President Donald Trump’s move to gain more control over independent US regulatory agencies is raising alarms among financial leaders. Europe’s largest asset manager, Amundi, warns that this shift could damage trust in the US economy. The new executive order requires federal agencies to align their plans and regulations with White House priorities. While this change is seen as a push for deregulation and economic control, it also brings serious risks that could affect global confidence in the US financial system.
Tightening Control Over Watchdogs
Trump’s executive order mandates that independent US agencies must now consult with the White House on their strategic plans and draft regulations. It also gives the president the power to set performance standards for these agencies. Supporters argue that this move will streamline government operations and promote economic growth. However, critics worry that it compromises the independence of regulatory bodies that are supposed to operate without political influence.
Eroding Trust in US Markets
Vincent Mortier, chief investment officer of Amundi, expressed serious concerns about the potential consequences of this move. He emphasized that trust in US markets is built on checks and balances within the political system. Mortier warned, “If everything is put under executive power, with an agenda for deregulation and conflicts of interest, it’s quite dangerous. It could undermine democracy and trust in the US financial system.”
Mortier highlighted that the US dollar’s strength and the stability of its markets are deeply connected to global trust. If this trust is shaken, particularly among large foreign investors, it could have far-reaching effects on the economy. He stressed, “The biggest threat is when people start to question the trust in the US system, the Federal Reserve, and the economy as a whole.”
Impact on the Federal Reserve
The executive order exempts the Federal Reserve’s monetary policy functions, but its supervisory role is still under scrutiny. Trump has previously criticized the Fed and called for lower interest rates. Although his administration claims to focus on the 10-year US government bond yields, which influence global assets, there are concerns about indirect pressure on the central bank.
Mortier believes that Trump’s team understands the negative consequences of revoking the Fed’s independence. “Short term, there’s no need to do it because the negative impact would be much greater than any positive outcome,” he said. However, he expects the administration to continue pressuring the Fed, potentially challenging its independence over time.
Conflicts of Interest and Legal Challenges
The executive order raises questions about conflicts of interest and transparency within the US government. Mortier pointed out that while conflicts of interest are not new, the situation under Trump’s administration has reached a “new level.” This perception of increased political influence over independent agencies could weaken confidence in the fairness and stability of the US financial system.
Legal experts have also argued that Trump’s executive order could face legal challenges, as it may violate the principles of agency independence. Some believe that the order could be overturned in court, leading to more uncertainty in the regulatory landscape.
A Risk to US Dollar Dominance
The consequences of Trump’s actions go beyond regulatory control—they could impact the global financial system. The US dollar’s status as the world’s leading reserve currency relies heavily on trust in the US political and economic system. If that trust is compromised, it could weaken the dollar’s dominance and affect international trade and investment.
Mortier warned, “If checks and balances are seen as weaker, and conflicts of interest are everywhere, the US dollar’s status could be questioned. It’s all about trust in the system.”
