Two headline-grabbing developments dominated the past week, and Dr Komal Sri-Kumar is once again urging caution. The first, he says, was market-moving—the latest signs of backtracking from the Trump administration on tariff threats. The second was more predictable: the Federal Reserve’s refusal to budge on interest rates despite yet another public tongue-lashing from the President.

In his latest commentary, Sri-Kumar notes that the White House’s recent trade overtures are a signal of nervous recalibration rather than strategic victory. “The mere prospect of a deal was sufficient for equity markets to continue to rally following the immediate post-April 2 slump,” he observes, but adds that the politics behind it are transparent. Trump and UK Prime Minister Keir Starmer “badly need a win on the political front,” he writes, following the preliminary announcement that up to 100,000 UK-manufactured cars would face only a 10% tariff—not the previously floated 25%. In return, the UK is expected to ramp up beef imports from the US.

It’s a deal in form more than substance, but even that was enough to give the markets a sugar high.

Elsewhere, a fresh round of US-China talks is now scheduled for Geneva. Trump has floated the idea of dialling down his proposed 145% tariffs on Chinese imports to a still-punishing 80%, which Treasury Secretary Scott Bessent had earlier likened to an embargo. “Ahead of the Chinese making any concessions,” Sri-Kumar notes pointedly, the President is already offering cuts. The pattern is familiar: announce a hardline tariff, observe the backlash across equity markets and currency volatility, then swiftly row back.

Investors may cheer the theatrics, but Sri-Kumar sees through them. The concessions, he argues, are not made from strength. They are “not going unnoticed” in global capitals, least of all Brussels. The European Union—a much larger exporter to the US than China based on 2024 data—is preparing its own counterpunch. The EU is reportedly considering tariffs on €95 billion worth of US goods, including high-profile items like bourbon and aircraft. While the UK has opted for relative silence and negotiation, the EU is reaching for the playbook of retaliation.

Dr Komal Sri-Kumar, President of Sri-Kumar Global Strategies

Yet markets continue to rise, treating any flicker of diplomacy as a reason to bid higher. “Investors in US assets appear to believe that any sign of movement is good enough,” Sri-Kumar notes, warning that this mentality has a shelf life.

Meanwhile, the President is still at war with the Federal Reserve. After the Fed chose to hold rates steady last week, Trump called Jerome Powell a “fool” on Truth Social, claiming there is “virtually NO INFLATION.” His remarks came despite the fact that inflation pressures are rising—largely due to the tariffs he himself introduced. Sri-Kumar finds this contradiction telling.

He also connects the dots between global central banks. The European Central Bank cut rates. So did the Bank of England. But the Federal Open Market Committee held firm. “With inflation headed upward,” Sri-Kumar writes, “the FOMC may not have the leeway to reduce rates even at its next meeting set for June 17–18.” This, despite Trump’s very public frustration that Powell hasn’t followed the ECB’s lead.

But what comes next may be even more market-moving. Powell’s term ends in May 2026, and the question of who will succeed him is already looming large. “Would it be an independent thinker who does not bow to the President’s wishes to ease policy in the presence of rising inflation?” Sri-Kumar asks. Or will Trump choose a loyalist who acts on command?

The last time a US President pressured the Fed into easing amid inflation was in the 1970s. The outcome was chaos. “The result would be a déjà vu from the 1970s,” Sri-Kumar warns, referencing Arthur Burns and G. William Miller—both of whom presided over a disastrous monetary era marked by high inflation, falling equities, and rising bond yields.

The White House could float a successor name during the Federal Reserve’s annual Jackson Hole gathering in late August. “This is generally a location and occasion for major monetary policy announcements,” Sri-Kumar notes. If Trump follows his historical patterns, expect the event to serve more as campaign spectacle than policy signal.

But even if tariffs are gradually walked back, the monetary uncertainty is not going away. Sri-Kumar offers a final warning: “Investors in equities and bonds can ignore [this] only at their own peril.” Markets may be rallying for now, but they are surfing waves stirred by political whim—not structural clarity. Long-term Treasury yields, he suggests, are likely to rise sharply in response.

As ever, Sri-Kumar’s message is simple but sobering: don’t confuse noise for stability, and don’t expect central bank independence to remain a given.

Dr Komal Sri-Kumar is President of Sri-Kumar Global Strategies, which advises multinational investors and sovereign wealth funds on global risk and opportunity. He is a regular contributor to business media and an established voice in global economic forums.
Disclaimer: This article quotes views expressed by Dr Komal Sri-Kumar in his weekly commentary. These are his personal opinions and not financial advice. Always consult a qualified adviser before making investment decisions.
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