The president versus the Fed chair

Summary

Marketplace Morning Report: The President Versus the Fed Chair Release Date: July 17, 2025 | Host: Sabrina Short

In this episode of the Marketplace Morning Report, host Sabrina Short delves into the escalating tension between President Donald Trump and Federal Reserve Chair Jerome Powell. Additionally, the report examines the latest economic indicators affecting tariffs and consumer behavior, as well as the current state of the travel industry.

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1. Presidential Pressure on the Federal Reserve

Conflict Overview President Trump has publicly urged Federal Reserve Chair Jerome Powell to reduce interest rates. However, the Federal Reserve maintains that such decisions are based on comprehensive economic analyses rather than presidential directives. This tension has raised concerns about potential political interference in the Fed's operations.

Key Developments

• Renovation Controversy: The White House's Office of Management and Budget has questioned the Fed’s nearly $2.5 billion renovation project at its D.C. headquarters. President Trump perceives this as an opportunity to challenge Powell’s leadership, suggesting that cost overruns could justify Powell’s dismissal ([01:36]).

• Fed’s Response: The Federal Reserve contends that the buildings have not been renovated since the 1930s, citing unexpected expenses related to asbestos removal, contaminated soil, and a higher-than-anticipated water table ([01:54] - [02:00]).

• Expert Opinions: Former Fed attorney Cornelius Hurley believes the renovation issues are a pretext for firing Powell and warns that such a move could negatively impact market confidence. Hurley emphasizes that replacing Powell might not achieve the desired reduction in interest rates due to the structure of the Federal Open Market Committee ([02:20] - [02:57]).

Notable Quote

“The Fed's establishment could exact its own punishment,” warns Cornelius Hurley, highlighting the potential backlash if President Trump attempts to alienate key Federal Reserve members. ([02:26])

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2. Tariffs and the Import Price Index

Impact on Consumers and Businesses The episode transitions to discussing how US businesses are navigating tariffs. Options include passing costs onto consumers, absorbing the costs, or renegotiating with suppliers. Recent inflation data indicates that tariff-related costs are increasingly being transferred to consumers.

The Import Price Index Explained

• Definition: Measures the prices of imports when they arrive at the US border, before taxes and fees are applied ([03:34]).

• Current Trends: Contrary to expectations, import prices slightly increased in April and May. While some import prices from countries like China have decreased, the overall tariffs imposed have overshadowed these reductions, meaning foreign exporters are not significantly absorbing the costs. Consequently, American importers are bearing the brunt, leading to higher prices for businesses and consumers ([04:04] - [04:46]).

Economic Insights Economist Jason Miller notes that the minimal absorption of tariffs by foreign exporters has resulted in sustained higher costs for US importers. This situation serves as an early indicator of inflationary pressures resulting from tariffs, demonstrating that both businesses and consumers are ultimately paying more for imported goods ([04:18] - [04:37]).

Notable Quote

“If there's a 10% tariff on these goods coming from Europe, that's telling me that US Importers are paying more, which means businesses and consumers will too,” explains Megan Schoenberger, senior economist with KPMG. ([04:46])

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3. Travel Industry Faces Ongoing Challenges

Current State of Affairs The travel sector is showing signs of stabilization after a sluggish start to the summer; however, challenges persist. Travel remains subdued, with both international and domestic travelers reducing their plans.

Insights from Industry Professionals

• Host Perspective: Nora Murphy, an Airbnb host in Jersey City, reports a significant decline in bookings, particularly among European travelers who typically populate her listings. Concerns over airport detentions have led to increased cancellations ([06:37] - [08:24]).

• Consumer Behavior: One in five Americans have either reduced their travel plans or intend to do so in the future. Over half cite current economic conditions—such as tariffs and rising prices—as factors influencing their decision to cut back on travel ([07:03] - [07:16]).

• Economic Analysis: Economist Shannon Grine from Wells Fargo attributes the slowdown to a broader reduction in discretionary spending, including areas like dining out, travel, and personal care services. Persistent inflation fears, despite recent declines, continue to dampen consumer confidence and spending ([07:26] - [08:07]).

