Trump’s Assault on Powell Is a Bigger Market Threat Than Tariffs. Here’s Why.
Jul 14, 2025 06:42:00 -0400 | #Markets #The Barron's Daily
(SAUL LOEB/AFP via Getty Images)
It’s a busy time at the White House post office. President Donald Trump has been writing more letters and the European Union and Mexico are bearing the brunt this time. Still, it might be a ‘Dear Jerome’ letter that proves to be the greatest menace for markets.
The U.S. threat to charge a 30% tariff on goods from the EU and Mexico might have shocked markets months ago, but investors have been playing Trump’s trade game for a while now and are likely to take it as a negotiating tactic ahead of the Aug. 1 deadline rather than a realistic scenario.
Import levies will cast a shadow on earnings, which kick off with the big banks and Netflix this week. However, with analysts predicting S&P 500 companies’ profit to grow at an average annual rate of 4.8% in the second quarter, according to FactSet, there is a low bar to clear compared with the reported 13% growth in the first quarter. So long as the artificial-intelligence trade holds up, markets should remain calm.
So is there anything that can stop the stock rally reaching new highs? Watch Federal Reserve Chair Jerome Powell. Tuesday’s inflation data are expected to show a 0.3% rise in prices, with economists watching for the first signs that tariffs are beginning to fuel prices rises, therefore delaying interest-rate cuts. With Powell set to face questions from Trump’s advisers about the cost of renovating the Fed’s headquarters, tensions with the White House could reach breaking point.
Trump insisted again on Friday that he isn’t planning to remove Powell. But the administration seeking ways to apply more pressure on the central bank feels like the biggest risk to stock market confidence right now. When it comes to investors’ nerves, the most dangerous letter Trump can pen is the one seeking a breakup with Powell.
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EU, Mexico Press for Trade Deal Amid Tariff Threat
Markets were responding to President Donald Trump’s latest trade threats, as European Union leaders prepared for the possibility of setting retaliatory levies. Over the weekend, Trump announced he would raise tariffs on goods from the EU and Mexico to 30% from the current 10%.
- The EU will maintain suspended trade countermeasures until Aug. 1, which is when Trump’s higher levels kick in, as leaders continue to negotiate a deal, according to EU President Ursula von der Leyen. But the bloc is also considering the adoption of additional proportionate countermeasures if required.
- German Chancellor Friedrich Merz told the broadcaster ARD on Sunday that Trump’s tariffs would hit the German export industry “to the core,” and he vowed to work toward a solution. He was discussing options with French President Emmanuel Macron and the EU’s von der Leyen, Bloomberg reported.
- Today, the European Commission is to present members with new retaliatory proposals that could be used if trade talks fail, The Wall Street Journal reported, citing people familiar who said the plan targets an additional $84 billion of American imports to the bloc.
- France’s Macron said the EU should speed things up, and even consider a so-called “anticoersion” tool that could allow the EU to apply tariffs on U.S. services. But von der Leyen told reporters on Sunday that was for extraordinary situations, and “we are not there yet.”
What’s Next: Officials from Mexico were also continuing to work toward a trade deal with the U.S. by Aug. 1. Mexico’s Economy Ministry said Minister Marcelo Ebrard was in Washington for talks with the White House, the Commerce Department, and the U.S. Trade Representative.
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Inflation Data Coming This Week as Pressure Rises on Powell
The timing of the Federal Reserve’s next move on interest rates could depend on this week’s consumer price index for June. The report, due out on Tuesday, is expected to jump as prices adjust to President Trump’s tariffs, which are at the highest levels in decades.
- A big increase would be a tangible sign that tariffs are fueling inflation, possibly killing any chance of a surprise Fed rate cut this month. Economists expect the CPI to rise 2.6% in June from a year ago, and 0.3% from May.
- Core prices excluding food and fuel are expected to rise 3% from a year ago versus a 2.8% gain in May. Trump has repeatedly called on Fed Chair Jerome Powell to cut rates, claiming there is no inflation and that his tariffs are bringing in hundreds of billions of dollars.
- Powell has said the effect of tariffs should begin showing up in the data this summer. They have been slow to appear since Trump announced them in April, only to suspend many of the highest levies until his new restart date on Aug. 1.
- Businesses have been maneuvering to get ahead of tariffs in the meantime. The Fed’s periodic survey of its 12 regional banks, also due out this week, could reflect anecdotal evidence that tariffs are weighing on business planning and spending. A consumer confidence reading is due out on Friday.
