President Donald Trump, notorious for his frequent policy reversals—especially on tariffs—has once again changed course, this time regarding the fate of Federal Reserve Chair Jerome Powell. After weeks of escalating attacks and hints at Powell’s removal, Trump now insists he never intended to fire him, accusing the media of spreading falsehoods, although he continues to pressure Powell for more aggressive interest rate cuts. What he said this time sent U.S. stocks soaring. According to American media, Trump’s abrupt change of heart was influenced by the intervention of Treasury Secretary Bessent and Secretary of Commerce Lutnick, while White House lawyers quietly reviewed whether the president could legally dismiss the Fed chair.
Federal Reserve Chair Jerome Powell speaks during a news conference after the Federal Open Market Committee meeting, Wednesday, March 19, 2025, at the Federal Reserve in Washington. (AP Photo/Jacquelyn Martin)
On April 16, Powell said, “Markets are struggling with a lot of uncertainty, and that means volatility.” Given the sweeping changes in President Trump’s tariff regime, his view is that markets are “functioning just about as you would expect them to function”. He further noted that the real issue is the direction of trade policy, and until that’s clear, it’s impossible to make sound assessments, implicitly criticizing the administration’s erratic approach. Unsurprisingly, this triggered a barrage of attacks from Trump.
On April 17, Trump posted on his social platform: “Powell’s actions are always ‘too late and wrong.’ He should have cut rates like the European Central Bank long ago, and now he should cut them immediately. The sooner Powell leaves, the better.”
The next day, during a White House interview, Trump was asked about Powell’s claim that he wouldn’t resign even if the president requested. Trump retorted, “He’ll leave. If I ask him, he’ll leave… I’m not happy with him. If I want him out, he’ll be out there real fast, believe me,” making clear his intent to replace Powell.
Trump’s chief economic adviser, National Economic Council Director Kevin Hassett, later stated the administration would continue to study the issue.
On April 21, Trump again lashed out on social media, “Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’ Trump wrote, “Powell’s termination cannot come fast enough!”, warning that without timely rate cuts, the U.S. economy could slow down. These remarks triggered a sharp selloff, with the Dow plunging nearly 1,000 points.
Yet the very next day, when asked in the Oval Office if he planned to fire Powell, Trump abruptly reversed course, claiming he never intended to do so, though he still urged Powell to take more aggressive action on rates.
What happened behind the scene to prompt this reversal?
According to The Wall Street Journal, before Trump’s public U-turn, Treasury Secretary Scott Bessent and Secretary of Commerce Howard Lutnick intervened. Some senior White House officials had taken Trump’s threats seriously, prompting White House lawyers to privately examine legal options, including whether Powell could be dismissed “for cause”—a standard typically interpreted by courts as requiring misconduct or wrongdoing. Any attempt to oust Powell would have escalated tensions between the White House and the Fed.
Earlier in the week, these discussions ceased after Trump told senior aides he would not try to remove Powell,. Insiders say Bessent and Lutnick warned that firing Powell could trigger severe market turmoil and legal battles. Lutnick also told Trump that removing Powell would likely not change interest rates, as other Fed governors might maintain similar policies.
In fact, as financial markets reacted negatively to Trump’s aggressive trade and economic moves, he was forced to retreat and compromise.
Media analysis suggests that, despite Trump’s indifference to market swings in the eyes of the public, both he and his advisers closely monitor Wall Street and corporate reactions to his policies.
Most analysts believe that even if Trump managed to remove Powell before the end of his term, it would not deliver the lower rates Trump wants. At the last FOMC meeting, all 12 governors supported keeping rates unchanged.
Notably, last month, Trump promoted Fed Governor Michelle Bowman to Vice Chair for Supervision, but Bowman herself has repeatedly warned against premature or excessive rate cuts.
The Fed’s independence has long been regarded as “sacrosanct” by Wall Street bond investors. If foreign investors fear government interference in Fed policy, they could reduce purchases of U.S. debt, driving up rates. Political pressure on the Fed could also lead to short-term policymaking, increasing economic and market volatility.
As the world’s most important central bank, the Fed’s independence is critical not just for the U.S. economy but for global financial stability.
Tim Mahedy, chief economist at Access/Macro, warns that forcing out the Fed chair would trigger a “doomsday” market reaction: “The pain would be swift and severe,” likely forcing the president to backtrack immediately or risk a systemic financial crisis.
