Markets may have cheered Donald Trump’s decision to let Federal Reserve Chairman Jerome Powell serve out his term, but economist Dr Komal Sri-Kumar warns the reprieve is unlikely to mark the end of tensions between the White House and the central bank.
In his latest SriKonomics newsletter “All Clear” Despite Trump Pullbacks: Powell, China Likely to Remain in President’s Crosshairs, Sri-Kumar said the apparent cooling-off was “not by a long shot” a sign that financial markets could breathe easy. “There will be several more opportunities for the Chairman to fall short of the President’s expectations during coming months, starting with the next FOMC meeting set for 6-7 May,” he wrote.
Last week saw Trump lash out at Powell on social media, frustrated that the Federal Open Market Committee (FOMC) did not mirror the European Central Bank’s move to lower interest rates. Trump claimed there was “virtually no inflation” and renewed calls for a cut. Bond yields rose, the dollar dipped, and equities wobbled—until Trump abruptly declared he had “no intention” of firing Powell before his term ends in May 2026.
Markets staged a strong rebound on the back of Trump’s comments, but Sri-Kumar cautioned that volatility could soon return. “Several senior Fed officials have expressed the view in recent days that it would be too early to understand the full impact of tariffs on economic growth and inflation,” he noted. Powell is expected to maintain that line during his upcoming press conference, a stance that may not sit well with Trump.
Sri-Kumar observed that if essential goods—many of which have Chinese input—push consumer prices higher, the Fed might even be forced to hike rates, reigniting conflict with the White House. “All bets would be off in the Trump–Powell duel,” he said.
Alongside tensions with the Fed, the Trump administration’s tariff policy has also seen erratic shifts. After imposing a sweeping 145% levy on Chinese goods, Trump moved swiftly to carve out exemptions for electronics crucial to major US technology companies. He floated the idea that Chinese President Xi Jinping would soon offer concessions—a phone call that, according to Sri-Kumar, “never came.”
Instead, China’s foreign ministry accused the Trump administration of spreading “fake news”—a phrase Trump himself had popularised. Beijing’s officials, while in Washington, DC last week for the Spring Meetings of the International Monetary Fund and the World Bank, showed no inclination to soften their stance. They insisted the United States must first withdraw “all unilateral tariff measures against China” before expecting any concessions.
Despite the clear rebuff, Trump struck an upbeat tone, promising US tariffs “will come down substantially” and claiming he would be “very nice” during future discussions. But Sri-Kumar argued the President’s concessions could come at a cost.
“The unilateral Trump climbdown has been met by a rally in financial assets and a stronger dollar,” Sri-Kumar said. However, he added, “such pullbacks from hardline positions could continue to support risk assets in the short-term, but as trade partners see the past threats as toothless, expect that to weaken the US negotiating stance with the rest of the world and have a negative impact on global markets.”
The knock-on effects are already being felt. Sri-Kumar pointed out that regions with deep commercial ties to the United States—such as Canada, Mexico and the European Union—are paying close attention to how the United States manages its disputes with China.
Markets may enjoy temporary relief, but the underlying issues that triggered last week’s volatility remain firmly in place. As Sri-Kumar put it: “And that is no fake news.”
This article is based on quotes from Dr Komal Sri-Kumar’s latest newsletter, SriKonomics: “No “All Clear” Despite Trump Pullbacks: Powell, China Likely to Remain in President’s Crosshairs.” Sri-Kumar Global Strategies, Inc. advises multinational investors and sovereign wealth funds on global risk and opportunities.
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