ANALYSIS: Trump Wants Powell Out — and the Fed’s Independence Is at Stake

What the Law Says

The legal issue is less straightforward than a tweet. The Federal Reserve Act stipulates that Fed governors may be removed “for cause”—“for cause” in the original text. For nearly a century, everyone has understood that “for cause” meant serious misconduct, gross incompetence, or corruption. Not “he refuses to do what I want.”

But the Trump administration has already shown, through the dismissal of members of independent agencies, that it interprets presidential authority broadly. Kevin Hassett, director of the National Economic Council, confirmed that the White House legal team was actively exploring the possibility of removing Powell.

The Precedent That Doesn’t Exist

Never, in the Federal Reserve’s 111-year history, has a president fired its chair. This is no coincidence. It is a founding taboo—one of those unwritten conventions that distinguish a functioning democracy from a system where political power directly controls the printing press.

And yet, Trump treats taboos like windows: they’re meant to be broken. He’s proven this with inspectors general, federal prosecutors, and career civil servants. Why would he stop at this one?

The Silent Plunge

The Dow Jones lost 971 points on the day of Powell’s remarks. The S&P 500 fell 2.4%. The Nasdaq dropped 2.6%. These aren’t abstract numbers. They represent billions of dollars that vanished from the retirement accounts of millions of Americans in a matter of hours.

But the most worrying signal didn’t come from stocks. It came from the dollar. The greenback slipped to its lowest level in three years. And gold broke through the $3,300-per-ounce mark for the first time. When investors simultaneously flee a country’s currency and stock market, they aren’t panicking. They’re reassessing.

What Gold Tells Us

Gold never lies. It is the barometer of institutional fear.

At $3,300 an ounce, gold isn’t just saying that investors are nervous. It’s saying that they doubt the structural stability of the U.S. financial system. It’s saying that the unspoken promise—that the dollar is safe because the Fed is independent—is beginning to crack.

And yet, no one in the White House seems to understand that this crack is self-inflicted.

The Harsh Reality

Here’s how it works, stripped of all the jargon. Trump imposes 145% tariffs on Chinese goods. China retaliates with 125% tariffs on American goods. American companies that import Chinese components see their costs skyrocket. They have two choices: absorb the loss or pass it on to consumers. Most choose the latter.

The result: prices rise. Inflation, which the Fed had patiently brought back toward its 2% target, threatens to spike again. At the same time, companies that export to China are losing their market. They’re slowing down. They’re laying off workers.

A vicious cycle

The more prices rise due to tariffs, the more Powell must keep interest rates high. The longer rates remain high, the more the economy slows down. The more the economy slows down, the more Trump blames Powell. The more Trump threatens Powell, the more the markets panic. The more the markets panic, the weaker the dollar becomes. The weaker the dollar becomes, the more expensive imports are. The more expensive imports are, the more prices rise.

It’s a destructive cycle. And the only person who could break it—by backing down on tariffs—is the very one who is accelerating it by threatening to fire the firefighter.

The Turkish Lesson

There is a recent example of what happens when a leader subjects his central bank to his will. Recep Tayyip Erdoğan’s Turkey has experienced exactly this scenario. Erdoğan has fired three central bank governors in two years. He has forced interest rate cuts even as inflation soared. The result: the Turkish lira has lost 80% of its value. Inflation has exceeded 85%. Ordinary Turks have seen their purchasing power wiped out.

The United States is not Turkey. The dollar is not the lira. But the mechanism is identical: when markets lose confidence in the independence of monetary policy, they flee.

The Dollar’s Privilege—and Its Fragility

The U.S. dollar is the world’s reserve currency. This status is not set in stone—it rests on a belief: that the Fed acts in the interest of economic stability, not in the political interest of the sitting president. Every tweet from Trump against Powell erodes that belief. Every threat of dismissal cracks it a little further.

And once that belief is lost, it cannot be rebuilt in a single term.

The Absent Congress

In any institutional crisis, the silence of the guardians is more dangerous than the cries of the attacker.