What’s Next: Powell has been under increasing pressure by administration officials. On Sunday, former Fed Gov. Kevin Warsh, considered to be a top contender to succeed Powell, told Fox’s Sunday Morning Futures the central bank needs “regime change.”
— Liz Moyer
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Major Banks Kick Off Second-Quarter Earnings Season
As the four largest U.S. banks— JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup —report earnings this week, some analysts are warning clients that valuations are stretched and that the current rally could peter out. Generally, profit and revenue are expected to climb from a year ago.
- Banks will give investors a window into how investment bankers, trading desks, consumer-banking businesses, and wealth management arms fared during the volatile second quarter. Analysts will also look for evidence of erosion in loan repayments and expectations for credit quality.
- The KBW Nasdaq Bank Index rose 9.6% in the first half of 2025, its best first-half performance in four years. But earnings outlooks could determine whether that rally continues, Bank of America Global Research analyst Ebrahim Poonawala says.
- HSBC analyst Saul Martinez downgraded JPMorgan, Goldman, and Bank of America last week. JPMorgan, the biggest U.S. bank by assets, shouldn’t trade like a tech giant, he said. He is still optimistic about the firm’s business fundamentals.
- Christopher McGratty, head of U.S. bank research at KBW, said despite uncertainty about how the administration’s trade policies will play out, deregulation for the financial sector could boost stock buybacks at the biggest banks.
What’s Next: Of particular note will be what JPMorgan CEO Jamie Dimon tells reporters and analysts on Tuesday. He often makes headline-producing statements on the economy, markets, and business. Other key bank earnings this week include Goldman Sachs and Morgan Stanley on Wednesday.
— Rebecca Ungarino and Janet H. Cho
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Bitcoin Soars to Record as Washington Considers Crypto Bills
The world’s largest cryptocurrency Bitcoin climbed to another record high early Monday, with lawmakers this week set to advance several key pieces of legislation, which aim to establish structure for the crypto sector.
- The price of Bitcoin continued its bull run, soaring past $120,000 for the first time after hitting a record high late Friday.
- The token’s momentum is fueled by macroeconomic tailwinds, such as expectations of an interest-rate cut later this year, large Bitcoin inflows to spot exchange-traded funds, and regulatory developments.
- This has been coined “Crypto Week” as the House of Representatives will consider three pieces of legislation —the CLARITY Act, Anti-CBDC Surveillance State Act, and the Senate’s GENIUS Act—that intend to provide a clearer framework and boost the U.S. crypto sector.
- “Historically, when lawmakers advance industry-backed frameworks, institutional sentiment strengthens,” Dilin Wu at Pepperstone noted. “We expect capital that was previously sidelined due to regulatory uncertainty to re-enter.”
What’s Next: Cryptos remain volatile assets so investors shouldn’t rule out sharp pullbacks following such big gains. The crypto fear and greed index is currently at 70, and a number closer to 100 indicates the market may be overheated. That figure suggests the market is “due for a correction,” Shivam Thakral, CEO of digital asset exchange BuyUcoin, said Monday.
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‘Superman’ Soars In Another Blockbuster Summer Movie Weekend
James Gunn’s Superman was the undisputed star of another blockbuster summer movie weekend, winning over audiences and dodging criticism from conservative commentators to sell $122 million in tickets. Overall, the weekend was expected to generate nearly $200 million in domestic box office sales.
- Superman, the first release from Warner Bros.’ new DC Studios unit, grossed another $95 million overseas, including $6.6 million in China, for an estimated $217 million globally. It is helping to boost Hollywood’s overall summer movie performance after a slow start to 2025.
- Comscore senior media analyst Paul Dergarabedian said total domestic ticket sales of $4.7 billion this year are 15% higher than at this point in 2024. An onslaught of new releases over the past 10 weeks has helped summer ticket sales surpass last year’s summer totals by 16.5% so far.
- Comcast’s Universal Pictures’ dinosaur thriller Jurassic World Rebirth scared up another $40 million in its second weekend domestically, and $529.5 million globally. Warner Bros. and Apple Original Films’ F1 The Movie won third place with $13 million this weekend, and $393.4 million globally since June 27.
- Superman is the third movie this year to open with more than $100 million in domestic box office sales over its three-day debut. Warner Bros.’ A Minecraft Movie, sold $162.7 million on its opening weekend, and Walt Disney’s Lilo & Stitch had a $146 million debut.
What’s Next: Films opening Friday, July 18, include Paramount’s animated Smurfs, starring Rihanna as Smurfette; Sony Pictures’ horror flick I Know What You Did Last Summer; and A24’s western drama Eddington. Disney’s The Fantastic Four: First Steps opens July 25.
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner