The American financial markets plunged into chaos Monday as investors reacted to escalating tensions between President Donald Trump and Federal Reserve Chair Jerome Powell, combined with ongoing uncertainty over global trade policies. The Dow Jones Industrial Average nosedived over 1,200 points (3.1%), marking its steepest single-day drop in months. The S&P 500 and Nasdaq Composite followed suit, sinking 3.2% and 3.5%, respectively, with nearly every major company across all three indexes closing in the red.
Meanwhile, the U.S. dollar hit a three-year low, sliding 1% against a basket of foreign currencies—a surprising shift, as the dollar typically strengthens during market turmoil, says a latest CNN report.
According to the CNN report, the sell-off intensified after Trump renewed his attacks on Powell over the weekend, calling the Fed chair a “major loser” in a social media post and demanding immediate interest rate cuts. This latest outburst follows months of public clashes between Trump and Powell, whom the president appointed in 2018.
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I am not happy with him: Trump
Trump has repeatedly blamed Powell for not slashing rates to boost economic growth, even as the Fed cut rates three times in 2019. Last week, Trump claimed Powell’s “termination cannot come fast enough,” sparking fears he might attempt to remove the Fed chair—a move experts say would violate legal precedent and destabilize markets. As per CNN, Trump even took to telling reporters in the Oval Office, “If I want him out, he’ll be out of there real fast, believe me,” while adding, “I’m not happy with him.”
Powell, however, has pushed back indirectly. During a speech in Chicago last week, he warned that Trump’s aggressive trade policies—including tariffs on Chinese goods and European allies—could harm the U.S. economy by fueling inflation and slowing growth. His remarks came hours after the European Central Bank (ECB) cut its benchmark rate, widening the policy gap between the Fed and global counterparts. While the Fed paused rate cuts in December, Powell hinted that Trump’s trade wars might force the central bank to act again in 2024.
Economic stability in question?
The White House added fuel to the fire Friday when National Economic Council Director Kevin Hassett revealed the administration is exploring “new legal analysis” to justify ousting Powell.
The market meltdown highlights a broader crisis of confidence. Typically, investors flock to “safe” assets like U.S. bonds or the dollar during downturns. This time, however, the dollar fell sharply while gold prices surged—a sign traders may be losing faith in U.S. economic stability. Analysts warn Trump’s attacks on the Fed could backfire, spooking foreign investors and complicating the Fed’s ability to combat future recessions.
