Trump's election delays rate cut? Economists worry about resurging inflation, will there be a change in the Federal Reserve Chair?

U.S. presidential candidate Donald Trump stated in an interview with Bloomberg that the Federal Reserve should avoid cutting interest rates before the November election, and indicated that he would allow Federal Reserve Chairman Powell to serve a full term until 2026.

Trump in Office, Powell Out?

The relationship between Trump and Federal Reserve Chair Jerome Powell has been tense. Powell was nominated by Trump to be the chair of the Federal Reserve in 2017, but the two started to clash rapidly in 2018, with friction arising during the pandemic in 2020 over the pace of interest rate cuts.

In a interview in February 2024, Trump stated that he would not reappoint Powell and criticized him as a political figure because cutting interest rates was seen as helping the Democratic Party.

However, in a recent interview with Bloomberg, Trump explicitly stated that if he wins the U.S. presidential election in November, he would not remove Powell from office before the end of his term, allowing Powell to serve his full term until May 2026.

Trump said:

I would let him go the full term, especially if I think he's doing the right thing.

Nevertheless, Trump does not hide his thoughts on interest rate policy. He warned that the Federal Reserve should avoid cutting rates before the November election to prevent boosting Biden's chances. Currently, Wall Street fully expects two rate cuts by the end of the year, including one in September, just before the U.S. election in November.

Trump in Office, Inflation Rising?

Trump has consistently advocated for raising tariffs to bring in more revenue for the U.S., but mainstream economists do not agree with his views, warning that tariffs could further stimulate inflation. A report from the Peterson Institute for International Economics estimated that his tariff system would result in an average additional cost of $1,700 per year for middle-income families. The combination of Trump's tariffs, immigration restrictions, and extended tax cuts could also exacerbate inflation and slow economic growth, according to the Oxford Economics Institute.

However, Trump stated that he would lower prices by opening up more U.S. oil and natural gas drilling.

We have more liquid gold than anybody!

Trump Seeks Protection Fee from Taiwan? TSMC Falls Over 2%

During the interview, Trump also mentioned that Taiwan has taken away all the chip business and should pay a protection fee to the U.S.

Bloomberg Interview with Trump: Defending Taiwan is a bit difficult, semiconductors are very profitable, should pay protection fee to the U.S.

These remarks led to a drop in TSMC's stock price today, with shares falling by 30 points to 1,025 points at one point, a decline of 2.85%. This also dragged down the Taiwan stock market below the 10-day moving average, closing at 23,769 points.

However, TSMC has already set up a factory in the U.S. to expand its services and footprint. TSMC's heavyweight investor conference is scheduled for tomorrow, July 18th.