Congress has the power to protect the Fed’s independence. It could pass a resolution. It could hold hearings. It could publicly remind everyone that the central bank is not a department of the White House. It has done nothing. Republicans, out of partisan loyalty. Democrats, out of political calculation—letting Trump trip over his own tariffs could pay off in 2028.

Meanwhile, the institution is burning, and everyone is staring at their phones.

The Whispering Voices

A few voices are speaking out, but in hushed tones. Renowned economists. Former Fed officials. Wall Street analysts who know their bonuses depend on the stability that Powell defends. They publish op-eds. They give cautious interviews. But no political heavyweight has asked the obvious question: What happens the day Trump actually does it?

A man can be replaced, but an institution cannot

Jerome Powell will step down as Fed chair in May 2026. His term is coming to an end. Trump doesn’t even need to fire him—he just has to wait thirteen months. The fact that he refuses to wait says more about his intentions than a thousand speeches. It is not Powell the man that Trump wants to eliminate. It is Powell the symbol—the symbol that there is an economic power the president does not control.

And yet, that is precisely what the financial markets need to believe in order to continue functioning.

The Trillion-Dollar Question

If Trump can fire the Fed chair because he refuses to cut rates, then no future Fed chair will be able to resist political pressure. The markets will price in this reality. Long-term interest rates on U.S. debt will rise to reflect the political risk. The cost of borrowing for every American—mortgages, auto loans, student loans—will increase.

Trump wants low rates. The irony is that his actions would produce exactly the opposite result.

Europe is repositioning itself

Across the Atlantic, the European Central Bank has cut interest rates for the seventh consecutive time, bringing the key rate down to 2.25%. Christine Lagarde doesn’t need to mention Trump for everyone to understand: when she speaks of “exceptional uncertainty” weighing on the global economic outlook, she’s referring to Washington.

Europe is preparing for a world in which U.S. monetary policy could become politically compromised. And in that world, the euro and the yuan automatically become more attractive.

Global Rebalancing

Every country that holds dollar reserves—and there are dozens of them—is watching this crisis with a calculator in hand: China, Japan, Saudi Arabia. If the Fed loses its independence, diversification away from the dollar will accelerate. Not tomorrow. Not in a year. But once set in motion, the trend is irreversible.

Gold at $3,300 an ounce is not a bubble. It’s a vote of no confidence.

1971: The Forgotten Lesson

Richard Nixon pressured Arthur Burns, then chairman of the Fed, to lower interest rates ahead of the 1972 election. Burns gave in. The economy overheated. Inflation skyrocketed. The United States endured a decade of stagflation, oil shocks, and economic hardship. It took Paul Volcker and interest rates of 20% to clean up the mess—at the cost of a brutal recession.

History doesn’t repeat itself. But it rhymes. And this time, the rhyme is deafening.

What Nixon Didn’t Have

Nixon didn’t have Truth Social. He didn’t have 77 million followers. He didn’t have a Supreme Court composed mostly of justices he himself had appointed. He didn’t have a Congress that systematically refuses to impose limits on him. Trump has all these levers. And he’s using them.

The Humphrey’s Executor Case

Since 1935, the Humphrey’s Executor v. United States precedent has protected the heads of independent agencies from arbitrary dismissal by the president. This is Powell’s legal shield. But the current Supreme Court—with its conservative supermajority—has already shown its willingness to revisit established precedents.

If the case reaches the Court, the outcome is uncertain. And in financial matters, uncertainty is almost as destructive as the certainty of the worst-case scenario.

The Conservative Paradox

Here is the cruelest irony: the conservative justices who might overturn Humphrey’s Executor in the name of unitary executive power would, at the same time, destroy the very mechanism that protects American capitalism from political intervention. They would give the president—any president, including a future Democratic president—the power to turn the Fed into a political tool.

Conservatives who defend the free market may be about to deal it the most devastating blow in its history.

The Republican Who Says No

Jerome Powell is a Republican. Appointed by Trump. Confirmed by a Republican Senate. And that is precisely why his refusal to give in carries such weight.

Powell is not a political opponent. He is not an ideological dissenter. He is a conscientious technocrat doing the job for which he was appointed. He looks at the data. The data show that cutting rates now, while tariffs are driving up inflation, would be a dereliction of duty. And he refuses to commit that dereliction, even if the cost is his job.

