Trump’s Escalating Clash with US Fed Sparks Market Turmoil and Global Uncertainty
President Donald Trump has once again rattled global markets, intensifying his feud with the US Federal Reserve and reviving fears about political interference in one of the world’s most influential financial institutions.
Over the weekend, Trump reignited his long-running battle with Fed Chair Jerome Powell, branding him a “major loser” and demanding immediate interest rate cuts — a move that has sent shockwaves through Wall Street. The renewed attacks follow Powell’s recent remarks expressing concern over the administration’s aggressive tariff policies, warning they could lead to both lower economic growth and higher inflation, thereby complicating the Fed’s ability to act.
“These are very fundamental policy changes,” Powell told the Economic Club of Chicago last week. “There isn’t a modern experience of how to think about this.”
Powell’s cautionary tone sent stock markets sliding on Thursday, but it was Trump’s aggressive social media posts and confirmation from National Economic Council Director Kevin Hassett that the president was exploring legal ways to fire Powell that triggered an even deeper selloff on Monday.
“I think that is terrifying markets,” said Monash University economist Dr Zac Gross. “A politicised Fed would lead to much higher inflation and, eventually, much higher interest rates — ultimately driving the stock market into a massive crash.”
Market Reaction: Stocks, Bonds, and the US Dollar Suffer
The impact wasn’t limited to equities. Bond markets also took a hit, with prices falling and yields rising — a signal of investor concern about rising inflation and government instability. The US dollar also came under pressure as investors fled American assets for safer options like gold and the Swiss franc.
“You almost need a degree in psychology to forecast where the economy and stock market are going,” Dr Gross told ABC News. “That’s because almost everything is being driven by one man — Donald Trump.”
Can Trump Fire Powell?
While legal experts at the Federal Reserve believe the president lacks the authority to dismiss Powell outright, a pending US Supreme Court ruling regarding presidential power over independent agencies could embolden Trump. A decision in his favour may pave the way for a direct challenge to Powell’s position.
Despite this, even if Trump manages to remove Powell as chair, he may struggle to sway monetary policy. The Fed’s Federal Open Market Committee (FOMC) includes six other members, who could collectively resist efforts to politicise the institution.
Powell’s term as chair runs until May next year, but he is legally entitled to remain on the board until 2028. His presence could continue to be a thorn in the side of any replacement — including top contender and Trump adviser Kevin Hassett, who has publicly confirmed the administration’s interest in removing Powell.
Undermining Global Confidence
The implications of this political-financial showdown are already being felt around the world. The mere prospect of instability at the helm of the Fed — combined with a potential Supreme Court clash — is shaking confidence in the US’s global financial leadership.
“Financial markets are fully aware of the damage such a confrontation could cause,” Dr Gross said.
Even if Trump doesn’t succeed in removing Powell, the uncertainty alone may erode market stability and investor trust — a dynamic expected to continue as long as threats of interference persist.
“Any time Donald Trump signals he’s willing to disrupt the economy for political purposes, markets will react — and not in a good way,” Dr Gross warned.
