Trump Denies He Wants to Fire Fed Chief

(Reuters)
By Yuval Rosenberg and Michael Rainey

Happy Tuesday! President Donald Trump and Treasury Secretary Scott Bessent made comments today that might - just maybe - help momentarily calm some fears about the economic disruption they are unleashing. We've got details.

Trump Denies That He Wants to Fire Fed Chief

President Donald Trump said Tuesday that he has no intention of firing Federal Reserve Chair Jerome Powell.

"Never did," Trump told reporters. "The press runs away with things. No, I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates."

Despite Trump's spin on the situation, he has strongly suggested that he would like to see Powell go. Complaining about the Fed chief's cautious approach to interest rate policy, Trump wrote on his social media platform last week: "Powell's termination cannot come fast enough!"

Additionally, members of his administration have indicated that Trump has been looking into the legality of removing Powell, who is nominally independent. Asked about the situation last week, White House economic adviser Kevin Hassett said, "the president and team will continue to study that matter" - a response that raised anxiety among investors, which Trump may be trying to ease.

Bessent Says Trade War With China Should 'De-Escalate' Soon

Treasury Secretary Scott Bessent told a group of investors Tuesday that the punishing trade war between the U.S. and China cannot be sustained, and he expects it to ease in the near future.

Speaking at a closed-door investor summit hosted by JPMorgan Chase in Washington, D.C., Bessent reportedly said that "there will be a de-escalation" in President Trump's tariff battle in the "very near future," which "should give the world, the markets, a sigh of relief."

Bessent said the current level of tariffs - 145% on Chinese goods coming into the U.S. and 125% on U.S. goods coming into China - amounts to a two-way embargo that is severely depressing trade between the countries. But neither nation "thinks the status quo is sustainable," Bessent said per the Associated Press. He added that the goal for the U.S. is to reset the terms of production and trade rather than to decouple from the Chinese economy entirely.

At the same time, it may be a while before the two sides can reach a final agreement acceptable to both. "I do say China is going to be a slog in terms of the negotiations," Bessent said. A comprehensive deal could take two to three years, Bessent suggested, and no formal talks have started.

White House Press Secretary Karoline Leavitt echoed Bessent's comments Tuesday, telling reporters that the administration is "doing very well" regarding a "potential trade deal with China." Trump is "setting the stage for a deal with China," she added, "and the ball is moving in the right direction."

Leavitt declined to say, however, whether Trump had spoken directly to China's President Xi Jinping, and there are questions about just how much dialogue is occurring between the two nations at any level. China warned other countries Tuesday about making trade deals with the U.S. that would harm the manufacturing giant. "China firmly opposes any party reaching a deal at the expense of China's interests," the Commerce Ministry said in a statement.

Separately, Politico reported that the White House is making progress on trade deals with Japan and India, but those agreements will likely being far from complete, with many difficult details left to be dealt with in a process that could take months.

Investors were happy with even a hint of positive news on tariffs, sending stocks sharply higher on Wall Street, with the S&P 500 rising 2.5% and the Dow Jones Industrial Average jumping 2.6%, or 1,016 points.

Trump Trade War Will Hurt US Economy, IMF Warns

President Trump's trade war could deliver a significant blow to the global economy, with the U.S. being hit particularly hard, according to the latest outlook from the International Monetary Fund.

In its new World Economic Outlook, published Tuesday, the IMF slashed its growth projection for the U.S. to 1.8% in 2025, down a full percentage point from the 2.8% rate in its January estimate. At the same time, the IMF raised its estimate for U.S. inflation in 2025 to 3.0%, up from 1.9% estimate in October.

At the global level, growth is projected to slow from 3.3% last year to 2.8% this year.

The IMF said Trump's trade war has everything to do with the gloomier economic picture. "The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity," the group said, adding that the risks to the global economy are "firmly tilted to the downside."

Pierre-Olivier Gourinchas, the IMF's chief economist, told reporters Tuesday that there is no reason to think tariffs will boost growth in later years, as the White House has suggested they would. "The long-term impact of the tariffs, if they are maintained, [will be] negative for all regions, just like the short-term impacts," he said.

Among its prescriptions for change, which include goals for monetary policy and fiscal spending, the IMF called for nations of the world to "bring back stability and find mutually beneficial trade arrangements." Noting that "businesses need predictability going forward," the IMF said "the global economy needs a well-functioning rules-based trading system."

Rubio Announces Major Reorganization of State Department

Secretary of State Marco Rubio on Tuesday unveiled plans for a sweeping reorganization of the State Department, including changes that will eliminate 132 offices and about 700 jobs in the first phase of much deeper planned staffing cuts.

