Trump Administration Eyes Powell Replacement Amid 125% Tariff Fallout

The Trump administration is preparing for a significant change in leadership at the Federal Reserve, as economic pressures from new tariffs prompt discussions about replacing Jerome Powell as Fed Chair. Powell’s term is set to expire in May 2026, but the administration's early move indicates a growing urgency to align monetary policy with its broader economic strategy.

The administration has implemented a 125% tariff on Chinese imports, a move aimed at addressing long-standing trade imbalances. However, the economic repercussions have been immediate. According to an April 2025 report, these tariffs could reduce U.S. GDP by up to 1.3% over time, resulting in an average tax increase of $1,300 per American household this year. In addition to higher consumer costs, the tariffs have provoked retaliation from other countries, affecting approximately $330 billion worth of U.S. exports. Economists caution that the total GDP impact, including foreign countermeasures, could reach a 1.0% reduction, exacerbating recession fears as households already contend with persistent inflation and high interest rates.

Treasury Secretary Scott Bessent has confirmed that the administration will begin interviewing potential replacements for Powell this fall. Bessent's criticism of the current Fed leadership focuses on its reluctance to lower interest rates, which he believes are "crushing the bottom 50% of Americans."

“The Trump team is committed to driving interest rates down,” Bessent stated in a recent televised interview. “We want a Fed Chair who understands the financial strain people are under and can act decisively in 2026 to stimulate the economy.”

While Powell and the Federal Open Market Committee have so far resisted cutting rates, insisting that inflation is still too high to safely do so, Trump officials view the 2026 leadership change as an opportunity to redirect policy in their favor.

The administration appears to be bracing for a challenging 2025, seeing it as a necessary period of economic correction before stimulus measures can take effect the following year. With forecasts already indicating slower growth and persistent inflation, insiders believe a new Fed Chair aligned with Trump’s economic outlook could implement aggressive rate cuts and stimulus efforts by 2026.

Market analysts suggest this timeline could be strategic, setting up 2026 as the year of interest rate cuts and economic stimulus. Although Powell’s departure is not guaranteed, the mounting economic challenges, combined with political pressure, have made a change at the Fed more likely than ever.

As the U.S. economy adapts to the ripple effects of trade tensions, leadership at the Fed could soon be reshaped to reflect a new monetary era, one defined not just by inflation control, but by the political forces reshaping America’s economic policy from the top down.