Trump Tests the Guardrails of US Credibility

Presidents are often remembered for their signature obsessions. Teddy Roosevelt had his trust-busting. Franklin Roosevelt had his New Deal. Ronald Reagan had his tax cuts. Barack Obama had his health care reform. Donald Trump? He seems determined to be remembered for firing the referees of the US economy. 

This month alone, Trump has delivered two unprecedented blows to America’s institutional independence. First came the dismissal of Erika McEntarfer, Commissioner of the Bureau of Labor Statistics, whose offence was presiding over a weak jobs report that dared to revise earlier numbers downward. Then, in a move that rattled financial markets, Trump abruptly announced the “effective immediately” removal of Federal Reserve Governor Lisa Cook, citing alleged misstatements in her mortgage paperwork.

In true Trumpian fashion, the firings were accompanied by bombast and accusations of sabotage. Yet behind the theatrics lies something far more consequential: a systematic attempt to bend independent institutions, the ones that provide neutral scorekeeping and impartial judgment, to the will of political power.

Disloyal Data 
Some dismissed the firing of McEntarfer earlier this month as just another White House tantrum. After all, Trump has long feuded with statisticians, journalists, and anyone who publishes numbers that fail to flatter him.

Her real crime? Allowing a jobs report to state the obvious, that employment was weaker than initially believed, with sharp downward revisions to prior months. That is not fraud; it is statistics. Data is messy, subject to revisions, and often tells uncomfortable truths. But in Trump’s world, uncomfortable truths are treason.

Imagine if this precedent sticks. What stops the next BLS commissioner from “smoothing” the figures before they reach the public? Why risk being fired when you can massage the data into something campaign-friendly? A jobs report could soon read like a press release: Payrolls soared by 3 million, the greatest jobs ever, believe me, everyone says so.

Markets may laugh at the parody, but beneath the satire is a serious risk. Neutral economic data is the lifeblood of modern markets. Investors decide whether to buy bonds, hire workers, or build factories based on those numbers. If traders begin to suspect the data is doctored, they will demand a risk premium. The cost of borrowing will rise, volatility will spike, and trust in the world’s most important set of statistics will evaporate.

Authoritarian regimes have played this game before. Argentina’s government in the early 2010s underreported inflation so brazenly that households started relying on supermarket price surveys and “shadow” inflation indices. China’s GDP figures have long been accused of being suspiciously smooth, with growth never dipping below politically convenient thresholds. One major reason why the Renminbi couldn’t come anywhere closer to even the Euro, forget the dollar, in the contest to become a reserve currency – the missing trust. America, by contrast, prided itself on numbers that were dull precisely because they were trustworthy. That reputation now looks shakier.

Sacred Fed
If firing the messenger at the BLS was shocking, Trump’s next move was heretical. On August 25, he declared that Lisa Cook, a sitting Federal Reserve Governor, was “terminated, effective immediately.”

The legal justification rested on alleged misstatements in Cook’s mortgage paperwork. But few serious analysts believe that is the true reason. What matters is that no president in modern US history has ever fired a Fed governor mid-term. The Federal Reserve Act allows governors to be removed “for cause,” but the phrase has historically been interpreted narrowly, to include corruption, incapacity, or clear ethical violations. Displeasing the President is not, and has never been, cause.

Central bank independence has been treated for decades as a sacred principle. Politicians come and go, but the Fed’s job is to provide a steady, technocratic hand, setting interest rates based on economic conditions rather than election calendars. Presidents from both parties, even Nixon, who infamously leaned on Fed Chair Arthur Burns in the early 1970s, at least preserved the façade of independence. Trump has torn away the veil.

The symbolism is staggering. By firing Cook, Trump has signalled that the Fed is no longer a temple of technocracy insulated from political impulse. It is now, at least in his telling, just another agency answerable to the whims of the Oval Office.

Markets reacted instantly. Treasury yields ticked higher, the dollar wobbled, and gold surged—classic signs that investors smell

political interference in monetary policy. The message from Wall Street was clear: if central bankers can be fired for political convenience, then the rules of the game have changed.

Purges as Policy 
One firing is an episode. Two is a trend. And taken together, these firings amount to a strategy: purge the referees, bend the institutions, and ensure that no one in Washington can deliver inconvenient news without fear of personal reprisal.

This is not just Trump’s quirk. It is a populist playbook seen around the world. Turkey’s President Erdoğan repeatedly fired central bankers who refused to slash interest rates at his command, even as inflation soared. Hungary’s Viktor Orbán stacked previously independent institutions with loyalists. The outcome is always the same. Policy tailored for short-term political needs, long-term credibility sacrificed.

The irony is that Trump himself campaigned on “Make America Great Again,” a slogan implicitly about strength, credibility, and dominance. Not the least to strengthen the dollar. Yet undermining the Fed and the BLS weakens America where it matters most: in the trust that global investors place in its institutions.

The courts will now decide the fate of Trump’s firing of Lisa Cook. If the dismissal is upheld, the precedent is seismic: every future Fed governor becomes a political appointee serving at the pleasure of the President. Independence would be a myth, and monetary policy would risk being weaponised for electoral gain. By the way, in that case, who needs a Fed? The Treasury could do the job!

If the courts block Trump, the Fed will survive, scarred but intact. Yet even in that scenario, damage has already been done. Central bank independence depends not only on laws but also on norms, or unwritten rules of restraint. Once a president has broken the taboo of trying to fire a Fed governor, the institution's sanctity is permanently weakened.

Meanwhile, the rest of the world is watching with grim fascination. For decades, America has lectured others about the importance of independent central banks and impartial statistics. IMF missions have scolded developing countries for doctoring inflation data. Treasury officials have warned emerging markets not to politicise their central banks. Washington, in other words, set the rules.

Now, Washington itself risks becoming the cautionary tale. If global investors conclude that US institutions are politicised, they may start to treat the dollar less like a safe haven and more like any other currency, valuable but not unquestioned. That would be the true own-goal: weakening the very source of America’s global financial power.

Disruption as Identity
Defenders will argue that Trump is merely “disrupting” outdated institutions, draining the swamp, or holding technocrats accountable. But there is a difference between reform and vandalism. Reforms strengthen institutions; firings meant to punish critics corrode them.

The truth is more straightforward. Trump thrives on conflict, on headline-grabbing gestures, on being the centre of every drama. Firing the referees delivers all of that at once. It is reality TV governance: fast, theatrical, and indifferent to long-term consequences.

However, the United States has long prided itself on having guardrails—checks and balances that prevent any one leader from dominating every sphere of public life. Independent data agencies and a semi-detached central bank were part of those guardrails. They were not glamorous, but they were vital.

Now, one by one, those guardrails are being put to the test. If they hold, America emerges rattled but intact. If they fail, the cost will be steep: higher borrowing costs, weaker markets, and diminished global trust.

Trump may relish his new hobby of firing referees, but the economy is not a reality show. Numbers cannot be bullied into submission, and markets do not care about politics. They care about credibility. Once lost, credibility is extremely difficult to regain.

And when the world’s biggest economy loses its referees, everyone else is forced to play a much more dangerous game.