TLDR
- Trump petitions Supreme Court to fire high-profile officials from independent agencies, potentially targeting Fed Chair Jerome Powell
- Powell’s reluctance to cut interest rates amidst Trump’s tariff policies has intensified their conflict
- Recent tariffs caused market disruptions with crypto markets falling 10-20% and liquidations reaching $888 million
- Powell faces a difficult decision: rate cuts risk inflation while maintaining rates could harm the labor market
- If Trump succeeds in dismantling the 1935 Humphrey’s Executor precedent, it could remove protections for Powell’s position
In an unprecedented move, President Donald Trump has petitioned the Supreme Court to grant him authority to fire officials from independent federal agencies, in what many see as a direct challenge to Federal Reserve Chair Jerome Powell. This legal maneuver comes amid growing tensions between Trump and Powell over interest rate policies following recent market turmoil caused by the administration’s tariff actions.
The conflict centers on Powell’s reluctance to cut interest rates in response to market disruptions triggered by Trump’s tariff policies. On April 2, 2025, dubbed “Liberation Day,” the administration imposed tariffs on dozens of countries, causing global market turbulence. Crypto markets responded with 10 to 20 percent drops on April 7, while stock markets experienced their worst declines in decades. Crypto liquidations that day reached approximately $888 million.
The Tariff Fallout
American markets saw less severe drops, partly due to rumors of a 90-day tariff pause. While the White House initially denied these rumors, it later confirmed a pause for most countries except China, which instead faced increased tariffs of 145%.
The market reaction was swift. The fear-greed index reached “extreme fear” following Liberation Day and the subsequent week. Bill Ackman, CEO of Pershing Square, highlighted the threatening situation for small businesses in the U.S. in a widely shared social media post.
Our stock market is down. Bond yields are up and the dollar is declining. These are not the markers of successful policy.
I am receiving an increasing number of emails and texts from small business people I do business with or have invested in, expressing fear that they will…
— Bill Ackman (@BillAckman) April 9, 2025
Trump had previously warned Americans about potential “pain” from tariffs in February, framing it as a necessary cost for America’s future prosperity. The subsequent 90-day pause and openness to negotiations with various countries, including China, has been interpreted differently. Some view it as a strategic move to pressure countries into negotiations favorable to the U.S., while others see it as capitulation to pressure from investors.
Indeed. I’d go so far as to say that the US is now viewed as an extremely unreliable trading partner by the rest of the world. Whilst some may hope to lessen any short-term shocks to their economies, they’ve all learned about the danger of dealing with a country that can change…
— Andy (@andyturner) April 10, 2025
Powell’s No-Win Situation
On April 10, inflation rates in the U.S. showed a decline. Trump viewed this positively but still pushed for interest rate cuts to address market instability. This decision falls to the Federal Reserve, an independent agency chaired by Jerome Powell, who has shown reluctance to cut rates.
Powell faces what the Wall Street Journal described as a no-win situation. Cutting rates risks unleashing inflation, while maintaining current rates could ignore the slowing economy and harm the labor market, which might cause inflation to rise anyway.
Despite these pressures, Powell has maintained his focus on controlling inflation and managing economic risks. On April 4, he stated that central banks should first assess the impacts of Trump’s rapid trade policy changes before making monetary policy adjustments.
The Legal Challenge
Trump’s petition to the Supreme Court could potentially dismantle the 1935 precedent set by Humphrey’s Executor v. the United States, which currently protects officials like Powell from being fired by executive power. Trump’s legal team argues these limitations conflict with Article II of the Constitution, which vests executive authority in the presidency.
If successful, this move could remove protections for Powell’s position and allow Trump to replace him, possibly with someone more aligned with his desire for rate cuts. Kevin Warsh, seen as more pro-crypto, has been mentioned as a potential successor.
The Federal Reserve Act currently requires “good cause” for terminating the Fed Chair. Powell’s term is set to end in May 2026, and he has stated he would not resign before then.
The implications of this legal battle extend beyond Powell’s tenure. Scrapping the Humphrey’s Executor precedent could expand presidential control over independent institutions like the Fed, potentially compromising their impartiality. This aligns with broader efforts outlined in Project 2025, which calls for an overhaul of the U.S. monetary framework.
Crypto Market Implications
For the crypto market, Powell’s leadership has had mixed effects. In December 2024, his announcement of a low interest rate cut reversed a crypto bull run. However, he has also been supportive of crypto in other ways, criticizing the debanking of crypto clients by financial institutions.
The Fed had previously signaled intentions to cut rates in 2026, which many viewed as positive for Bitcoin adoption. Lower interest rates might trigger inflation, which typically benefits Bitcoin in the short term.
Trump’s crypto-friendly policies are already considered a bullish factor for Bitcoin. However, the attempt to remove Powell through judicial means just to achieve rate cuts has raised concerns about institutional independence.
As this legal battle unfolds, market participants are watching closely to see how the Supreme Court will rule and what implications this might have for monetary policy and market stability in the coming months.
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