Trump’s tariff war is just foreplay

With demolishing the independence of the Federal Reserve in his sights, Trump’s almost complete dominance of the governance of the United States will be complete

Trump’s campaign against the independent Federal Reserve (the US central bank) took an obscene turn earlier in the week with the personal attacks against chairman Jerome Powell taking on a new twist.

Having failed to push through his agenda on Powell, asking him to lower interest rates so as to reduce the cost imposed on taxpayers from his “Big Beautiful Bill”, Trump has adopted another tactic.

As if he were following the happenings of our own Varoshiotou case – where the popular belief is that the real reason for not confirming her as a judge was not to accept pressure on her decision on the Thanasis case – Trump has sought to find an excuse for enabling him to fire Powell. Knowing that firing the chairman for not lowering interest rates was untenable, he is now seeking to claim that Powell committed fraud in the way he managed the reconstruction of the Federal Reserve building.

A concerted campaign has been initiated among the Trump faithful to frame the discussion on the fraudulent or incompetent management of the reconstruction project, so as to build a case for removing Powell from his position. Some interviews on the Fox channel are particularly sickening in their prejudice. Trump himself was reported to be asking legislators in a recent Oval Office meeting, whether he should go ahead and fire Powell, holding a draft termination letter as a way to drive home his point.

He of course walked back the suggestion he would imminently fire Powell after the dollar took a dive, but the scenario of slowly building the groundwork for removing Powell, not only as chairman – his term in that position expires in 2026 – but also as a member of the Federal Reserve board – that term expires in 2028 – is being set up.

After installing a majority in the Supreme Court of judges willing to look favorably at his actions, Trump has now set sights on the other major independent body, the Federal Reserve. When he achieves that, as he probably will, his almost complete dominance of the governance of the United States will be complete. For make no mistake, once he secures the power to set interest rates – and ominously for the world, the power to grant or not dollar swap lines with other countries’ central banks – then there will be no limitations on how he can exert economic pressure to achieve whatever aims he sets his sights on. The present tariff war will seem like foreplay.

I have been repeating ad nauseum my views on how critical the independence of institutions on a well-governed society is. The independence of the Fed in particular was judged so critical so as to be protected by law. This became necessary to avoid the government using the power to issue money at will without considering the long-term consequences.

Some people argue that the markets will eventually catch up with what is going on and force Trump to water down his actions. Jamie Dimon, the head of JPMorgan Chase, the largest US bank and one of the most respected figures in Wall Street, has come out in defence of an independent Fed and Powell. Perhaps this is why Trump, for now, has said that he would not imminently fire Powell. But the plan is, with reasonable certainty, to remove Powell from the Fed board when his chairmanship expires in 2026. US Treasury Secretary Scott Bessent (himself a prospective candidate for Fed chair) has indicated as much when he said that Powell’s presence on the board would undermine the new chairman that Trump will appoint, who will surely lower interest rates irrespective of what happens to inflation.

For the past few months, I have been grasping at any signs that Trump’s policies would somehow trigger a realisation of how dangerous what he represents truly is. I conveniently seem to forget that when Hitler came to power in 1933, he was continually growing in strength until he initiated the world war in 1939 that brought about his demise. While I hope that another war will not be how we end this era of world history, the continued rise of Trump’s power seems to be a virtual inevitability.

Loukis Skaliotis is an economist