- Utah economist Robert Spendlove warns Trump's investigation of Fed Chair Powell could destabilize the economy.
- Spendlove emphasizes the importance of an independent Federal Reserve for economic stability.
- Trump's tariffs have increased tax revenue but raised concerns about economic uncertainty and fiscal crisis.
SALT LAKE CITY — The top economist at Utah's largest bank began his economic outlook report to state policymakers on Monday with a warning.
The criminal investigation into Federal Reserve Chairman Jerome Powell by President Donald Trump's Department of Justice could throw the economy into chaos.
"It is essential to our national economy, and to our world economy, to have an independent Federal Reserve Bank," Zions Bank senior economist Robert Spendlove said.
"And if we don't have an independent Fed, it undermines our entire economy, and it undermines free markets."
Before briefing legislators and lobbyists on other economic trends, Spendlove highlighted Trump's pressure campaign on the federal agency overseeing monetary policy to lower interest rates.
On Sunday, Powell posted a video statement in which he announced that the Department of Justice had issued subpoenas related to his testimony before the Senate Banking Committee last year.
The testimony focused on the renovation of the Federal Reserve headquarters. But Powell said the investigation is a "threat" to push the Federal Reserve to lower the rate at which banks may borrow from each other.
"This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation," Powell said.
Spendlove chose to begin his presentation to members of the Utah Taxpayers Association by highlighting the investigation of Powell as one of the most significant factors influencing Utah's economic well-being.
Spendlove said he has been a frequent critic of the Federal Reserve's board of governors, which has cut rates over the past few months since raising them in the wake of the COVID-19 pandemic in an attempt to curb inflation.
The Fed is responsible for encouraging low inflation and high employment. U.S. presidents reinforced the Fed's independence after President Richard Nixon pushed for lower interest rates ahead of the 1972 election.
In July, Trump called on Powell to resign "immediately," because he didn't think he was bringing down interest rates fast enough. And in December, Trump criticized Powell for "gross incompetence," alleging that he had tried to influence the 2024 election by lowering interest rates.
The Fed has lowered the target range for the national borrowing rate from 5% to around 3.6%. "The reason the president is mad," according to Spendlove, is because the Fed said in December, "We're done with cutting the Fed funds rate."
Spendlove predicted the Fed will not lower rates anytime soon, especially in light of the investigation into Powell. What they do decide to do will be one of the central economic questions of 2026, Spendlove said.
How will Trump's tariffs impact the economy?
Other Trump administration policies have also had a large impact on the short-term and long-term trajectory of the U.S. economy, primarily through the One Big Beautiful Bill Act and tariffs, according to Spendlove.
Over the past year, the Trump administration has upset the global economic status quo by imposing blanket levies on some of America's biggest trading partners, as well as targeted import taxes on certain goods.
Trump's worldwide regime has created the highest tariff rate in a century. Before Trump returned to office, the rate was 3%. After his "Liberation Day" announcement, it rose to Great Depression levels of nearly 17%.
The tariff rates for each individual country have varied dramatically as the Trump administration negotiates trade agreements, Spendlove pointed out. This has created uncertainty for many Utah businesses.
But the tariffs have also raised an incredible amount of tax revenue by charging foreign companies that wish to sell their products in the U.S. This could help slow the nation's accelerating debt crisis, Spendlove said.
National debt, driven by ballooning mandatory spending programs like Social Security and Medicare, has reached 100% of gross domestic product, at $35 trillion, with interest payments now crowding out other budget items.
Trump's One Big Beautiful Bill Act, a budget package which extended business tax cuts and funded immigration enforcement, added around 1 million jobs, but will increase the debt by $4 trillion, Spendlove said.
This could be the surge in deficit spending that triggers a "national fiscal crisis," Spendlove said. But Trump's tariffs have also proven to be an extraordinary tool to raise revenue that could balance the new spending.
As "essentially a sales tax," tariffs have raised an average of $30 billion a month for the U.S. Treasury, which will likely approach $400 billion annually, and $4 trillion over the next decade, according to Spendlove.
"That alone is enough to pay for the 'one big, beautiful bill,'" Spendlove said. "So that's why I think you're going to see the Trump administration fighting really hard to keep those tariffs in place."
There are no clear indicators that tariffs have caused inflation, Spendlove said. But there is a clear impact on job growth, which increased steadily after the pandemic until tariffs were implemented, he said.
Trump's sweeping tariff agenda is currently before the U.S. Supreme Court. Justices appeared skeptical during oral arguments in November that the president wields authority to impose tariffs under emergency acts.
