| Good morning and welcome back to White House Watch! Let’s jump into: Late on Tuesday, Donald Trump asked about a dozen Republican members of Congress if he should fire Federal Reserve chair Jay Powell. Reports of the discussion — the latest sign that the US central bank’s independence might be under threat — rattled markets yesterday, even as Trump later pushed back against the prospect that he would imminently sack Powell. The dollar swung in volatile trading, with an index tracking the currency against its peers sinking as much as 0.9 per cent, before settling down 0.3 per cent. On prediction market Polymarket, the odds that Trump would fire Powell in 2025 shot up to as high as 40 per cent, before receding to 20 per cent when the president appeared to backtrack. “We’re not planning on doing anything,” Trump insisted yesterday afternoon in the Oval Office. “I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud, and it’s possible there’s fraud.” He added, however, that “almost every one” of the lawmakers he met with on Tuesday had signalled that he should remove the Fed chair before Powell’s current four-year term ends in May 2026. The president also said that people he had “known a long time” were calling him and “begging for the job”. Republican Speaker of the House Mike Johnson said he was “not sure” if Trump had the authority to fire Powell, but noted that he believed “new leadership would be helpful at the Fed”. Trump has repeatedly lambasted “Too Late Powell” for not lowering interest rates. Another fresh line of attack came last week when Trump ally Russell Vought, director of the Office of Management and Budget, accused Powell of “grossly” mismanaging a $2.5bn renovation of the central bank’s headquarters in Washington. The Fed declined to comment. US revenues from customs duties hit a record high of $64bn in the second quarter, $47bn more than in the same period in 2024, according to data published by the US Treasury on Friday. [Free to read] As Washington rakes in a mighty haul from Trump’s sweeping tariffs, America’s trading partners, fearful of further escalation, have largely failed to strike back. Mexico, for example, did not retaliate after being hit with 25 per cent tariffs in March on exports not covered by the US-Mexico-Canada Agreement. Likewise, Trump’s threat to increase tariffs on the EU to 30 per cent did not provoke a major reaction in Brussels.
“The calculation is short term versus long term,” said Creon Butler, head of global economy at Chatham House. “It makes sense not to retaliate in the short term, but long term, there’s a calculation for other countries over the extent to which we are going to fight for global supply chains.” Even Canada and China — the only two countries so far to impose retaliatory tariffs on the US — have seemed wary of antagonising Trump. Ottawa recently ditched a digital services tax under US pressure and did not match Trump’s decision to double steel tariffs to 50 per cent.
Economists said that the US had been largely shielded from a backlash due to its dominant position as the world’s largest consumer market. “We can’t be confrontational with the US,” said Dan Nowlan, an adviser to former Canadian premier Stephen Harper. US-Canada trade accounts for 20 per cent of Canadian GDP, but just 2 per cent for the US. Alexander Klein, professor of economic history at the University of Sussex, said many international governments “fear[ed] the hit to global supply linkages and inflation from escalation”. He added: “Trump cares less about that, so is taking advantage.” | 
