President Donald Trump’s unprecedented tariffs, particularly on China, and recent attacks on Federal Reserve Chairman Jerome Powell have alarmed some of his top advisers and the nation’s largest CEOs, who have warned of financial chaos and the potential for empty store shelves, people familiar with the matter said.
Those warnings — and the market’s own volatility this week — appear to have blown past expectations. Trump on Tuesday backed off a threat to try to oust Powell, telling reporters in the Oval Office, “I have no intention of firing him.”
That was a relief for Wall Street. Just a day earlier, stocks rallied after Treasury Secretary Scott Bessant said Trump would seek to de-escalate the trade war with China. U.S. stocks rose again on Wednesday.
Trump’s Oval Office statement about Powell also came as a relief to senior administration officials who had been uneasy about the fiery rhetoric and worried about a protracted legal battle if Trump tried to remove the Fed chairman, people familiar with the matter said.
The Dow Jones Industrial Average closed up 420 points, or 1.07%. The S&P 500 rose 1.67% and the tech-heavy Nasdaq Composite gained 2.5%.
The three major indexes held gains but closed well below their highest levels of the day. The Dow Jones surged nearly 1,200 points in early trading before retreating: Stocks retreated from their highest levels after Bessant warned that rebalancing the U.S.-China trade relationship could take quite some time.
Bessant told a group of reporters after speaking at an event hosted by the Institute of International Finance on Wednesday that a full rebalancing would take “two to three years,” a person familiar with the matter confirmed to CNN.
The comments, which were previously reported by Bloomberg News and CNBC, highlight that obstacles remain even as investors are eager for a trade deal and CEOs seek clarity on tariffs.
White House press secretary Carolyn Levitt said on Fox News on Wednesday that “there will be no unilateral reduction of tariffs on China.”
“The president has made it clear that China needs to make a deal with the United States, and we are confident that we can do that,” Levitt said. “If things continue to go the way they are, the rate of tariffs on China will be determined by the president.”
Trump told reporters Wednesday that his administration would reach a “fair deal” with China on trade, adding that talks with countries were “going very well.”
When asked during an impromptu question-and-answer session outside the White House if he was actively talking to China, Trump responded: “Actively. Everything is very active.”
“Every country wants to participate, even those that have ripped us off for years. China is an example, but not just China, but the European Union. They ripped us off for years, and those days are over,” he added.
U.S. Treasuries initially rose on Wednesday before giving up big gains. The benchmark 10-year Treasury yield briefly fell below 4.3% in early trading before recovering to nearly 4.39%, just below Tuesday’s close. Yields and prices move in opposite directions.
Trump changes tone after meeting with CEOs
The apparent shift in Trump’s tone on Powell and China came a day after he met privately in the Oval Office with the CEOs of four of the nation’s largest retailers, who expressed concerns about the growing economic impact of Trump’s tariffs and the uncertainty they are causing for financial markets.
The CEOs of Walmart, Target, Home Depot and Lowe’s were invited to the White House as part of an ongoing internal campaign to brief Trump on the real-world impact of his policies, and they all pointed out supply chain disruptions and their impact on consumers, administration officials said.
Trump’s tariffs have put enormous pressure on the retail industry. Business leaders warned that store shelves across the U.S. could be “empty soon,” two people familiar with the matter said, painting a grim economic outlook that could become clearer in a matter of weeks.
For weeks, White House Chief of Staff Suzy Wells and other senior advisers have been fielding worried calls from business leaders about the consequences of Trump’s tariffs and his ongoing threats to fire the Federal Reserve chairman. All told, the president’s comments roiled markets and shook confidence in the administration’s ability to manage the economy.
Bessant, one of the key Cabinet officials whose speeches have calmed financial markets, played a key role in arranging the CEO meeting, officials said, a move designed to show Trump how severe the economic challenges facing the administration were.
Walmart CEO Doug McMillon, who has built a friendly relationship with Trump through meetings at Mar-a-Lago and with several mutual friends, bluntly told Trump that the trade war with China had begun to disrupt supply chains and officials said would only intensify by the summer.
Axios first reported the fallout from the president’s meeting with the CEOs.
Bessant urges caution on Powell
Many Trump advisers ultimately did not believe the president would try to fire Powell because he had been warned months earlier by his economic team, including Bessant.
Trump appeared to have absorbed those warnings.
But his fiery rhetoric over the past week has led to new uncertainty about his intentions — especially his tweet Thursday that Powell “can’t be fired fast enough!” and his call on Monday that Powell was a “big loser.”
Trump has argued that the Fed should cut rates sooner rather than later to accelerate economic growth, perhaps to offset the significant economic drag expected from his massive tariffs. But Powell has repeatedly said the Fed makes decisions to raise or cut rates only after careful consideration and will not rush to make decisions or issue emergency cuts before the rate-setting committee’s next meeting in May.
White House press secretary Karoline Leavitt continued Trump’s line of attack at a press conference on Tuesday, defending the president’s criticism of the Fed. She suggested that the Fed’s actions to cut rates late in the Biden administration — but not during the Trump administration (yet) — could be politically motivated. There is no evidence that the independent Fed is taking political positions, and Powell has repeatedly and strongly denied the suggestion that the Fed is playing politics in making monetary policy decisions.
“The president believes they have been acting in the name of politics and not in the interest of the American economy,” Levitt said before Trump’s comments in the Oval Office. “The president has a right to express his displeasure with the Fed and to say he thinks interest rates should be lower.”
Kevin Hassett, Trump’s chief economic adviser, also told reporters that the White House is studying whether Trump could fire Powell and said a potential “new legal analysis” could ease market concerns. This is a change from Hassett’s previous comments supporting the central bank’s independence.
Levitt said on Tuesday that Hassett recently changed his mind about the Fed after Powell insisted that the Fed would not make a hasty decision to cut interest rates.
“I also talked to Kevin Hassett about the Fed, and he questioned the independence of the Fed and whether they are really doing things in the best interest of the economy or for partisan reasons,” she said.
But White House officials have long determined that firing Powell would trigger legal challenges and market turmoil.
Trump said on Tuesday that if any study was indeed being conducted, it would not be necessary. He said in the Oval Office that he “never” intended to remove Powell from his position.
