierce battle is unfolding between President Donald Trump and Federal Reserve Chair Jerome Powell centered on interest rates and trade policy. With Trump’s aggressive tariff agenda and relentless pressure for lower rates, Powell’s commitment to the Federal Reserve’s independence is being tested like never before. This article dives into the roots of their feud, its economic implications, and the burning question: Can Trump fire Powell?
Table of Contents:
The Heart of the Conflict
Trump’s Trade War and Rate Cut Demands
Powell’s Stand
Can Trump Fire Powell?
Economic Fallout: Tariffs, Inflation, and Recession Risks
What’s Next?
Conclusion
The Heart of the Conflict
The Trump-Powell feud is a clash of visions. Trump believes his trade policies, anchored by sweeping tariffs, will revitalize American industry and fund government coffers. He sees lower interest rates as the fuel to supercharge growth, keep borrowing costs down, and boost the stock market.
In contrast, Powell prioritizes the central bank’s mandate to balance inflation and employment while safeguarding monetary policy independently of political pressures. Powell views Trump’s tariffs as a potential trigger for stagflation—rising prices coupled with sluggish growth—making rate cuts a risky move.
The tension has simmered since Trump’s first term, when he repeatedly criticized Powell’s rate hikes, calling him “clueless” and worse. By April 2025, with Trump back in the White House and tariffs reshaping global trade, the feud has erupted into a public showdown, rattling markets and raising questions about the Fed’s autonomy.
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Trump’s Trade War and Rate Cut Demands
Trump’s administration has imposed a 10% baseline tariff on all imports, with punitive levies as high as 245% on Chinese goods. He argues these tariffs will protect U.S. jobs, reduce trade deficits, and generate revenue, claiming on Truth Social that the U.S. is “getting RICH ON TARIFFS.”
To offset the economic friction tariffs created, Trump demanded the Fed slash interest rates, pointing to the European Central Bank’s (ECB) seven rate cuts in 2024 as a model. In a fiery April 17, 2025, post, he blasted Powell as “always TOO LATE AND WRONG,” urging immediate action to keep the economy humming.
Powell’s Stand
Jerome Powell, whose term as Fed chair ends in May 2026, has refused to bend. Speaking at the Economic Club of Chicago on April 16, 2025, he warned that Trump’s tariffs could act as a “stagflationary shock,” driving inflation to 4-5%—well above the Fed’s 2% target—and risking job losses and slower growth.
Powell emphasized the need for “greater clarity” before adjusting rates, which have held steady at 4.25-4.5% since December 2024.
Powell has made it clear he won’t resign, and he’s signaled that any attempt to remove him would face legal challenges. “The law is clear,” he said in a recent interview, referencing the Federal Reserve Act, which allows removal of a Fed governor only “for cause,” such as misconduct, not policy disagreements.
Can Trump Fire Powell?
The question of whether Trump can fire Powell is a legal gray area. While the Federal Reserve Act allows removal of a Fed Governor ‘for cause,’ it does not explicitly say whether a President can remove a Fed Chair from their leadership role alone. No president has ever tried to fire a Fed Chair mid-term, so this would likely trigger a legal battle without clear precedent.
Powell could theoretically be demoted (not fired as Governor, but replaced as Chair) by the President nominating a new Chair and having them confirmed by the Senate. But outright firing is legally contentious.
Trump’s threats have already had an impact. Markets dipped after his April 17 Truth Social rant, and gold prices hit record highs as investors sought safe havens. If Trump pushes to oust Powell, it could spark a constitutional crisis, with courts likely deciding the outcome. For now, Powell’s digging in, backed by Fed governors and bipartisan voices who see his independence as a firewall against economic chaos.
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Economic Fallout: Tariffs, Inflation, and Recession Risks
The World Trade Organization slashed its 2025 global trade growth forecast from 2.7% to -0.2%, citing U.S. tariffs as a primary driver. Economists polled by Reuters now peg recession odds at 45%, up from 25% six months ago.
Powell’s warnings about stagflation aren’t hypothetical. A 2025 study by the Peterson Institute for International Economics estimated Trump’s tariffs could add $1,700 annually to the average U.S. household’s expenses while shaving 0.5% off GDP growth. Industries like manufacturing and agriculture, key Trump constituencies, face export losses as trading partners retaliate. The ECB’s rate cuts, which Trump admires, are partly a desperate response to his trade war’s ripple effects on Europe’s economy.
For Powell, the tariffs create a policy trap. Raising rates to tame inflation could choke growth, while cutting rates risks fueling price spikes. The Fed’s current pause reflects this bind, but it’s left Powell vulnerable to Trump’s charge that he’s “killing the economy.”
What’s Next?
The Trump-Powell standoff is far from over. Trump’s tariff rollout is set to intensify through 2025, with new levies on Canada and Mexico looming. Powell, meanwhile, faces a delicate balancing act at the Fed’s May 2025 meeting, where any hint of rate changes could be seen as capitulating to Trump—or defying him further. Legal battles over Powell’s job could escalate if Trump tests his firing power, potentially landing in the Supreme Court.
Conclusion
The clash between Trump and Powell is a high-wire act with global consequences. The question of whether Trump can fire Powell remains unresolved, but the mere threat undermines confidence in U.S. institutions. As tariffs reshape trade and inflation looms, the economy hangs in the balance. For now, this feud is less about policy than power—and neither side is backing down.
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