Embrace the Black Swan: Why President Trump May Seriously Fire Jerome Powell—and Still Could

Just five months into his second term, President Donald Trump has already delivered several major wins: trade deals with the UK, China, Vietnam and more; a sweeping tax and spending bill; the Genius Act for crypto; and a stock market hitting record highs. These gains reflect Trump’s firm grip on the political agenda, backed by a GOP-controlled Congress. But one key obstacle remains: the Fed. Trump has repeatedly pressed Chair Jerome Powell to cut rates, but Powell has resisted, citing tariff-related risks and insisting on completing his term. This standoff has angered Trump and sparked threats. Ultimately, he may move to fire Powell—an extraordinary step that could rattle global markets. Here’s why it’s still on the table.

It’s worth noting that Jerome Powell, originally appointed by Trump during his first term in 2017, was reappointed under the Biden administration in 2022 and is currently set to serve until May 2026—still ten months away. At the time of his initial appointment, Powell was likely chosen in part due to Republican influence, as his nomination garnered bipartisan support. But Trump was never fully satisfied with Powell, especially after the Fed hiked rates four times in 2018, hampering Trump's fiscal loosening efforts and broader political agenda.

Trump appointed Jerome Powell as Fed Chair in 2017

Much of that friction stemmed from Trump’s limited experience in Washington during his first term, where many key appointments were heavily influenced by GOP leadership. This time, however, the situation is dramatically different. Following a decisive victory in the 2024 election, Trump has filled his administration with loyalists and allies, giving him far more control over everything from stock market, trade policy, AI, nuclear and crypto. Indeed, the President has even issued the “Trump Coin,” and his son has leveraged the family name to gain influence across the crypto and telecom sectors. With a GOP-led Congress and Supreme Court, Trump now has the institutional backing to act with far less resistance.

Now back to Powell. Though his term as chair ends next May, he will remain on the Fed’s Board of Governors until January 2028. That extended presence could complicate Trump’s efforts to reshape monetary policy. The President is reportedly seeking a new Fed chair who favors aggressive rate cuts, aiming to neutralize Powell’s influence and steer market expectations toward a looser monetary stance. But as long as Powell remains at the Fed, even in a non-chair role, he could hinder Trump’s ability to push through those changes. To ensure full alignment with his agenda, Trump may see Powell’s removal as necessary—either by force or persuasion.

So why is Trump so urgently focused on ousting Powell, and why does Powell continue to resist rate cuts that could align with the administration's goals? The core issue lies in conflicting economic priorities. Trump’s strategy of imposing tariffs aims to attract manufacturing back to the U.S. while offering tax incentives to strengthen the MAGA agenda. A low interest rate environment is essential to this plan, making it easier for companies to borrow and invest domestically. Trump's broader aim is to combine higher tariffs, lower taxes, and reduced rates to manage the trade deficit and mitigate long-term debt risks.

In fact, Trump’s tariff policy has already shown results. In June, the Treasury Department recorded a record $27 billion in customs revenue, pushing the fiscal year-to-date total to $113 billion—nearly double the previous year. But the current 4.25–4.5% interest rate, combined with $36 trillion in national debt, could negate those gains, further frustrating the President.

Customs revenue data compiled by Reuters

From the Fed’s perspective, the calculus is different. Its dual mandate is to maximize employment and maintain price stability. While the labor market remains strong, recent inflation data has raised concerns. Tariff uncertainty adds upward pressure on prices. Although the recent CPI figures came in slightly below expectations, overall trends have shown signs of resilience. The Fed remains wary that new tariffs could reignite inflation down the road. That’s why Powell prefers a cautious “wait-and-see” approach, with markets currently pricing in only one or two rate cuts later this year.

Both sides may have legitimate arguments, but their conflicting objectives are creating a complex standoff. Without rate cuts, Trump’s economic strategy lacks a key pillar—cheap borrowing—and that gap threatens to derail his broader growth plans. The Fed, meanwhile, fears premature easing could accelerate inflation, especially as tariffs create supply-side shocks. Even if Trump installs a dovish new chair, Powell’s continued presence at the Fed could be a stabilizing—but obstructive—force. His commitment to insulating the Fed from political pressure will likely fuel continued friction.

But in what ways could Trump consider removing Powell? There was a recent report that the President asked a group of House Republicans whether he should fire Powell. Soon after, Trump stated it was “highly unlikely” that he would do so—but crucially, he did not rule out the possibility. At the same time, Powell has faced criticism over his handling of the Fed’s ongoing $2.5 billion renovation project, which was originally budgeted at $1.9 billion. Powell has defended the overrun, insisting the project is justified by long-term savings and aimed at eliminating—not adding—future costs.

This controversy could offer Trump a pretext if he chooses to push Powell out. The President may not be inclined to wait another 10 months for Powell’s term to end, especially given the chair’s ongoing influence on Fed policy even beyond his official tenure. Having already accomplished so much in just five months, Trump may view further delay as intolerable—particularly if the Fed continues to resist swift rate cuts. For this reason, investors should not dismiss the possibility that Trump might act on his intentions. Such a move would likely trigger significant market turmoil, as the removal of a neutral Fed chair could lead to a perception of politicized monetary policy, raising the risk of inflationary expansion and broader economic instability.