Deep Throat
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Former Google CEO Eric Schmidt recently sounded the alarm in The New York Times: China is not just catching up in artificial intelligence and technology innovation, it is, in some areas, pulling ahead. Despite US efforts to curb China’s progress through export controls on advanced AI chips, Schmidt argues these moves have only fuelled China’s determination to cultivate talent, build resilient supply chains, and accelerate homegrown innovation.
Schmidt points to a new era: “From DeepSeek to Temu to TikTok, Chinese tech is starting to pull ahead.” The era when China trailed far behind the US is over. American restrictions have, paradoxically, pushed China to double down, producing world-class products and, at times, even leapfrogging the West.
Google Former CEO Eric Schmidt argues in a commentary that China is rapidly catching up to the United States in artificial intelligence and technological innovation. (Image source: X)
A Changed Landscape: From Copycat to Contender
Schmidt’s commentary highlights how technological advances are transforming daily life in China. Electric vehicles speed through city streets; apps offer drone food delivery; and humanoid robots from Unitree Technology have become household names after performing on the Spring Festival Gala, China’s most-watched TV program. These shifts underscore China’s emergence as a peer-and sometimes a leader in fields like AI, robotics, and electric vehicles.
Humanoid robots from Unitree Technology became an overnight sensation after performing a dance and handkerchief-spinning routine on the stage of the Spring Festival Gala.
Schmidt notes, “To win the race for the future of technology, and, by extension, global leadership, the US must discard the belief that it is always ahead.” For years, China lagged behind. In 2007, when Steve Jobs unveiled the first iPhone, only about 10% of China’s population was online, and Alibaba was still years away from its New York IPO. But the pace of change has been staggering. In just over a decade, China has transformed from imitator to innovator, with products that sometimes outpace their Western counterparts.
AI: From Playing Catch-Up to Setting the Pace
When ChatGPT launched in late 2022, a wave of Chinese copycats followed, widely seen as years behind their American rivals. Yet, as with smartphones and EVs, Silicon Valley underestimated China’s capacity to rapidly develop affordable, state-of-the-art alternatives. Today, Chinese AI models are closing the gap. DeepSeek’s V3 large language model, updated in March, now ranks among the world’s best non-reasoning models on some benchmarks.
Schmidt observes, “In a dozen years, China has gone from a copycat nation to a juggernaut with world-class products that have at times leapfrogged those in the West.”
Manufacturing, Robots, and Open AI
Schmidt cites Xiaomi as a case in point: once dismissed as an iPhone copycat, the company delivered 135,000 electric vehicles last year. Meanwhile, Apple abandoned its own EV project after pouring in $10 billion over a decade. China is also racing to deploy robots at scale. In 2023, it installed more industrial robots than all other countries combined and has ambitious plans for mass-producing humanoids.
A key difference is openness. Leading US tech firms develop proprietary AI models and charge for access, partly because training these models costs hundreds of millions of dollars. Chinese AI companies, by contrast, often distribute their models freely for public use, download, and modification. This approach broadens their global influence and makes their technology more accessible to researchers and developers everywhere.
Schmidt’s New York Times op-ed headlined: “DeepSeek. Temu. TikTok. China Tech Is Starting to Pull Ahead.”
The Roots of China’s Tech Momentum
China’s rise is underpinned by decades of investment in STEM education, robust supply chains, and a brutally competitive domestic market that rewards relentless iteration. Apps from Chinese e-commerce giants like Shein and Temu, along with social platforms like RedNote and TikTok, are among the world’s most downloaded. Combined with the popularity of open-source Chinese AI models, it’s easy to envision a future where Chinese apps and AI companions are woven into the fabric of daily life worldwide.
Schmidt warns, “This China-dominated future is already arriving, unless we get our act together.” He urges the US to learn from China’s strengths: sharing more AI technology and research, accelerating innovation, and promoting AI adoption across the economy. He also cautions against underestimating China’s willingness to endure short-term economic pain for long-term technological supremacy.
Sanctions: Fuel for Innovation?
Despite US restrictions on advanced chip exports, China’s recent breakthroughs suggest that sanctions have only spurred local entrepreneurs to train and commercialize AI with renewed vigor. Schmidt concedes, “It’s a hard truth to swallow, but Chinese tech has become better despite constraints, as Chinese entrepreneurs have found creative ways to do more with less.”
The End of US Tech Dominance?
Schmidt closes with a stark warning: “We’re no longer in the era when China is far behind us.” If China’s ability to innovate holds, if its AI companies remain open, and if the country stays on track to claim 45% of global manufacturing by 2030, the next phase of the AI race will be a no-holds-barred contest across every front. America will need every advantage it can muster.
