Trump Targets New Fed Leadership as Tariffs Shake U.S. Economy

The Trump administration is gearing up for a major shift at the Federal Reserve, as economic strain from new tariffs prompts serious discussion about replacing Jerome Powell as Fed Chair. With Powell’s term not set to expire until May 2026, the early move signals growing urgency within the administration to align monetary policy with its broader economic strategy.

Tariffs Hit Hard, Households Feel the Pain

The administration has already enacted a staggering 125% tariff on Chinese imports—a move officials argue is necessary to address long-standing trade imbalances. But the economic blowback has been swift. According to an April 2025 report from the Tax Foundation, these tariffs could reduce U.S. GDP by up to 1.3% over time, translating into an average tax hike of $1,300 per American household this year alone.

In addition to increased consumer costs, the tariffs have triggered retaliation abroad, affecting roughly $330 billion worth of U.S. exports. Economists warn that the total GDP impact—including foreign countermeasures—could reach a 1.0% reduction, heightening recession fears just as households are already grappling with persistent inflation and high interest rates.

Bessent: Fed Needs a New Direction

Treasury Secretary Scott Bessent confirmed that the administration will begin interviewing potential replacements for Powell this fall. His criticism of the current Fed leadership centers on its refusal to lower interest rates, which he argues are “crushing the bottom 50% of Americans.”

“The Trump team is committed to driving interest rates down,” Bessent said in a recent televised interview. “We want a Fed Chair who understands the financial strain people are under and can act decisively in 2026 to stimulate the economy.”

While Powell and the Federal Open Market Committee have so far resisted cutting rates—insisting inflation is still too high to safely do so—Trump officials see the 2026 leadership change as an opportunity to redirect policy in their favor.

2026: The Rebound Year?

The administration appears to be preparing for a tough 2025, viewing it as a necessary period of economic correction before stimulus measures can take effect the following year. With forecasts already pointing to slower growth and inflationary persistence, insiders believe a new Fed Chair aligned with Trump’s economic outlook could roll out aggressive rate cuts and stimulus efforts by 2026.

Market analysts, including those behind The Kobeissi Letter, suggest this timeline could be strategic: “This sets up perfectly for 2026 to be the year of interest rate cuts and economic stimulus.”

Although Powell’s departure is not guaranteed, the mounting economic challenges, combined with political pressure, have made a change at the Fed more likely than ever.

As the U.S. economy adjusts to the ripple effects of trade tensions, leadership at the Fed could soon be reshaped to reflect a new monetary era, one defined not just by inflation control, but by the political forces reshaping America’s economic policy from the top down.