Update 884 – Trump/Powell Tete a Tete,
Japan Deal, EO on AI, Noms Lead Week
President Trump continued his ongoing pressure campaign against Federal Reserve Chair Jerome Powell in a highly unusual hard-hat clad tete-a-tete to tour the Fed’s Washington D.C. building renovations yesterday afternoon. Trump called on the Fed to lower interest rates ahead of next week’s FOMC meeting and appeared to lay the groundwork for a “for cause” firing of Powell who has affirmed the Fed’s independence at every Trump attempt to influence its policy.
This week, the U.S. and Japan also reached a trade deal that locks in their tariff rate at 15 percent ahead of an August 1 new tariff deadline. Trump’s efforts to control the hiring and firing of independent agencies saw several new developments across different agencies. Trump also issued three new EOs on artificial intelligence and pressed the Senate to move faster on his nominations. Additionally, the HFSC approved a slate of legislation in a two-day markup ahead of the August recess.
Good weekends all…
Best,
Dana
Headline
Trump Continues Effort to Undermine Fed Independence
President Trump continued his ongoing effort to undermine the independence of the Federal Reserve yesterday afternoon, when he reiterated his call for Fed Chair Jerome Powell to lower interest rates while apparently laying the groundwork for his firing during a near-impromptu visit at the site of the Fed’s ongoing building renovations. Trump has issued and walked back threats to fire Powell repeatedly over the last several months.
President Trump and Fed Chair Powell – along with Senate Banking Committee Chair Tim Scott (R-SC), Office of Management and Budget Director Russel Vought, and Federal Housing Finance Agency Director William Pulte – visited the active construction site at the Fed’s Marriner S. Eccles Building and 1951 Constitution Avenue Building project. Trump’s visit was announced only the day prior to his visit and is highly unusual – the last President to visit the Federal Reserve was President George W. Bush, who attended the swearing in of Fed Chair Ben Bernanke in 2006.
Trump cannot legally fire Powell for refusing to lower interest rates. The President can only legally remove a member of the Fed’s board “for cause,” according to Section 10 of the Federal Reserve Act. Trump has called on the Fed to lower interest rates numerous times since his inauguration and threatened to fire Powell, walking back those threats each time, often in response to dips in the stock market.
Administration officials have suggested that Powell mismanaged the renovation. Yesterday, Trump claimed the cost of the project “looks like it’s about $3.1 billion,” then handed a document to Powell who pointed out that this figure included the cost of renovations to a third building, the William McChesney Martin Building, which were completed five years ago, saying “You just added in a third building… We finished Martin five years ago.”
Trump’s visit comes ahead of the Federal Open Market Committee meeting next week, during which it is expected to hold interest rates steady for the fifth consecutive occasion, as the Trump administration’s tariffs have begun pushing inflation higher. Inflation, as measured by the consumer price index, rose to 2.7 percent in June from 2.4 percent in May.
The Fed’s monetary policy independence is paramount for economic strength and stability and domestic and international confidence in U.S. markets.
Other Developments
U.S.-Japan Trade/Investment Deal Announced
On Tuesday, the U.S. and Japan announced that the two countries had finally reached a trade deal. After eight rounds of talks, the long-awaited deal includes:
- A reciprocal tariff rate of 15 percent, below Trump’s threat of 25 percent, which would have taken effect without a deal by August 1.
- Japan agreed to open its markets to American autos and rice. Notably, Japan secured a 15 percent duty on autos, which are subject to a higher sectoral tariff for other countries. Autos account for more than a quarter of American imports from Japan, and Japan ranks number five in America’s top trading partners in goods.
- Japan vowed $550 billion worth of investments in the U.S.; while details remain scarce, the investments are reportedly aimed at critical sectors including semiconductors, pharmaceuticals, steel, and autos. Japan is already the top investor in the United States and invested $783 billion in 2023.
While the 15 percent tariff on Japanese products is a steep escalation from even six months ago, it now comes as a relief to one of America’s strongest allies in Asia. It may also serve as a gauge for what we can expect with future trade deals. The 15 percent may act as a floor for trading partners like the E.U. and South Korea. The E.U., in particular, is rumored to be nearing a deal in the coming days and may try to capitalize on the 15 percent precedent set by Japan.
NLRB Appointments/Consumer Safety Cmsn. Firings
In an escalation of Trump’s quest to fill independent federal agency boards with political appointees, and maybe confident that the Supreme Court’s Wilcox v. Trump ruling will allow him to do so, Trump officially named appointees last week to the National Labor Relations Board (NLRB) to fill two vacancies. Their confirmation would allow a quorum on the Board, which was not possible after he fired the Democratic Board member back in January. The NLRB by statute had two Democratic board members, two Republican Board members, and one deciding vote who can be of either party. Terminations from the Board require cause. But when Trump fired Democratic member Gwynne Wilcox, Wilcox sued, and Trump’s firing was blocked by a federal judge, only to be overturned by the Supreme Court in an emergency docket case that will have serious ramifications for presidential authority over independent agencies. With these appointees, assuming they make it through Congress, the NLRB will be able to resume its duties and carry out much of Trump’s labor agenda.
