Eliza Wong
Fed Leadership Crisis Escalates as Trump Spars With Treasury
- Treasury Secretary Bessant (贝森特) privately warned President Trump (特朗普) against firing Fed Chair Powell (鲍威尔), citing economic risks
- Trump dismissed these concerns publicly while claiming credit for stock market highs
- Government review confirms SpaceX contracts remain vital despite Trump’s threats to terminate them
- Federal Reserve maintains rate hold amid persistent inflation concerns
- Trump pushes aggressive minimum tariffs targeting EU imports
Tipping Point in Fed-Treasury Relations
On July 20th, Wall Street Journal reporter Nick Timiraos revealed Treasury Secretary Bessant’s urgent intervention in a brewing Fed leadership crisis. According to three White House officials who requested anonymity, Bessant cautioned President Trump that removing Jerome Powell would destabilize markets despite looming rate cuts. The Treasury chief emphasized Powell’s term expires in May alongside Governor Kugler’s (库格勒) January departure, ensuring vacancies for Trump to fill. Bessant noted ongoing Fed preparations for potential double rate cuts later this year.
Legal Bomb Threat
Core to Bessant’s warning was the near-certainty that Powell would sue over premature termination, a case likely to extend through spring 2026. This litigation would create prolonged uncertainty during crucial economic transition months. Bessant positioned proactive Fed cooperation as preferable to disruptive leadership changes.
Presidential Fury Unleashed
Trump responded violently on Truth Social within hours: “I don’t need Bessant explaining market impacts – I know what’s best!” His 237-character tirade mocked Powell as “Mr. Too Late,” while boasting about “historic stock highs no one else could deliver.”
Operational Independence Tested
“The President fundamentally misunderstands Federal Reserve independence. Chair Powell serves fixed terms precisely to insulate monetary policy from political pressure” – former Fed Governor Kevin Warsh.
The outburst capped months of tension after Trump reportedly drafted an executive order demoting Powell before seeking legal advice. Treasury staff acknowledge coordinating defensive briefings with Fed leadership through confidential backchannels.
SpaceX Paradox
Simultaneously, administration officials confronted Trump’s June 5th threat ending Elon Musk’s government contracts. A Federal Acquisition Regulatory Council review concluded SpaceX’s $14.2 billion portfolio remains vital for national security payloads.
Contract Lock-In
NASA’s Artemis lunar program depends on Starship landers while Space Force relies on Starlink for hypersonic tracking systems. Pentagon officials privately noted Musk’s SpaceX holds monopoly positions across six launch/reconnaissance categories.
Inflation Constraints Tighten
July’s FOMC meeting approaches with 5.1% CPI eating Trump’s pressure for immediate cuts, reports Reuters. Treasury yields spiked 42 basis points following ouster speculation despite Trump demanding lower borrowing costs. Fed officials now project earliest September cuts pending inflation cooling.
Tariff Double-Edged Sword
According to Financial Times, Trump wants a 20% minimum tariff on all EU goods – exceeding his original demands. Europe’s trade commissioner acknowledged stalled negotiations could trigger sector-specific levies targeting pharmaceuticals and luxury vehicles.
Global Market Dislocations
Wall Street registered institutional anxiety through surprising rotation:Nvidia projections lifted valuation past Alphabet+Meta combined. Congressional leaders draft Federal Reserve Integrity Act requiring Senate approval for premature dismissals.
Broader Governance Fallout
Japanese Prime Minister Shigeru Ishiba conceded weakened authority after losing Senate control amid U.S. trade deadline pressures. Global institutions face unprecedented strains as executives compile contingency plans for potential November electoral outcomes.
What Lies Ahead for Markets
Financial systems navigate uncharted territory where Federal Reserve independence collides against direct presidential interventionism. Institutions countered with coordinated standards: ECB explicitly reinforced Mario Centeno’s fixed term while BOE governors cited U.S. tensions to justify tenure protections. The Fed leadership crisis shows institutional resilience remains critical even amid political crossfire. Watch September FOMC for clarification on Powell’s authority.
Executives should conduct executive scenario planning for all post-election monetary scenarios by August 20th, while confirming supply chain tariff buffers immediately. Treasury yield volatility warrants asset diversification into global infrastructure funds.
