Confidence in Trump’s tariff strategy may be waning after no major trade deals have materialized, prompting speculation that the administration is shifting from a strategy of bold negotiation to tactical retreat. Analysts suggest Trump’s recent softening toward Federal Reserve Chair Jerome Powell after months of criticism may be less about calming the markets and more about managing blame for potential economic fallout down the line. A few weeks ago, the White House said media and analysts had missed “the art of the deal” when it came to Trump’s tariff policy.
Now that no such deals have emerged, Wall Street is speculating that President Trump is more focused on “the art of the retreat.” This tactic is evidenced on two counts, wrote UBS chief economist Paul Donovan in a note seen by Fortune. “U.S. President Trump demonstrated the art of the retreat.
[Trump] stated [he] had ‘no intention’ of firing Federal Reserve Chair Powell,” Donovan wrote. “Trump also said they would be ‘very nice’ in any trade negotiations with China, raising hopes that the tax burden on U.S. consumers may lessen.” But the about-face on the Fed chairman—whom Trump had been lambasting for months—has raised suspicion among some analysts that the move may not merely be about calming markets, but about ensuring the Oval Office has a fall guy. “On Powell, we’ve never thought that he’d be ‘fired,’” wrote Macquarie strategists Thierry Wizman and Gareth Berry in a note seen by Fortune.
“Not only would the legality of a dismissal be challenged in the courts, but, even earlier, pressure from markets and even rating agencies would likely serve to halt the political process of a ‘firing’ in its tracks.” Trump may have changed his tune because he realized the threats were legally empty, but the Macquarie duo had a different take: “The best reason for thinking that Trump would not fire Powell is that Trump needs Powell as a ‘foil’—someone to blame for any economic slowdown that may ensue. Indeed, if the Fed cut its policy interest rates aggressively, Trump would have little excuse for a recession apart from his own policy agenda.” In a potentially inflationary environment courtesy of the Oval Office’s tariff plan, a dramatic rate cut is looking increasingly unlikely; Deutsche Bank notes that analysts priced in a 78% chance of a rate cut in June on Monday, but by Wednesday this had fallen to 57%. And Trump’s attacks on Powell thus far could already provide the bedrock of blame that the White House may need to deploy in the event of an economic slowdown.
The president has already given Powell a nickname, “Mr Too Late,” saying that Powell is a “major loser” for not slashing the base rate in order to foster economic growth.