Ordinary Courage

There’s a word to describe someone who simply does their job in the face of extraordinary pressure. That word isn’t “hero.” It’s “integrity.” And in an era when integrity has become an act of rebellion, Powell embodies something the markets instinctively recognize: predictability. Reliability. The idea that at least one American institution still operates by the rules.

It is this predictability that Trump wants to destroy. And that is exactly what the markets are punishing.

D-Day: Trump Signs the Executive Order

Let’s imagine this scenario. Trump signs an executive order removing Powell. The markets open the next day. The Dow Jones drops 2,000 points in the first hour. The dollar plunges 5%. Yields on 10-year Treasury bonds spike, because investors are demanding a political risk premium to lend to a government that has just politicized its central bank.

Asian and Gulf sovereign wealth funds begin selling their U.S. bonds. Not out of hostility—but out of fiduciary prudence. Their own mandates require them to reduce exposure to assets whose risk profile has just changed.

The Domino Effect

U.S. mortgage rates, already high, climb even further. The housing market, already fragile, freezes up. Businesses postpone their investments. Hiring slows. The recession that Powell was trying to avoid arrives—not despite the firing, but because of it.

And yet, in this scenario, Trump could appoint a compliant Fed chair who would cut rates. Policy rates would fall. But market rates—the ones that really matter for mortgages and loans—would rise. Because once trust is broken, it cannot be restored by decree.

The Fed isn’t an employee

In Donald Trump’s mind, the world is divided into two categories: those who obey and those who get fired. This framework works in real estate. It works on reality TV. It doesn’t work when the “employee” being threatened is the guardian of the financial credibility of the world’s largest economy.

The Fed is not the Trump Organization. Powell is not a contractor who can be intimidated by threatening not to pay his bill. Global financial markets are not a jury on The Apprentice.

The Cost of Ignorance

Trump claims that the Fed should cut rates because the ECB did. That’s like saying a surgeon should operate because another surgeon, in another hospital, on another patient, performed surgery. Economies are different. Diagnoses are different. Treatments must be different.

And yet, this false equivalence has become the U.S. president’s main economic argument. It’s frightening not because it’s false—it’s frightening because millions of people believe it.

Inflation Remains Above Target

Tariffs have a direct impact on prices. Every additional percentage point of tariffs translates, with a lag of a few months, into higher consumer prices. With tariffs at 145% on Chinese goods, the inflationary impact is massive. The Fed knows this. Powell says so. And that is exactly why he refuses to cut rates.

Cutting rates while inflation is rising is like pouring gasoline on a fire. It’s not excessive caution—it’s basic competence.

The job market is weakening

On the other hand, companies exposed to international trade are beginning to cut their workforces. The agricultural and manufacturing sectors, which depend on exports to China, are suffering the most. Farmers in the Midwest—Trump’s electoral base—are seeing their incomes plummet. And the Fed can’t do anything for them as long as inflation remains high.

It’s the perfect trap. And it’s a trap that Trump set for himself.

The Timeline

Powell’s term expires in May 2026. Thirteen months. In a normal world, it would be a matter of patience. In Trump’s world, thirteen months is an eternity—especially when markets are falling, poll numbers are deteriorating, and the narrative of “the president who crashed the economy” is beginning to take shape.

Every week that passes without a rate cut is a week in which Trump may decide that patience comes at too high a political cost. Every tweet is a test. Every statement is a trial balloon.

What’s Really at Stake

What’s at stake over the next thirteen months goes beyond Jerome Powell. It goes beyond Donald Trump. It goes beyond tariffs and interest rates. What’s at stake is the answer to a question America has never had to ask itself so directly: Can an institution hold its ground when the president wants to subdue it and no one stands up to defend it?

Gold at $3,300 an ounce offers a first answer. The dollar at a three-year low offers another. And Congress’s silence offers a third.

Powell is holding his ground. For now. But the ramparts will hold only if someone decides they are worth defending. And in the America of 2026, that decision is far from obvious.

Signed, Jacques PJ Provost