Donald Trump’s increasing influence over the Federal Reserve and his interventionist trade policies are raising concerns about the independence of American institutions. His actions, including the potential removal of Fed Governor Lisa Cook and the appointment of his advisor Stephen Miran, are seen as undermining the central bank’s credibility. Trump’s attacks on Fed Chairman Jerome Powell and his desire to replace him further exacerbate these concerns.
Macquarie’s Viktor Shvets suggests the Fed’s independence is becoming ‘de facto impaired’. Trump’s actions are drawing comparisons to emerging market policies, where personality-driven decisions often override impartial advice and transparent oversight. This shift raises questions about the risk premium applied to US investments, particularly in equities, which currently do not reflect the potential for stagflation or inefficiencies.
Trump’s intervention extends beyond the Fed. His administration’s suspension of the duty exemption on goods under $US800 has led to Australia Post suspending parcel deliveries to the US. This move, enacted through an executive order, is viewed as an attempt to shift the burden of tariffs onto exporters, who will likely pass the costs onto American consumers through increased prices.
While markets may currently be overlooking these interventions, the level of presidential involvement in the economy is unprecedented. Trump’s actions represent a significant gamble with potentially far-reaching consequences for the stability and independence of American financial institutions and trade relationships.
