President Trump is exercising direct authority over the economy in ways that few recent presidents have, flexing his muscle over institutions, agencies and commercial sectors where executive power has long been considered unwelcome, if not altogether irrelevant.
His no-holds-barred pressure campaign on the Federal Reserve, his reversal of post-war U.S. trade policy, his rejection of congressional budgetary mandates, his encroachment on private-sector companies, and his superintendence over labor market data represent an interventionist approach to the economy that’s a far cry from the institutional norms of past decades.
Interventionism has increased in recent years, drawing comparisons to eras of explicit industrial policy and other methods of state management of the economy, and the trend is only getting stronger during Trump’s second term.
“Presidents [usually] steer within informal or extra-Constitutional constraints, and those are the constraints that Trump is busting through,” Daniel Sargent, an economic historian at the University of California, told The Hill. “Trump is transgressing decades-long norms.”
Trump’s pressure campaign on the Fed reached a new level of intensity this week when he moved to fire Fed board of governors member Lisa Cook over a mortgage fraud allegation — a claim that administration officials have directed at other political foes of the president, as well.
The attempted firing is the most dramatic act of Trump’s pressure campaign so far, which has focused largely on Fed Chair Jerome Powell. The president has constantly mocked Powell on social media, and accused him of mismanaging renovations of the Fed’s headquarters, even ambushing the Fed chief with a new cost estimate for a facility renovation in front of rolling television cameras.
Behind the curtain, the White House is seeking greater control of monetary policy — specifically lower interest rates that could boost corporate profits and rally financial markets. Several of his predecessors, including former Presidents Lyndon B. Johnson and Nixon, have pushed the Fed for loose money, though less publicly than Trump’s pressure campaign.
But Trump has taken his push a step further by urging the Fed to reduce the costs of financing the $36 trillion national debt, blurring the lines between both fiscal and monetary policy and the longstanding separation of the central bank from the Treasury.
If that line gets blurred enough, the roles of fiscal and monetary policy can flip, with the Fed managing the debt and Congress and the Treasury Department determining price levels, something that usually only happens in crisis periods, but that economists are growing increasingly concerned about now.
“This is when the Fed effectively loses its independence and becomes subservient to the Treasury out of necessity to keep the government solvent. When we get to that type of regime, it’s never good,” David Beckworth, a research fellow at the Mercatus Center, told The Hill.
While almost everyone in Washington bemoans the national debt, solvency concerns are significantly alleviated by massive new amounts of tariff revenue — another economic arena where Trump is exerting near-unilateral authority.
Bulldozing 75 years of both U.S. trade rhetoric and policy, which has been centered on internationalizing production and opening up foreign markets, Trump’s tariffs are bringing in more than $20 billion a month and could reduce deficits by $4 trillion over the next decade, according to the Congressional Budget Office.
Former Presidents Reagan and Kennedy both had protectionist trade policies, but Trump’s transactional, one-off trade deals are a break from precedent and often a reflection of personal preference.
“In the context of Congress’s utter incapacity to balance the federal budget, I’m increasingly [thinking] that high tariffs are here to stay, [and] that a Democrat, say in 2029, is not going to reverse Trump’s tariff policy, because the federal government won’t be able to afford to,” Sargent said.
Trump started his trade war in his first term, and it was largely maintained by the Biden administration. Trade experts have described this disassembly of the U.S.-led global trade order as “illegal.”
“We are violating rules which American foreign policy and trade policy tried to persuade other countries to adhere to for 75 years,” Harvard economist Robert Kennedy told The Hill in 2023.
While good for revenue, the about-face on trade has a major potential downside, jeopardizing U.S. treasuries’ status as the global safe-haven asset and dragging down the value of the dollar, which is down more than 11 percent since Trump took office. A capital flight following the launch of the April 2 “reciprocal” tariffs sent bond yields soaring, something that could happen again if the Fed kowtows to Trump’s demands for lower rates.
International reserve currencies like the U.S. dollar have long been understood to go hand-in-hand with trade deficits, which the U.S. now appears to be in the process of reducing.
Trump has also grabbed Congress’s purse strings in addition to scaling back the executive through a cost-cutting initiative carried out by the Department of Government Efficiency panel, formerly led by Elon Musk.
On his first day in office, Trump blocked Congressional funds for investments to modernize automobile production and move the sector away from century-old internal combustion engine designs.
The White House said this was to “eliminate the ‘electric vehicle mandate’” and “promote consumer choice,” though less than 1 percent of American cars on the road are electric. Democrats called the funding freeze, which applied to more economic sectors than cars, illegal.
In his first week, Trump paused “all federal financial assistance” — a sweeping order that affects $3 trillion of funding, worth about 10 percent of U.S. gross domestic product.
“Federal agencies must temporarily pause all activities related to obligation or disbursement of all Federal financial assistance,” the White House ordered. The purpose of the pause was to “provide the Administration time to review agency programs.”
The trend is continuing. Just this week, Trump’s Justice Department asked the Supreme Court to pause a judicial order to spend $12 billion in foreign aid approved by Congress.
Aid groups blasted the move, saying it undermines Constitutional checks and balances as a form of overreach.
“Dangerously, this administration’s actions further erode Congress’s role and responsibility as an equal branch of government,” said Mitchell Warren, director of the AIDS Vaccine Advocacy Coalition, in a statement.
Following a disappointing July jobs report, Trump unexpectedly fired the statistical chief at the Labor Department, accusing the agency — without any evidence — of producing “rigged” employment data.
The economics field exploded at the decision, with economists on the left and right condemning the firing.
Although the report included substantial downward revisions in May and June, the unemployment rate is still at a relatively low 4.2 percent and economists see the labor market as generally “in balance,” albeit at a slower pace of job creation.
The lower supply of workers is largely due to Trump’s crackdown on immigrants, which economists estimated will reduce immigration by 205,000 people this year and take a bite out of gross domestic product.
The firing at the Bureau of Labor Statistics (BLS) has raised fears about the politicization of bedrock-level economic data that is scrutinized by companies and governments all over the world.
“Politicizing the BLS undermines the integrity of labor market data and the professionals who produce it,” wrote Joseph Kane, a fellow at the Brookings Institution, earlier this month. “The data and policy ramifications could extend for years to come.”
Trump has also been smashing through the traditional separation between the public and private sectors, turning private companies into partly government-owned entities.
He’s taken a 10 percent stake in American chipmaker Intel and a “golden share” in Japanese steel producer Nippon Steel as a condition of its takeover of U.S. Steel. In July, the Defense Department became the largest shareholder in MP Materials, a mining company that specializes in rare earth minerals.
As Trump brings the economy increasingly under state control, companies have largely stayed quiet about the various encroachments.
“What is striking, disappointing, and ultimately dangerous is the stunning silence from [private sector] voices,” Gene Sperling, director of the National Economic Council under former Presidents Obama and Clinton, told The Hill.
This story was first posted at 6 and updated at 9 a.m. EDT.