Trump Takes a Hard Line: Can the 10% Interest Rate Cap Reshape the U.S. Financial System

Trump once again advocates for radical financial policies. He demands that major U.S. credit card companies reduce their annual interest rates from the current 20%-30% to 10% by January 20, 2026, or face severe legal sanctions. This statement has drawn significant attention from financial markets and has intensified the power struggle between the Trump administration, the Federal Reserve, and financial institutions.

Policy Core: Populist Narrative vs. Practical Feasibility

Trump characterizes high interest rates as “systematic exploitation of ordinary families” and directly links them to the increasing debt burden of U.S. residents. Under the backdrop of inflationary pressures and declining purchasing power, this narrative can resonate with some voters.

However, the practical difficulties of implementing such a policy cannot be ignored:

• Lack of clear legal basis: Currently, there is no direct legal mechanism at the federal level to cap interest rates, and the policy’s implementation path remains unclear.
• Time pressure: Requiring credit card companies to make such significant adjustments within 8 days is highly challenging.
• Strong opposition from the banking sector: Several financial institutions warn that imposing mandatory interest rate caps could lead to credit market contraction, making it harder for high-risk borrowers to access credit.

Escalation of Power Struggle: Trump vs. Federal Reserve

It is noteworthy that this policy proposal emerged at a time when Fed Chair Powell faces threats of criminal investigation by the Department of Justice. According to the latest reports, Powell has indicated that he is under criminal threat for refusing Trump’s demand for interest rate cuts.

This reflects an escalation of pressure from the Trump administration on the Federal Reserve. Trump has previously criticized high interest rates multiple times, and now, through the forced interest rate cap on credit cards, he is further attempting to influence the financial system. This is not only a policy conflict but also involves a reconfiguration of the power structure.

Three Major Risks of Policy Implementation

Market Impact Assessment

In the short term, this policy proposal has become a focal point of market attention. With the January 20 deadline approaching, markets are awaiting further actions from the Trump administration.

Key points to watch include:

• Whether credit card companies will proactively adjust interest rates to avoid political risks
• Whether the Trump administration will actually initiate legal procedures
• Attitudes and responses from the Federal Reserve and financial regulators
• The actual impact of the policy on the consumer credit market

In the long term, this appears more as a political signal than a mature structural reform plan. Genuine financial system reforms require considering risk pricing mechanisms, borrower credit assessments, market liquidity, and other factors. Simple interest rate caps often lead to unforeseen market consequences.

Summary

Trump’s proposal to cap credit card interest rates is essentially a political and economic confrontation. On one hand, it reflects genuine public dissatisfaction with high interest rates; on the other, it exposes the roughness of policy-making and the high uncertainty of implementation.

Against the backdrop of escalating conflicts between the Federal Reserve and the Trump administration, the ultimate outcome of this policy will profoundly influence the trajectory of the U.S. financial markets in 2026. Investors should closely monitor policy developments around January 20, as well as the responses from financial institutions and regulators. Regardless of whether the policy is ultimately implemented, it has reignited broad discussions about the U.S. financial regulatory system.