TLDR
- Trump has petitioned the Supreme Court to authorize firing officials from independent agencies, potentially targeting Fed Chair Jerome Powell
- Powell has maintained high interest rates to control inflation despite Trump’s pressure for cuts
- Trump’s recent tariff policies caused significant market turmoil, with crypto markets falling 10-20% on April 7
- The conflict centers on Powell’s reluctance to cut rates to remedy market instability following tariff implementation
- Powell’s removal could lead to lower interest rates, which might benefit crypto in the short term
After refusing to bow to pressure for interest rate cuts, Federal Reserve Chair Jerome Powell now faces a potential removal attempt through the Supreme Court, as President Donald Trump seeks greater control over monetary policy following recent market turmoil caused by new tariffs.
The conflict between Powell and Trump isn’t new. Powell has consistently kept interest rates high to combat inflation, which has frustrated Trump. Though Trump initially stated in December 2024 that he wouldn’t try to remove Powell, the situation has changed.
On April 2, 2025, Trump’s administration implemented widespread tariffs on dozens of countries, dubbed “Liberation Day.” This policy caused severe market disruption globally. Crypto markets dropped 10-20% on April 7, while stock markets experienced their worst declines in decades. Crypto liquidations reached approximately $888 million that day.
American markets fared better, partly due to rumors of a possible 90-day pause on tariffs. The White House initially denied these rumors but later confirmed a pause would happen for most countries except China, which instead faced increased tariffs of 145%.
Market Reaction and Business Impact
The market response was severe, with the fear and greed index reaching “extreme fear” following Liberation Day. Small businesses in the US appeared especially vulnerable to the economic fallout.
Trump has shown no regret about the market downturn. In February, he warned Americans about potential “pain” from tariffs, suggesting it was worth it for future prosperity. The later announcement of a 90-day pause and openness to negotiations with many countries, including China, shifted perceptions somewhat.
Some analysts believe Trump intentionally created market fear to strengthen America’s negotiating position. Others suggest he yielded to pressure from wealthy investors. Many remain puzzled about how restricting American companies with Chinese manufacturing operations will help the US economy.
On April 10, US inflation rates showed a decline. While Trump welcomed this news, he still pushed for interest rate cuts to stabilize markets. This decision falls under the authority of the Federal Reserve, an independent agency chaired by Jerome Powell, who has been reluctant to cut rates.
The Powell-Trump Standoff
According to the Wall Street Journal, Powell faces an impossible situation. Cutting rates risks unleashing inflation, while maintaining current rates might ignore economic slowdown and labor market deterioration, which could eventually cause inflation anyway.
Despite these pressures, Powell sees no justification for rate cuts and remains focused on controlling inflation and minimizing economic risks. On April 4, he stated that central banks should first evaluate the impacts of Trump’s rapid trade policy changes before making monetary policy adjustments.
Trump appears dissatisfied with this resistance. According to Bloomberg, he has petitioned the Supreme Court to authorize firing high-level officials from two independent agencies. This move could target Powell, who has stated he won’t resign before his term ends in May 2026.
Legal Strategy and Implications
If the Supreme Court overturns the 1935 precedent established in Humphrey’s Executor vs. the United States, Powell could lose his protection from executive removal. Trump might argue this precedent conflicts with Article II of the Constitution, providing legal grounds for termination.
Critics view this approach as an attempt by Trump to consolidate power and reduce government decentralization. However, investors hoping for rate cuts might welcome such a move.
Potential Crypto Market Effects
Powell’s December 2024 announcement of a low interest rate cut reversed a crypto bull run that was underway at that time. He hasn’t been viewed as particularly crypto-friendly, though he has shown support on some occasions, such as criticizing banks for refusing service to crypto clients.
If Trump succeeds in removing Powell, he might nominate Kevin Warsh, who is seen as more pro-crypto, or someone more willing to cut rates on demand. Lower interest rates could trigger inflation, which typically benefits Bitcoin in the short term.
Trump’s overall crypto-friendly policies are already considered a positive factor for Bitcoin. However, the attempt to use the Supreme Court to remove Powell, who many believe has performed well in his role, simply to force interest rate cuts could have unintended consequences for markets and monetary policy independence.
