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Trump’s War with the Federal Reserve Threatens Long-Term Damage to the Treasury Market

Donald Trump’s repeated criticisms of the Federal Reserve and its chairman, Jay Powell, have sparked alarm among top investors. Even after Trump walked back threats to fire Powell, concerns remain about lasting damage to the $29 trillion U.S. Treasury market.

Mounting Tensions and Investor Concerns

Despite stating this week that he has “no intention” of removing Powell, Trump renewed his complaints that the Fed has been too slow to cut interest rates. Powell’s term runs until May 2026, but the president’s continued pressure has reignited fears over the Fed’s independence and future direction of U.S. monetary policy.

Andrew Chorlton, head of fixed income at M&G Investments, warned: “Once you’ve said it, you’ve said it. You may take it back, but people will still wonder—what’s the next surprise?” He emphasized that any erosion in confidence regarding the Fed’s autonomy could increase borrowing costs for the government.

Ông Powell khẳng định chủ quyền của Fed, phớt lờ áp lực từ ông Trump - Nhịp sống kinh tế Việt Nam & Thế giới

Rising Yields Reflect Market Anxiety

Growing concerns over central bank independence—fueled by Trump’s calls for rate cuts and comments that Powell’s term “can’t end fast enough”—have led to a sharp sell-off in Treasuries. The yield on the benchmark 10-year Treasury note climbed above 4.4% this week, approaching levels seen during earlier market turmoil.

Biểu đồ đường biểu diễn lợi suất trái phiếu kỳ hạn 10 năm của Hoa Kỳ so với Đức, phần trăm điểm cho thấy các câu hỏi của Fed gây thêm áp lực lên trái phiếu kho bạc

 

Speculation Over Powell’s Successor

With uncertainty swirling, speculation has begun about potential replacements for Powell. Kevin Warsh, a former Fed board member and past Treasury secretary contender, is seen as a possible pick. Although Warsh was a vocal critic of Fed policy last year, he has remained silent on recent decisions.

Capital Economics noted that if Warsh were nominated, “he would have to compromise on his traditionally conservative monetary stance and align more closely with Trump’s preferences for low rates.” Kevin Hassett, former chair of Trump’s Council of Economic Advisers, is also seen as a contender.

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Market Risks of Political Interference

Jeffrey Campbell of DoubleLine highlighted the “significant risks” of the next Fed chair appointment, particularly as global investors begin to question the fundamental security of their investments in U.S. debt.

Investment managers warn that any deviation from the norm in selecting a Fed chair—or signs of a policy shift—could widen the gap between U.S. bond prices and global counterparts. “In this environment, it’s hard to lie down in front of the train if you see it coming,” said Greg Tipp of PGIM. “We are definitely vulnerable to that risk.”

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Conclusion

While Trump’s immediate threats may have receded, the long-term implications of his attacks on the Fed remain. For investors in U.S. Treasuries—the world’s safest assets—the concern is not just about rates, but about the reliability of American economic governance.

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