"In its current form, the Department is bloated, bureaucratic, and unable to perform its essential diplomatic mission in this new era of great power competition," Rubio said in a statement that sounded distinctly Trumpian. "Over the past 15 years, the Department's footprint has had unprecedented growth and costs have soared. But far from seeing a return on investment, taxpayers have seen less effective and efficient diplomacy. The sprawling bureaucracy created a system more beholden to radical political ideology than advancing America's core national interests."

Rubio said the changes would bring the department into the 21st century. He posted a proposed new organizational chart and the department said it would be cutting the number of bureaus and offices by about 18%, from 734 to 602. Rubio has reportedly also instructed senior officials at the department to prepare plans to cut personnel by 15%.

Among the most notable changes, the Undersecretary of State for Civilian Security, Democracy, and Human Rights is eliminated. That office looks to advance American values around the world. In a Substack post, Rubio said the bureau "became a platform for left-wing activists to wage vendettas against 'anti-woke' leaders in nations such as Poland, Hungary, and Brazil, and to transform their hatred of Israel into concrete policies such as arms embargoes." He also claimed that the department's Bureau of Population, Refugees, and Migration had "funneled millions of taxpayer dollars to international organizations and NGOs that facilitated mass migration around the world, including the invasion on our southern border."

The Office of Global Criminal Justice and the Bureau of Conflict and Stabilization Operations are also cut.

The New York Times notes that the State Department budget is about 6% of the Pentagon's. "The proposed cuts run counter to President Trump's indications that he wants to resolve some major crises through diplomacy rather than military action," the Times's Edward Wong and Michael Crowley write.

Congressional Republicans applauded the proposed changes. "Every program, office, and policy at State must effectively advance U.S. foreign policy goals-not advance progressive ideology," Sen. Jim Risch of Idaho, chairman of the Senate Foreign Relations Committee, said in a statement. "Secretary Rubio's plans to reorganize the department will do just that. ... Change is not easy, but President Trump and Secretary Rubio have proposed a vision to remake the State Department for this century and the fights that we face today, as well as those that lie ahead of us."

House Foreign Affairs Committee Chairman Brian Mast said that bloat and bureaucracy had prevented the State Department from responding to global changes. "This reorganization will make the State Department leaner and meaner and ensure every dollar and diplomat puts America First," he said.

Democrats sounded a far different note. Sen. Jeanne Shaheen of New Hampshire, the top Democrat on the Senate Foreign Relations Committee, said in a statement that, while she and many of her colleagues welcome reforms where needed, American leadership in the world is being diminished.

"Any changes to the State Department and USAID must be carefully weighed with the real costs to American security and leadership," she said. "When America retreats - as it has under President Trump - China and Russia fill the void. A strong and mission-ready State Department advances American national security interests, opens up new markets for American workers and companies and promotes global peace and stability. It remains to be seen how the administration's latest proposals will achieve that goal."

Why it matters: The reorganization and cuts come as part of President Donald Trump's push to scale back the federal government and reshape it to fit his agenda, including the near-total elimination of the U.S. Agency for International Development. The remaining parts of that agency are being moved into the State Department.

The departmental overhaul also comes after years in which China has rapidly expanded its diplomatic network, which surpassed that of the United States to become the world's largest as of 2019, according to the Lowy Institute's 2024 Global Diplomacy Index.

Quote of the Day

"If you want to tax billionaires, you have to go after their wealth. It's quite plausible they raise the top rate because it's not where the money is."

− Steve Rosenthal, formerly a senior fellow at the nonpartisan Tax Policy Center think tank, as quoted by The Washington Post in a piece detailing the thinking of Trump administration officials and outside advisers about the possibility of seeking a tax hike on Americans earning more than $1 million a year in order to help offset the cost of Republicans' other tax plans.

The Post's Jeff Stein reports that Vice President JD Vance and Office of Management and Budget Director Russell Vought "have expressed openness" to the idea of tax increases on the wealthy. "While most analysts and aides think it's unlikely to advance," Stein writes, "the growing number of Trump officials open to higher taxes on the rich reflects an ideological schism in the Republican Party, as a newer and more populist wing rejects some of the traditional conservative dogma that has dominated the party for decades."

He adds that the idea, also pushed by former Trump strategist Steve Bannon, still faces intense opposition from some Trump advisers and many congressional Republicans, who have traditionally fought any tax increases.

Still, the discussion itself highlights how desperate Republicans are to find ways to offset the cost of their tax cut plans.

And critics like Rosenthal say a tax increase on millionaire income could have relatively limited effect in terms of economic inequality. "The money is in the wealth, the retirement savings, the unrealized gains, all of which goes tax-free. So taxing income may not be that big a deal," Rosenthal told the Post.

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