Stocks tumbled today driven by President Trump’s imposed and proposed tariffs and his threats made to Federal Reserve Board Chair Jerome Powell. As of 2:45 pm EST, the Dow Jones Industrial Average was down 1,186, the S&P 500 167.84, and the Nasdaq 579.13. This continues a troubling trend as markets and businesses become increasingly concerned about the president’s worldwide tariffs.
In what’s become known as the “Sell America” trade, the markets continue to be largely at the mercy of Trump’s tariffs. Add to the president’s assault on Powell and the “Fed” which raises suspicions about the stability of that institution and the world’s reaction to it, and you’re left with extremely volatile markets.
Early Stock Fears and the Powell Attack
Portending trouble, before the markets opened, U.S. stock futures pointed lower after a holiday-shortened trading week, and the major indexes finishing in the red amid continued uncertainty about the tariffs. And then came the explosive comment made by Trump regarding the status of Chair Powell.
Last week, Fed Chair Jerome Powell commented that the tariffs imposed by President Trump could present a potential conflict between attempts to keep prices stable and promoting full employment. He said the Fed would wait for more clarification on tariffs and their effect on the economy. before any more rate cuts were proposed. Trump’s response to Powell was razor sharp.
“Powell’s termination cannot come fast enough! If I want him out, he’ll be out of there real fast, believe me.”
It remains doubtful that the president has the authority to fire the Fed chair over a policy disagreement. The president nominates members to the central bank’s Board of Governors, who are confirmed by the Senate and serve 14-year terms. From among that group, the president nominates a chair to serve a four-year term. And these board members can only be dismissed for cause, which courts have generally interpreted to mean malfeasance, not policy disputes.
None the less, Trump continued his threat to Powell today saying in a Truth Social post.
“Powell as a major loser. Preemptive cuts in interest rates are being called for by many. There can almost be no inflation, but there can be a slowing of the economy unless Mr. Too Late…lowers interest rates, NOW.” Powell has always been too late, except when it came to the Election period… How did that work out?”
Effects on Individual Stocks
The effects of this volatility on individual stock have obviously been devasting. Here is the how the “Big Seven” stocks are performing today.
Alphabet: -4.71
Amazon: -6.84
Apple Inc: -6.27
Meta Platforms: -17.80
Microsoft: -10.96
Nvidia: -6.05
Tesla: -17.38
It is evident by these stock downturns what the effect of the administration’s tariffs and the threat to the autonomy of the Federal Reserve has had on the overall economy. This a far cry for the period at the end of the Biden administration where actions by the president and the Federal Reserve helped the U.S. avoid a recession after the pandemic period.
Future Issues
Chicago Fed President Austan Goolsbee has said that U.S. economic activity might soon appear uncharacteristically high but that a summer drop-off is likely this summer. This will be due to businesses rushing to stock up on items before Trump’s tariffs take full effect. Remarking about this, he said.
“We heard a lot about preemptive building up of inventories that could last 60 days, 90 days We just don’t know how big they’re gonna be. I hope there not a situation where monetary independence is questioned due to the president’s statement that Jerome Powell should be fired.”
The real fear is that the U.S. Economy will sink into a period of “Stagflation.” This is an economic condition where slow economic growth, high unemployment, and rising prices (inflation) occur simultaneously.
