US Markets in Turmoil: Trump’s Fed Attacks Spark 3% Plunge and Dollar Slide

The US stock market faced its steepest decline in months on April 21, 2025, with the Dow Jones Industrial Average plummeting over 1,100 points—its worst single-day drop since early 2024—as President Donald Trump intensified his public feud with Federal Reserve Chair Jerome Powell. The Nasdaq Composite fell 3.4%, while the S&P 500 dropped 2.9%, erasing gains from earlier in the week and pushing the index 17% below its February peak. Meanwhile, the US dollar slid to a three-year low against major currencies, amplifying fears of political interference in monetary policy.

The Root of the Crisis: Trump’s Tariffs and Fed Tensions

The sell-off was directly tied to Trump’s relentless attacks on Powell, whom he labeled a “major loser” and “Mr. Too Late” on social media. Trump demanded immediate interest rate cuts to offset the economic drag from his newly imposed tariffs, which he claims are necessary to “protect American jobs.” However, Powell has steadfastly refused to cave to political pressure, warning that tariffs risked inflationary pressures and undermining the Fed’s dual mandate of price stability and maximum employment.

The president’s rhetoric has now escalated to threats of removing Powell, whose term expires in May 2026. Legal experts, however, argue that such a move would require “cause” under the Federal Reserve Act—such as malfeasance—and note that no president has ever ousted a Fed chair mid-term. The Supreme Court’s pending review of executive power could theoretically open the door to such an action, but the political and market consequences remain deeply uncertain.

Tech stocks bore the brunt of the sell-off, with Tesla and Nvidia each falling over 5% on April 21. This mirrors broader market anxiety about the Fed’s inability to preemptively address the economic fallout of Trump’s policies.

The Fed’s Dilemma: Rate Cuts or Inflation?

The central bank faces a precarious balancing act. Inflation, at 2.4% in March 遑, remains above the Fed’s 2% target, while unemployment sits at 4%, near its lowest in decades. Raising rates could stifle borrowing and growth, but cutting rates risks allowing inflation to escalate further—a scenario that could lead to stagflation. Powell has insisted the Fed will await tariff-related economic data before acting, but Trump’s demands for “preemptive cuts” have intensified pressure.

Analysts warn that firing Powell would trigger a “severe reaction” in markets, as investors lose confidence in the Fed’s independence. Treasury Secretary Scott Bessent recently cautioned that politicizing monetary policy could destabilize global markets, noting that the S&P 500’s 17% drop from February highs already reflects growing investor skepticism.

What’s Next?

The Fed’s next meeting on May 6–7 will be pivotal. Investors are watching for clues about whether the central bank will cut rates or hold firm. Meanwhile, Trump’s continued public warfare with Powell risks further eroding market stability.

The data tells a clear story: markets are pricing in the risks of political interference. The S&P 500’s 17% drop from its February peak—nearing bear market territory—underscores the fragility of investor confidence. With the dollar at a three-year low, global investors are already questioning the stability of US economic institutions.

Conclusion: A Crossroads for Monetary Policy

The current turmoil highlights the existential threat posed by political interference in the Fed’s independence. Historically, the central bank’s nonpartisanship has been a cornerstone of US economic credibility. Now, however, Trump’s attacks are testing that principle.

The numbers are stark: a 3% plunge in major indices, a 17% drop in the S&P 500 from its peak, and the dollar’s three-year low all reflect market panic. If Powell is removed, or if the Fed caves to political pressure, the resulting loss of institutional trust could be catastrophic.

Investors should brace for volatility until May 6–7, when the Fed’s decision will either calm nerves or deepen the sell-off. The stakes couldn’t be higher—not just for markets, but for the future of US monetary policy itself.