The Trump administration is preparing for significant economic changes in its proposed tariffs, which are said to set the potential stage for a potential overhaul of Federal Reserve leadership.
Like Gary Gensler’s expulsion in the SEC (Securities and Exchange Commission), reports show that Federal Reserve Chairman Jerome Powell could face a similar fate as debate long before his term ends.
Jerome Powell’s exit planned to spell out Trump’s tariffs economic hardships
Treasury Secretary Scott Bescent has announced the Trump administration’s plan to interview candidates to replace Federal Reserve Chairman Jerome Powell.
In particular, Powell’s term as Fed Chairman will end in May 2026 for more than a year. With almost 13 months remaining, experts suggest that the administration’s move to economic turbulence expected from Trump’s aggressive tariff policy in 2025 could be a strategic response.
The sentiment is that the Trump administration will pave the way for the new Fed chairs to pilot the economy throughout 2026 with interest rate cuts and stimulus packages.
“Interest rates affect credit cards and auto loans. The bottom 50% of Americans over the past two years have been crushed by these high interest rates. We’ve reduced interest rates,” Bescent argued in a TV interview.
Trump’s tariff proposal, which includes a 125% tax on Chinese imports, is projected to have a major impact on the US economy. According to a Tax Foundation survey released on April 11, 2025, these tariffs could reduce US GDP by 1.3% in the long term.
The study also estimates that tariffs correspond to the average tax increase per US household in 2025. This puts pressure on consumers who are already addressing inflation concerns.
In combination with foreign retaliation affecting US exports of $300 billion, overall GDP reduction could reach 1.0%. This highlights the economic challenges the administration is anticipating next year.
The Trump administration is preparing for an economic recovery in 2026
The report comes a month after Bescent presented Federal Reserve Chairman Jerome Powell as a key obstacle. He implied that Powell had hindered the Trump administration’s resolve to lower interest rates.
In fact, Powell-led Federal Open Market Committee (FOMC) has refused to cut interest rates. They maintain this position until they become accustomed to inflation cooling.
The Fed also made a significant downward revision to its 2025 economic forecast. They painted pictures of weaker growth and sustained inflation.
According to economists, the Trump administration has been blessed with “economic debilitating” in 2025 due to tariffs. However, 2026 is considered a year of recovery due to monetary policy adjustments.
“This will be a year of interest rate cuts and economic stimulus packages, along with the newly appointed Fed Chairman, which was set up fully for 2026,” the Kobeissi letter said.
Therefore, the timing of Powell’s exchange is consistent with these economic forecasts. The new Fed chair, potentially aligned with Trump’s economic agenda, could drive interest rate cuts and stimulation, and counter the tariff-induced slowdown.
Jerome Powell has been chairman of the Fed since 2018. He piloted a complex economic environment, including high inflation and a post-pandemic recovery.
His second term, confirmed in May 2022, is characterized by an effort to balance the Fed’s stable prices and double dual duties. However, this came across criticism from President Trump.
“If US tariffs begin to shift (easily) the path to the economy, the Fed will have a much better cut rate. Do the right thing,” Trump shared about the true society.
Early searches for his successor illustrate the administration’s desire for the Fed chair, which may be more susceptible to policy goals.
