- President Trump backed down from threats to fire Federal Reserve Chair Jerome Powell
- Meetings with major retail CEOs revealed warnings about empty store shelves and supply chain disruptions
- Markets surged after Trump's reversal with the Dow gaining 678 points (1.73%)
- Treasury Secretary Bessent indicated efforts to de-escalate the China trade war
- Retail executives from Walmart, Target, Home Depot, and Lowe's directly warned Trump about tariff impacts
- Full trade rebalancing with China expected to take 2-3 years according to Treasury Secretary
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Trump's Economic Policy Reversal Sparks Market Rally
President Donald Trump has changed his mind about firing Federal Reserve Chair Jerome Powell and softened his stance on Chinese tariffs after getting serious warnings from top business leaders and his own advisors. This big shift in policy made the stock market jump up on Wednesday, April 23, 2025, with the Dow going up 678 points (1.73%) by afternoon.
The turn-around came right after Trump met with CEOs from America's biggest retail stores, who told him that his tariffs might make store shelves empty soon. These leaders from Walmart, Target, Home Depot, and Lowe's gave Trump a scary picture of what could happen in just a few weeks if he didn't change course.
"I have no intention of firing him," Trump said about Powell during an Oval Office meeting on Tuesday. This was a complete change from his social media post last Thursday when he wrote that Powell's "termination cannot come fast enough!"
Warnings from Business Leaders and Economic Advisors
Behind Trump's policy shift were urgent warnings from both his own team and powerful business leaders. Stock market reactions to tariffs have been increasingly negative, putting pressure on the administration to reconsider its approach.
Trump's economic advisors, including Treasury Secretary Scott Bessent, had been getting alarming calls from business executives about the combined effects of the tariff policies and threats to fire the Fed chair. Many warned that these actions were shaking market confidence and could lead to financial chaos.
The meeting with retail CEOs seems to have made a big impact on Trump. Doug McMillon, Walmart's CEO who has built a relationship with Trump through Mar-a-Lago meetings, told the president very clearly that the China trade war had already started messing up supply chains. McMillon warned this would only get worse by summer if nothing changed.
White House Chief of Staff Susie Wiles played a key role in bringing these concerns to Trump's attention, as business leaders have been raising alarms for weeks about the economic fallout from his policies.
Trump's Reversal on Federal Reserve Chair Powell
Trump's new position on Powell marks a sharp U-turn in his approach to the Federal Reserve. Just days before declaring he had "no intention" of firing Powell, Trump had launched harsh attacks on the Fed chair on social media.
Fed Chair Powell issued his strongest warnings about keeping politics out of Fed decisions earlier this month. Powell has said many times that the Fed will only decide to raise or lower rates after careful thinking and would not rush a decision or make an emergency rate cut before the next scheduled meeting in May.
Trump has pushed for rate cuts to speed up the economy, possibly to offset the drag that his large tariffs are expected to create. However, White House officials had already determined that trying to fire Powell would cause legal challenges and market panic.
White House press secretary Karoline Leavitt had defended Trump's criticism of the Fed earlier on Tuesday, suggesting that the Fed's actions could be political. She said, "The president believes they have been making moves and taking action in the name of politics rather than the name of what's right for the American economy."
But Powell has strongly denied any political motivation in Fed decisions, sticking to the central bank's independence in making monetary policy.
Market Reaction to Policy Changes
The stock market loved Trump's change of heart. By Wednesday afternoon, the Dow was up 678 points (1.73%), the S&P 500 gained 2.3%, and the tech-heavy Nasdaq Composite rose 3.3%. Earlier in the day, the Dow had surged nearly 1,200 points before pulling back.
Investors also bought U.S. Treasury bonds, pushing the benchmark 10-year yield down to 4.36%. This shows growing confidence in the stability of U.S. markets following Trump's more moderate stance.
The rally came after Treasury Secretary Bessent suggested Trump would try to calm down the trade war with China. But Bessent also warned reporters that fully fixing trade problems with China could take "2 to 3 years for the full rebalancing."
Nvidia took a $55 billion hit earlier from U.S. trade tensions, showing how tech companies have been especially vulnerable to trade policy uncertainty.
When asked if he was talking actively with China, Trump told reporters: "Actively. Everything's active." He added, "Every country wants to partake, even countries that have ripped us off for many, many years. China is an example, but it's not just China, European Union. They ripped us off for many, many years, and those days are over."
