• The dollar is down over 9% year to date compared with a standard basket of currencies, with the euro stronger relative to U.S. currency than at any point since November 2021. The safe-haven status of gold is also in focus as the precious metal’s price hits record highs above the $3,420 mark.

President Donald Trump’s tariffs are ostensibly aimed at forcing the world to “buy American,” but investors are doing the opposite with U.S. assets. The selloff in equities and Treasury bonds has even hit the almighty dollar, putting its safe-haven status in question, and Trump’s badgering of Federal Reserve Chair Jerome Powell doesn’t appear to be helping.

While the virtues of central bank independence have become mainstream economic dogma, experts warn it lacks a strong legal basis. On Monday, markets got their first chance to react to Trump’s top economist saying the administration is studying its options to fire the Fed chair. The dollar slid to a two-year low, and the S&P 500 dropped over 3% as the president took to social media and once again called on Powell and the Fed to cut interest rates, which Trump claims will complement his tariff strategy.

“With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation,” Trump wrote on Truth Social, “but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”

Last week, the president said Powell’s termination could not “come fast enough” after the Fed chair warned Trump’s announced tariffs could result in both slowing growth and higher inflation, a dreaded combination known as “stagflation.” Powell acknowledged such a scenario is difficult for central banks, which raise interest rates to fight inflation but lower them to spur economic activity.

A day later, Trump repeatedly criticized the world’s most important central banker while talking to reporters with Italian Prime Minister Giorgia Meloni.

“If I want him out, he’ll be out of there real fast, believe me,” Trump said.

Powell has maintained that he can only be fired “for cause,” presumably referring to Section 10 of the Federal Reserve Act. While not explicitly defined in the statute, the Supreme Court’s 1935 decision in Humphrey’s Executor v. United States held that protection meant the head of such an agency could only be removed for “inefficiency, neglect of duty, or malfeasance”—and not for current policy disagreements.

Trump has already tested that precedent by firing Democratic members of the National Labor Relations Board and Merit Systems Protection Board, with both cases going to the Supreme Court. Regardless, Jay Hatfield, CEO of Infrastructure Capital Advisors, thinks the court’s 1935 standard could be used to describe Powell and the Fed’s slow response to rising inflation in 2021. 

Now, he agrees with Trump that the central bank should cut rates. Still, even Hatfield, who manages ETFs and a series of hedge funds, told Fortune the president needs to back off on his threats. 

“We just don’t need more volatility, more uncertainty right now,” he said.

Treasury Secretary Scott Bessent seems to agree. Last week, Politico reported Bessent has repeatedly warned White House officials that any attempt to fire Powell risks destabilizing markets.

Will the dollar lose its safe-haven status?

The independence of the Federal Reserve is a key part of what makes the U.S. economy appealing to investors. When politics interferes with the central bank’s ability to set monetary policy, however, inflation tends to be the result, which has been a major problem in autocracies like Turkey.

Trump, notably, is far from the first president to pressure the Fed to cut interest rates. President Richard Nixon told then–Fed Chair Arthur Burns to keep rates low in the early 1970s, later contributing to America’s worst bout with stagflation.

The crisis was only cured after Burns’ successor, Paul Volcker, raised rates to a record 20%. The move induced a painful and unpopular recession. However, the rise of an independent central bank committed to fighting inflation helped usher in a period of macroeconomic stability known as the “Great Moderation,” according to Paul Donovan, chief economist at UBS Global Wealth Management.

“Building that trust takes years,” he wrote in a note Monday. “Losing that trust can happen overnight.”

To many, recent market turmoil has signaled a dramatic drop of confidence in the U.S. The dollar is down over 9% year to date compared with a standard basket of currencies, with the euro stronger relative to U.S. currency than at any point since November 2021. The safe-haven status of gold is in focus as the precious metal’s price hits record highs above the $3,420 mark.

Of course, Trump and several of his allies have called for a weaker dollar to make American exports cheaper abroad. At a Senate hearing in 2023, Powell was questioned about its status as the world’s reserve currency by now–Vice President JD Vance.

“It’s the place where people want to be in times of stress,” Powell said, “using dollar-denominated assets.”

That’s not the case right now, though.

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In a recent interview on Meet the Press, financier Ray Dalio, warned of “something worse than a recession” if current financial, economic, and trade issues are not “handled well.” Later in the interview, he warned that if current problems worsen, we could experience a “world order in which there is great conflict.” I agree on both counts—with the caveat that this might be an understatement. Others have issued similar warnings.

For me, Dalio’s comments triggered troubling thoughts on how the world would handle a future financial crisis. During my long career on the international stage—as economic advisor to Henry Kissinger in the National Security Council in the 1970s, vice chairman of Goldman Sachs (international) in the 1980s and 1990s, and then Undersecretary of State in charge of U.S. geo-economic relations in the early part of this century—I was at the epicenter of a number of such crises and of negotiations to help resolve them. The key to success in such efforts was not just the financial skills of the major players but also their willingness to engage in trustful collaboration.

That ingredient does not exist today. Never have I seen the world so deeply riddled with mistrust on so many economic and political issues. And that mistrust can be the Achilles’ heel of any future negotiation in the event of a new financial crisis—unless we recognize it and figure out how to overcome it before a crisis hits.

Those in high-level positions and around the world must consider how they would manage a new crisis—which is a growing risk with so many countries facing slowing growth, growing debt, inflationary pressures, tariff wars, and currency volatility—and operating under fraught and confrontational political circumstances. 