Future Outlook Nora Murphy anticipates a continued slump in bookings for the remainder of the year, emphasizing a cautious "wait and see" approach among consumers. This trend underscores the fragile state of the travel industry amidst ongoing economic uncertainties ([08:13] - [08:24]).

Notable Quote

“Consumers are more pessimistic... it's really easy to understand why consumers are more pessimistic,” sums up the discussion, highlighting the compounded effect of tariffs and inflation fears on travel and discretionary spending. ([07:52])

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Conclusion

This episode of the Marketplace Morning Report provides a comprehensive analysis of the strained relationship between President Trump and Federal Reserve Chair Jerome Powell, highlighting the implications of potential political interference in monetary policy. Additionally, the discussion on tariffs reveals their tangible impact on consumer prices and business operations. Finally, the ongoing challenges in the travel industry reflect broader economic anxieties that continue to influence consumer behavior.

Stay informed with Marketplace as they bring you the latest in business and economic news to kickstart your day.

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This summary is based on the transcript provided and aims to encapsulate the key discussions and insights presented in the Marketplace Morning Report episode released on July 17, 2025.

Transcript

[Pam]

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[Ryan]

This Marketplace podcast is supported by Palo Alto Networks. Enterprises are deploying and experimenting with AI apps and agents, often without the right security in place. Leverage the power of a comprehensive AI platform to secure AI at every step from apps, agents, models and data. Deploy AI bravely with Prisma airs more at Palo Alto networks.com Palm the President.

[Sabrina Short]

Versus the Fed Chair From Marketplace, I'm Sabrina Short in for David Brancaccio. President Trump wants Federal Reserve Chair Jerome Powell to cut interest rates, but the Fed makes that call based on analyzing the economy, not a president's wishes. This has some concern. The president is looking for an excuse to fire Powell. That excuse would be costly renovations at the Fed's D.C. headquarters. The Fed is supposed to respond to a letter from the White House's Office of Management and Budget questioning these renovations. Trump says he's discussed the idea of firing Powell, but says it's highly unlikely. Marketplace's Nancy Marshall Genser has more.

[Nancy Marshall Genser]

The letter gives Powell until July 21 to respond to a series of questions about cost overruns in the nearly two and a half billion dollar renovation. The Fed says the buildings in question haven't been renovated since the 1930s. Former Fed historian Gary Richardson can attest to that.

[Sabrina Short]

The bathrooms down in the basement near.

[Nancy Marshall Genser]

The library are really kind of scary, richardson says. The water in the sinks was scalding and the buildings were not very accessible for people with limited mobility. The Fed blames the higher price tag on asbestos and contaminated soil removal and says the water table is higher than expected. Former Fed attorney Cornelius Hurley is among the central bank watchers who think the renovation is a pretext to fire Powell.

[Sabrina Short]

I think it's a weak case and I think Powell will challenge it, hurley.

[Nancy Marshall Genser]

Says President Trump should worry about how markets will react if he does terminate the chair. He should also think about whether such a move would get him what he wants because the chairman of the Fed board is Only one of 12 members of the Federal Open Market Committee, which actually sets interest rates and considers itself, Hurley says, the Fed's establishment.

[Sabrina Short]

If Trump were to alienate the establishment. The establishment could exact its own punishment.

[Nancy Marshall Genser]

In other words, even if Trump succeeds in replacing Powell, he might not get the lower interest rates he wants. I'm Nancy Marshall Genser for Marketplace.

[Sabrina Short]

When a US Business is faced with a tariff, it has some pass that cost onto consumers, drop, try and eat it, or ask suppliers if they can eat some of it, too. Inflation data that's rolled in this week so far suggests the costs are starting to get passed on to consumers. Later this morning, we're going to get a not often talked about piece of economic data called the Import Price Index. It's going to reveal more about just who is paying these tariffs marketplaces. Justin Ho has more.

[Megan Schoenberger]

The Import Price Index measures prices when imports arrive at the border, says Megan Schoenberger, senior economist with kpmg.

