Donald Trump's second term is testing the boundaries of American institutional independence in ways that extend far beyond typical political pressure. His move to force out Lisa Cook from the Federal Reserve Board — technically illegal since she has not been convicted of anything — signals a broader campaign to subordinate monetary policy to his economic agenda. Trump wants the Fed to cut interest rates regardless of inflation data, a manoeuvre designed to lower borrowing costs for American consumers already feeling the sting of his tariffs, which function as a simple tax on imported goods passed down to end users.
The Fed's independence matters precisely because it must resist these impulses. Jerome Powell and the institution's board members have long tenures by design; Cook's mandate runs until 2038. Yet Trump is systematically testing these guardrails, having already replaced one board member with a loyalist and now threatening Powell himself. When Trump fires the head of the Bureau of Labor Statistics after unfavourable jobs data, or attempts to replace Fed governors, he is doing more than venting frustration. He is signalling that if he can pack these institutions with allies, policy will bend to his will — and the markets have reacted with volatility each time, sensing the erosion of institutional credibility that keeps global capital flows stable.
Facing the political reality of America's debt — now at roughly 100 per cent of GDP — Trump is pursuing unorthodox methods to raise revenue. The first is a tax on patent value: taxing companies 1 to 3 per cent on the estimated value of their intellectual property. The second is revenue-sharing agreements tied to export licences; the most concrete example is the deal with Nvidia and AMD to allow sales to China in exchange for 15 per cent of revenue. The third is direct equity stakes. This week, the Trump administration became a 10 per cent shareholder in Intel, a move announced after Trump publicly demanded the CEO's resignation via Truth Social following reports of ties to China.
The Intel deal reveals the mechanism at play. Trump allowed Intel to keep $9 billion in promised federal grants on the condition that he take ownership — not board control, but ownership. This preserves a legal fiction of private autonomy while establishing the government as a stakeholder with vested interest. It mirrors the Nippon Steel arrangement and shows a pattern: Trump uses crisis, public pressure, and regulatory leverage to force companies into deals that shift capital to the state and bind corporate interests to his administration's geopolitical strategy. Whether this generates returns or merely politicises investment decisions remains to be seen. But the consistency of the approach — across patents, exports, and equity — suggests this is not ad hoc but deliberate policy, one that fundamentally reshapes the relationship between American capital and state power.