Timeline of the China Trade War Concerns
The tension between the U.S. and China over trade has been building for months. Trump's administration announced sweeping new "Liberation Day" tariffs on April 2, 2025, that threatened to start a global trade war. Trading partners like the European Union and Britain immediately said they were preparing responses.
Trump's tariffs and their impact on low-cost tech have been particularly concerning for many industries. The tariffs have placed major pressure on U.S. companies that depend on global supply chains, especially those with strong ties to Chinese manufacturing.
The president has given mixed messages about why he's using tariffs. Sometimes he says they're to protect American jobs, other times to punish countries for "ripping off" the United States, and sometimes as leverage in negotiations.
"Trump can't make up his mind about why he's doing tariffs," one analyst told CNN, highlighting the unpredictable nature of the administration's trade policy that has made business planning difficult.
Retail Sector Pressures and Supply Chain Warnings
The meeting between Trump and retail giants highlighted just how serious the tariff situation had become. CEOs from Walmart, Target, Home Depot, and Lowe's brought direct evidence of supply chain disruptions to the Oval Office.
These business leaders warned that store shelves across America could "soon be empty" as a result of the trade policies. Their warnings carried extra weight because they came from companies that millions of Americans visit every day.
Walmart CEO Doug McMillon specifically pointed out that the China trade war had already started to disrupt supply chains and would only get worse by summer if nothing changed. As the largest retailer in America with extensive supply chains in China, Walmart's warnings likely carried particular weight with the president.
Mark Zuckerberg's FTC trial testimony recently highlighted how tech companies are also feeling pressure from regulatory uncertainty, adding another layer of concern to an already volatile business environment.
The retail sector has been caught in a difficult position - trying to maintain affordable prices for consumers while facing higher costs from tariffs. Many retailers had already been forced to either raise prices or absorb costs that cut into their profits.
Future Economic Outlook and Remaining Challenges
Despite the positive market reaction to Trump's policy shifts, significant challenges remain for the U.S. economy. Treasury Secretary Bessent's comment about a "2 to 3-year timeline for the full rebalancing" of trade with China suggests this won't be a quick fix.
The administration now faces the difficult task of negotiating with China while maintaining credibility after shifting positions. Trump told reporters that his administration will get a "fair deal" with China on trade, but details remain scarce.
Some economic experts worry that the damage to supply chains might take time to repair, even with improved relations. Companies that started moving production out of China due to tariff fears may not quickly reverse those decisions.
The Federal Reserve still faces pressure as it weighs decisions on interest rates. Powell and the Fed must balance concerns about inflation against the potential economic slowdown that could result from trade tensions.
Paris peace talks involving the U.S., Ukraine, and Russia may also impact global economic stability, as geopolitical tensions continue to influence market confidence.
While markets have responded positively to Trump's changes, many business leaders remain cautious, waiting to see if his new approach will last or if he might change direction again.
Frequently Asked Questions
What made President Trump change his stance on Federal Reserve Chair Powell?
Trump backed down from threats to fire Powell after warnings from top advisors and business leaders about potential financial chaos and legal battles that would result from such an action.
How did the stock market react to Trump's policy changes?
Markets surged after Trump's reversals, with the Dow gaining 678 points (1.73%), the S&P 500 rising 2.3%, and the Nasdaq Composite increasing 3.3% on Wednesday, April 23, 2025.
Which retail companies met with Trump to discuss tariff concerns?
CEOs from Walmart, Target, Home Depot, and Lowe's met with Trump in the Oval Office to express concerns about tariffs causing supply chain disruptions and potentially empty store shelves.
How long will it take to resolve trade issues with China?
According to Treasury Secretary Scott Bessent, there is a "2 to 3-year timeline for the full rebalancing" of trade between the United States and China.
What did Walmart's CEO specifically warn about?
Doug McMillon, CEO of Walmart, told Trump that the China trade war had already started to disrupt supply chains and would only get worse by summer if policies didn't change.
Why did Trump want the Federal Reserve to cut interest rates?
Trump has pushed for rate cuts to speed up the economy, possibly to counteract the negative economic effects that his massive tariffs are expected to create.
Can the president fire the Federal Reserve Chair?
White House officials had determined that firing Powell would spark legal challenges and market tumult, suggesting significant legal obstacles to removing a Fed chair before their term expires.
How are tech companies affected by the trade tensions?
Tech companies with global supply chains have been particularly vulnerable to trade tensions. Nvidia's $55 billion market value drop exemplifies how these companies can be severely impacted by trade policy uncertainty.