US stocks and the dollar saw significant losses as President Donald Trump escalated his criticism of Federal Reserve Chair Jerome Powell, calling him “a major loser” for not lowering interest rates.
Trump’s comments came in a social media post, urging Powell to cut interest rates “pre-emptively” to support the economy. Trump argued that Powell had been slow to react to changing economic conditions, suggesting that failing to act could slow the economy further.
The criticism follows a challenging period for the markets, where Trump’s trade policies, including tariffs, have led to stock market sell-offs and heightened fears of an economic downturn.
Market Response to Trump’s Criticism
The impact of Trump’s remarks was immediately felt on Wall Street. The S&P 500, a key index tracking 500 major US companies, dropped about 2.4% on Monday, marking a 12% decline since the beginning of the year. Meanwhile, the Dow Jones Industrial Average also fell by 2.4%, down nearly 10% for the year, and the Nasdaq saw a decline of over 2.5%, down approximately 18%.
Although the US market struggled, stock trading in the Asia-Pacific region remained relatively stable on Tuesday. Japan’s Nikkei 225 closed down 0.1%, while Australia’s ASX 200 dropped 0.3%. In contrast, Hong Kong’s Hang Seng gained 0.3%.
In Europe, early trading saw mixed results. The UK’s FTSE 100 saw a minor decline of 0.05%, Germany’s DAX was down by 0.5%, and France’s CAC 40 fell by 0.6%.
Dollar and Government Bonds Struggling
Despite traditionally being seen as “safe haven” assets during market uncertainty, both the US dollar and US government bonds have been under pressure. On Monday, the dollar index, which measures the strength of the dollar against several major currencies, reached its lowest point since 2022. Additionally, interest rates on US government bonds continued to rise, as investors sought higher returns.
Gold, typically considered a safer investment in volatile times, hit a record high, surpassing $3,500 per ounce, as investors flocked to the precious metal.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, pointed out that geopolitical instability, including conflicts in Ukraine and Gaza, as well as tensions in the Arctic, have contributed to gold’s rising appeal.
Powell and Trump’s Longstanding Tensions
Trump’s attack on Powell is not new. During his first term in office, Trump reportedly discussed firing Powell over disagreements regarding interest rates. Since his election win, Trump has consistently urged Powell to lower borrowing costs.
This latest round of criticism follows Powell’s warnings about the negative effects of Trump’s tariffs, which he stated could drive up prices and hinder economic growth. Last week, Trump publicly called for Powell’s removal, writing on social media, “Powell’s termination cannot come fast enough.” However, such a move would be legally complicated, as the Federal Reserve operates with a tradition of independence.
Despite the controversy, one of Trump’s economic advisers confirmed that the administration was exploring options related to Powell’s position.
Growing Concerns Over Global Economic Impact
As tensions rise between Trump and Powell, key economic policymakers are gathering in Washington for the spring meetings of the International Monetary Fund (IMF) and World Bank. Christopher Meissner, a professor of economics at the University of California, Davis, warned that central bank independence has been crucial to maintaining financial stability and low inflation over the past few decades.
“The independence of central banks is vital to ensure long-term price stability and to protect policymakers from short-term political pressures,” Meissner stated.
The IMF is expected to release updated growth forecasts soon, with analysts anticipating significant downward revisions. Meissner highlighted that many are forecasting a downturn in the US economy, which could have global implications. “When the US sneezed, the rest of the world caught a cold,” he noted.
The Reputation of the US Under Scrutiny
Streeter also pointed out that Trump’s policies have hurt the global perception of the US, which is no longer seen as a “calmer port in a storm” for investors. The rise in yields on US Treasuries, particularly 10-year bonds, signals increasing uncertainty about the direction of the US economy.
As concerns over inflation and economic growth continue to grow, markets are showing signs of unease, with investors unsure about the long-term impact of Trump’s trade policies.