[Pam]

And so it happens before there are any taxes and fees applied to it.

[Megan Schoenberger]

Through customs, Schoenberger says. That can tell us how tariff costs are shared. That's because a foreign company that exports to the US Might decide to lower its prices if it's worried that tariffs will make its products too expensive.

[Pam]

The foreign exporter doesn't want to lose their whole market, so maybe they start discounting.

[Megan Schoenberger]

But Schoenberger says that hasn't really been happening recently. Import prices actually rose a little in April and May. Jason Miller, a professor at Michigan State University, says the price of certain imports from China, for instance, have fallen some.

[Sabrina Short]

But when you look, especially if we focus on, you know, items from China, the overall increase in tariffs has been far, far, far larger.

[Megan Schoenberger]

Which means foreign exporters aren't absorbing much of the tariffs at all. American importers are, Miller says. That's why the Import Price Index can be an early indicator, because if we're.

[Sabrina Short]

Not seeing substantial declines in that, then we know, okay, if there's a 10% tariff on these goods coming from Europe, that's telling me that US Importers are.

[Megan Schoenberger]

Paying more, which means businesses and consumers will too. I'm Justin Ho for Marketplace.

[Ryan]

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[Sabrina Short]

This week that business is stabilizing after a slow start to the summer, but there is still a chance of turbulence. Travel is still pretty slow. Marketplaces NovaSafo has more summer is usually.

[Nora Murphy]

Go time for the travel industry, and yet prices are down about 3% compared to a year ago. And if you want know why, Nora Murphy can tell you. She owns and operates four Airbnb listings in Jersey City.

[Pam]

People usually come to Jersey City not because it's so lovely, which it is, but also because it's proximity to get to Manhattan.

[Nora Murphy]

It's right across the river. Murphy's properties would normally be packed right now with mostly European travelers, but she's only half full.

[Pam]

There were guests who had already scheduled, but they are calling and canceling because they are afraid to be detained at the airports.

[Nora Murphy]

And it's not just international travelers who are pulling back.

[Sabrina Short]

One in five Americans have planned less or plan to travel less going forward.

[Nora Murphy]

Jeremy Goldman is an analyst at eMarketer.

[Sabrina Short]

And more than half of Americans report that the current economic conditions, like tariffs, like rising prices, have indeed affected their travel plans for the year.

[Nora Murphy]

So foreign travelers and Americans, a double whammy. Economist Shannon Grine of Wells Fargo sees all of this as part of a bigger pattern, a pullback in discretionary services.

[Pam]

Spending, things like eating out travel, personal professional care services, things that maybe we don't need to prioritize, and things that.

[Nora Murphy]

Are sensitive to how consumers are feeling.

[Pam]

They don't care that inflation's down compared to last year. They're worried about the fact that it's going to go higher and that it's still higher than what they remember pre Covid. So when you throw tariffs on top of that, I think it's really easy to understand why consumers are more pessimistic.

[Nora Murphy]

And many are in a wait and see mode. Just ask Nora Murphy, our Airbnb host in Jersey City.

[Pam]

Normally at this time, my October, November and December, those are our biggest times. Those would be all booked by now, but I do not have a single booking for those right now.

[Nora Murphy]

Murphy is expecting this entire year to be slow. I'm Nova Safo for Marketplace, and in.

[Sabrina Short]

New York, I'm Sabri Benishore with the Marketplace morning report from APM American Public Media.

[Ryan]

Pam, are you here to game with me?

[Pam]

In a minute, Ryan. But first it's time to share what's happening on the 10 News podcast.

[Ryan]

The 10 News is a kids news podcast for curious 8 to 12 year olds that even grown ups can learn from. What else is there to say?

[Pam]

That we cover everything from the Supreme Court in the war in Ukraine to Pokemon and Minecraft. And we'll always tell you 10 things, things you need to know.

[Ryan]

And we're available wherever you get your podcasts. Is it game time now, Pam?

[Pam]

It's game time, Ryan.

[Sabrina Short]

Let's go.