In a reaffirmation of how SCOTUS will likely rule on the matter, SCOTUS ruled on Wednesday that Trump can proceed with firing the three Democratic members of the Consumer Product Safety Commission, an agency with a similar structure and bipartisan board to the NLRB. The ruling was 6-3, with the liberal justices in dissent, in a repeat of what happened in the Wilcox case. All of these developments indicate that Trump will likely get his way when it comes to federal employment decisions, even as it flies in the face of decades-old legal precedent and undermines agencies designed to be insulated from political influence. Lower court judges have otherwise protected leadership at federal independent agencies, in part because SCOTUS has not provided a definitive ruling on the subject and thus gives federal jurists some flexibility in their opinions. On Tuesday, for example, a federal judge reinstated two Democratic appointees at the National Credit Union Administration (NCUA), despite Trump firing them, on the grounds that there would be nothing to differentiate the justification provided for firing NCUA Board members from firing members of the Federal Reserve Board, which SCOTUS still regards as illegal.
Trump EOs Advance His AI Agenda (and Culture Wars)
On Wednesday, Trump signed three executive orders on artificial intelligence, his most significant moves on AI advancement to date. The EOs are meant to pave the way for AI development, but also seek to further Trump’s culture war agenda. On the former point, the EOs would try to limit federal and state regulations on AI, similar to a provision for the OBBB preventing state regulations on AI that was eventually cut in the face of considerable bipartisan pushback. They would also seek to promote the creation of more data centers, including with some lightening of environmental regulations, and propagate the use of American AI models abroad.
On the latter point, Trump signed an EO that explicitly requires U.S. companies doing business with the federal government to remove “AI agendas” from their models, and states that “The American people do not want woke Marxist lunacy in the AI models.” Accusations that large language models (LLMs) used by Google and OpenAI are politically biased are nothing new, though they do not necessarily cut in one direction. On the one hand, last year, Google had to pause its Gemini model’s image generator and then roll out a major update when it unpromptedly changed the races and sexes of major historical figures, causing backlash among online conservatives. On the other hand, Elon Musk’s own chatbot, Grok, sparked controversy earlier this year when it started talking about alleged “white genocide” in South Africa unprompted, mirroring Musk’s own political views. In short, while the issue of bias in AI is real, Trump’s focus on combating it is misguided at best.
Trump Nominations
Trump has grown increasingly agitated with the pace at which the Senate is approving his nominees, which may come as a surprise to those who have noticed that the Senate has actually made good progress on getting his nominations through since his inauguration. Regardless, there are currently over a hundred of Trump’s nominees waiting in the wings that Trump wants approved ASAP, enough that he tried to push the Senate to cancel its August recess, a demand that Senate Majority Leader John Thune has not acceded to. Several nominations were advanced by the Senate Banking Committee this week:
- Conservative lawyer Craig Trainor is up for Assistant Secretary for Fair Housing and Equal Opportunity at HUD. This is a particularly concerning appointment, as he is already at the center of a lawsuit from the NAACP over his work at the Department of Education, where he allegedly eliminated protections against racial discrimination. His nomination was favorably reported out of committee in a 13 to 11 party-line vote.
- John Jovanovic, a financial analyst, is up for chair of the U.S. Export-Import Bank. His nomination was favorably reported out of committee in a 19 to 5 vote, with Democratic Senators Reed, Warner, Cortez Masto, Warnock, Kim, and Gallego joining the Republicans in voting to send his nomination to the Senate floor.
- Ben Demarzo, Representative Mary Miller’s (R-IL) chief of staff, is up for assistant secretary at HUD. His nomination was favorably reported out of committee in a 13 to 11 party-line vote.
- Francis Brooke, GOP Whip Steve Scalise’s (R-LA) policy director, is up for assistant secretary for international trade and development at the Treasury Department. His nomination was favorably reported out of committee in a 13 to 11 party-line vote.
Unless new controversies arise around these picks, there is little reason to believe they will face serious opposition in the Senate. The only question is when their nominations will be taken up. With current pressure on the Senate to advance more notable judicial and diplomatic nominees, it is doubtful that they will get a floor vote anytime soon.
Markup
HFSC Advances Banking, Capital Markets Expansion Bills
The House Committee on Financial Services advanced 17 pieces of legislation focused on sanctions, capital markets, and financial regulation during its markup on Tuesday and Wednesday. The bills can now move forward to the House floor when Congress returns from the August recess.
The bills include:
- H.R. 3446, the FDIC Board Accountability Act, sponsored by Representative Bill Huizenga (R-MI), which seeks to undermine the power of the Director of the Consumer Financial Protection Bureau (CFPB), who serves as one of the five members of the Federal Deposit Insurance Corporation (FDIC) board. The bill would make the CFPB Director a non-voting observer on the FDIC board, eliminating his voting power. The bill passed in a 26-23 party-line vote.
- H.R. 4460, the Stop Agency Fiat Enforcement of Guidance (SAFE Guidance) Act, sponsored by Representative Dan Meuser (R-PA), which would require agencies including the CFPB, the Securities and Exchange Commission (SEC) and federal banking regulators – the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) – to state that its new guidance “does not establish any rights or obligations for any person and is not binding on the agency or the public.” The bill was approved in a 26-23 party-line vote.
The Committee also voted to advance a resolution authorizing its Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity to continue work until January 22, 2026. The task force was established earlier this year to focus on the Federal Reserve’s role in monetary policy, regulation and supervision, and U.S. Treasury markets.
Look Ahead
Tuesday, July 29
- July FOMC Meeting (Day 1)
Wednesday, July 30
- July FOMC Meeting (Day 2)
- GDP, 2nd Quarter 2025 (advanced estimate)
Thursday, July 31
- June PCE report
Friday, August 1
- July jobs report