This will be an enormous challenge, and failure will affect all Americans and nearly every person on this planet.

During the last crisis, there was impressive, trustful cooperation between the U.S. and China. But with the intensifying trade war and various other confrontations between the two, attaining that again is likely to be far more problematic—if not impossible.

And tariff-related frictions between the U.S. and its key allies—among the world’s largest market economies—have undermined and in some cases virtually destroyed the mutual trust that has been so critical in resolving issues in the past. Intense trade disputes will make cooperation among them to deal with a new financial crisis far more difficult.

On top of this, a study is underway in Washington as to whether the U.S. should withdraw from the International Monetary Fund (IMF)—the critical global institution in such matters. And questions are being raised at high levels in the U.S. administration as to whether the president should fire Jerome Powell, chairman of the Federal Reserve. Powell enjoys very high credibility in markets and among policymakers around the world and would be an essential player in finding solutions to any new crisis. Both factors add to already high uncertainty and the risks of deepening instability.

Given this rancor, friction, and uncertainty, central bankers and finance ministries of countries who were instrumental in dealing with crises in the past—who are now meeting in Washington for what are known at the IMF Spring Meetings—need to figure out how to avoid, or cope with, the increasingly dangerous threat of a major financial crisis. 

In the past, there was usually one major nation that led the process, or served as the designated convenor of the key players. That was mainly the United States, in cooperation with the IMF. If the U.S. won’t be willing to do so this time, or won’t be trusted by others to do so, who will it be?

It hasn’t always been the U.S. France, under its president Valerie Giscard d’Estiang, for example, pulled the G7 together during a series of crises in the 1970s, and its current president Emmanuel Macron has a formidable financial background, as does Canada’s new prime minister Mark Carney. Or, we might rightly ask, will any country be in a position, or be given broad international support, to play this role? If not, the global economy is condemned to major disruption. (China, now a formidable and experienced player in global finance, might look at this moment as an opportunity to step up to play a leadership role, but it is difficult to see the U.S., or some other market economies, agreeing to that.) 

The financial community, already rattled by uncertainty, economic nationalism, deepening tariff wars, massive debt increases, and market-debilitating currency instability, should put this on their high-concern list as well, and press political and financial leaders in their countries and around the world to organize a contingency plan grounded in a collaborative effort. With statesmanship, will, and trust this can be done—as in the past. But without a lot of advanced planning, and a willingness to engage in trustful collaboration, a major global financial disaster could be on the horizon.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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COLUMBIA, S.C. (AP) — South Carolina’s Republican-dominated Senate and its elected Republican treasurer faced off Monday in an extraordinary hearing as senators try to kick state treasurer Curtis Loftis out of office over a $1.8 billion accounting error.

The hearing is the culmination of over two years of investigation by the Senate that started when state accountants unintentionally exaggerated money given to colleges and universities by $3.5 billion.

That led to the discovery of an account error that started a decade ago when the state was changing from one accounting system to another. If accountants couldn’t balance the entries in the two sets of books as they moved thousand of accounts with different definitions, they kept adding it to a special account year after year until it grew to $1.8 billion.

It took forensic accountants, who were paid millions of dollars in fees, to finally unravel that nearly all of the $1.8 billion was not real money but just an accumulation of errors.

The two Republican senators calling for Loftis to be kicked out of office said he can no longer be trusted to handle South Carolina’s bank accounts. They charged that he is incompetent and never reported the mistakes to lawmakers as required by law while refusing to take accountability.

“He’s a liar that was so concerned with his public appearance that he would do and say anything to cover up his mistake,” Sen. Stephen Goldfinch said.

Loftis has called the Senate investigation a witch hunt. He repeatedly said no money went missing and the errors were not made in his office, although others have testified differently. The treasurer said continuing to focus on the mistakes threatens the state’s strong credit rating.

His lawyer Deborah Barbier opened the treasurer’s three-hour case with a photo of Loftis and Republican President Donald Trump on a screen. She pointed out that he has won election four times and will face voters again in a primary in 14 months. Loftis has previously said he would not run for reelection.

“The people don’t want to be told that you are better than them,” Barbier said from a temporary lectern at the back of the state Senate chamber. “Let issues like this be decided at the ballot box.”

Senators can ask questions at the end of the hearing. The Senate would need a two-thirds vote to decide Loftis committed “willful neglect of duty” and send the matter to the House, which must also hold its own two-thirds vote to remove the treasurer.

Thirty-one of the 40 senators present on Monday will have to vote against Loftis to keep the process going.

No office holder has been removed in this way since South Carolina became a state 225 years ago.

Republican leaders in the House have given no indication whether they will take up the matter.

The books still haven’t been fully straightened out, and accountants continue to struggle with Loftis’ office and how they handle the state’s bank accounts, Grooms said.

The treasurer is trying anything to protect his 14 years in office and reputation as a competent conservative steward who is always looking out for taxpayers, Grooms said.

“Because of his failures, the self-proclaimed best friend of the taxpayer is costing the taxpayers tens of millions in legal, auditing and oversight fees,” Grooms said. “With friends like this, who needs tax-and-spend liberals.”

A Senate subcommittee held hearings to question Loftis under oath. They have been contentious. Loftis has slammed papers, accused senators of a witch hunt and threatened to get up and leave.

He did not show any outward signs of frustration or anger as the hearing started Monday.

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