Trump Targets Fed Shakeup as Tariffs Strain U.S. Economy

The Trump administration is reportedly preparing to replace Federal Reserve Chair Jerome Powell ahead of the end of his term in May 2026, citing mounting economic challenges tied to its aggressive new tariff regime. The early move underscores a strategic pivot toward stimulating the economy through potential interest rate cuts and monetary easing, which current Fed leadership has resisted.

Treasury Secretary Scott Bessent confirmed that the administration will begin interviewing candidates to succeed Powell, signaling a proactive approach to reshaping the Federal Reserve’s policy direction in anticipation of 2026 economic conditions.

“Interest rates affect credit cards, auto loans—the bottom 50% of Americans have been crushed by these high rates,” Bessent said during a televised appearance. “We’re set on bringing interest rates down.”

The potential leadership transition comes amid escalating concerns over the economic impact of Trump’s proposed 2025 tariffs, including a headline-grabbing 125% levy on Chinese imports. According to a recent analysis from the Tax Foundation, these measures could reduce U.S. GDP by as much as 1.3% and cost the average household an additional $1,300 in annual expenses. The study also warns that retaliatory tariffs affecting $330 billion in U.S. exports could push total economic losses even further.

The administration’s economic outlook aligns with these projections, viewing 2025 as a period of expected weakness, followed by a recovery phase in 2026 driven by monetary stimulus. Analysts suggest that a new Fed Chair more aligned with the administration’s policy stance could facilitate this strategy.

Tensions between Powell and the Trump administration have grown over the Fed’s resistance to lowering interest rates. The Federal Open Market Committee has held rates steady, emphasizing that inflation remains too high to justify cuts. Moreover, the Fed recently downgraded its 2025 economic outlook, forecasting weaker growth and persistent price pressures.

These developments follow a trend of leadership reshuffles under the Trump administration, such as the reported removal of SEC Chair Gary Gensler. Powell, who was reappointed in 2022 for a second term, has guided the central bank through the pandemic recovery and a sustained inflationary environment, often drawing criticism from President Trump for not acting more decisively on rates.

“The Fed would be much better off cutting rates as U.S. tariffs start to transition their way into the economy. Do the right thing,” Trump posted on Truth Social.

According to financial commentary from The Kobeissi Letter, the anticipated transition “sets up perfectly for 2026 to be the year of interest rate cuts and economic stimulus,” marking a shift toward a Fed leadership more closely aligned with executive policy objectives.

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