Wall Street was rattled yesterday after a scathing attack by the former US president on Federal Reserve Chair Jerome Powell.
The Dow Jones plunged over 1,000 points, the S&P 500 dropped 2.8%, while the US dollar sank to a three-year low.
Trump has sparked yet another crisis. And it’s not just America that will feel the fallout. His trade war tantrum is hurting British investors too.
It’s a wrecking ball aimed at decades of economic orthodoxy.
Trump wants to scrap free trade as we know it, betting that a high-tariff economy will bring American jobs and factories back home.
Markets are in disarray as Trump changes tack from day to day.
Trillions have been wiped off share prices, smashing UK pensions and Stocks and Shares ISAs.
There could be a lot more to come, as Trump looks to remake America’s core institutions, from the judiciary to FBI, in his own image.
Now he's on the warpath against the US Federal Reserve, or Fed, which is that country's equivalent of the Bank of England.
One man is standing in his way. Fed chair Jerome Powell. Trump wants him out, and if he succeeds, chaos will follow.
It was Trump himself who nominated Powell as Fed chair in 2017, but he isn't happy with him today.
He wants Powell to slash interest rates to revive markets and support growth.
Powell thinks it's too early to slash rates, even though US inflation fell to 2.39% in March, down from 2.82% in February month and 3.48% last year.
He fears Trump's tariffs will drive inflation back up, by increasing the cost of imported goods.
Trump takes a different view.
“There is virtually No Inflation,” Trump wrote on his Truth Social site, then went onto to slam Powell as “Mr Too Late” and a “major loser”.
Loser is the biggest insult Trump can think of, so he's going all in.
The US President even accused Powell of being politically biased, claiming he cut rates in 2020 to help Joe Biden win that year's election.
Powell is standing his ground. Core inflation remains sticky and cutting too soon risks repeating reigniting inflation, in his view.
Something has to give.
Powell is seen as a steady hand. If he's forced out it could shatter the Fed’s independence and send shockwaves through global finance.
This won't just hammer the stock market. It will slam the bond market too, which is even bigger with a total value of around £100trillion.
The bond market is how governments raised the money they need to fund their spending.
If it crumbles that could sell disaster for the US, which relies on bond investors to fund its towering $36trillion (£29trillion) debt mountain.
Faith in the US dollar is plunging as a result. Trump might welcome a weaker greenback to boost exports, but it would come at a staggering cost.
If bond investors sense the Fed is no longer independent, they may walk.
That would send US borrowing costs through the roof, triggering the kind of spiral we saw when Liz Truss was PM. Only this time in the world's biggest economy.
Trump wants Powell gone. The rest of the world should hope he stays right where he is.
