Late yesterday, President Trump said he had no intention of firing Jerome Powell. It came after Kevin Hasset and others in the White House had said they were exploring options to dismiss Powell before his term ended. That sent markets into turmoil on Monday.
Tuesday, Treasury Secretary Bessent let it be known that the White House knows the situation with China is unsustainable and the White House expects a trade deal there. That calmed the markets.
The President rejecting his advisors’ thinking on firing Powell should help more too.
I understand the desire of the Administration to move quickly so any recession might be recovered before the midterms. But also, a number of people in the President’s orbit think the GOP House Majority is toast next year anyway, so a realignment that takes longer is fine. That thinking, unfortunately, could have spill over effect down ballot into state races.
Economic turmoil blamed on tariffs could, for example, swing suburbs of Atlanta against the GOP gubernatorial nominee in 2026, forcing more spending there for the GOP, which then puts pressure on the GOP’s chances in Arizona and elsewhere. Mercedes and Porsche are both headquartered in Atlanta now and are hurt by the tariffs. The spillover effects stretch across swing states.
The go hard and fast approach is impeded by investors and bond purchasers who cannot be prodded into a quick realignment of the global economy. It’s not that the President’s economic team is herding cats, but herding two legged cats — they won’t go where you want and they won’t go fast. Additionally, small businesses are less resilient and have less of an ability to adapt to the tariffs.
For all the bragging about this plan will realign the economy away from Wall Street to Main Street, it is Apple, Nvidia, Walmart, and Target that get access to the President to get exceptions and carve outs. The mom and pop show on the town square does not.
The go hard and go fast approach has added too much uncertainty and instability into an economic climate that requires more certainty and stability than is presently being offered.
Scott Bessent suggesting a deal will come with China and the President taking off the table that he would fire Powell will both help provide stability and calm investors. More of this, please.