Trump threatens the Fed: cut interest rates - or I will stop trade with countries with which the US has a deficit

US President Donald Trump renewed today, Friday, the pressure on the Federal Reserve to lower interest rates, and threatened that if the central bank does not do so, the US may stop trading with countries with which the US has a trade deficit, according to CNBC.

Trump published the remarks on the Truth Social network following the employment report for August, which indicated an addition of 162,000 jobs — a figure that was significantly higher than forecasts. In the post, Trump called on the Fed and its chairman, Kevin Warsh, to "come to their senses" and lower interest rates. According to Trump, the American economy is stronger today and therefore the US should enjoy a lower interest rate.

He argued that countries that enjoy trade surpluses with the US are largely dependent on their access to the American market, and that Washington could deny this advantage if it chooses to reduce or stop trade with them. He later explicitly threatened:

"Lower the interest rate or I will stop trading with countries with which we have a deficit."

The Fed refused to comment on the remarks. If implemented as stated, Trump's threat would be highly unusual, as the US has trade deficits with dozens of countries — including some of its largest trading partners. The US trade deficit has long been at the center of Trump's policy, who has also used tariffs in an attempt to reduce it. The White House did not provide further details on how such a move might be carried out.

This statement marks a return of Trump to the pressure campaign against the Fed, which had weakened after the inauguration of Kevin Warsh as chairman of the central bank in place of Jerome Powell. Trump has long pushed for an interest rate cut and tends to argue that a high interest rate puts the US at a disadvantage compared to other countries. However, Trump's line contradicts the position presented by Warsh just last week. In a speech he gave in Jackson Hole, the Fed chairman presented a hawkish line and signaled that interest rate hikes may still be on the table as long as inflation does not moderate. He emphasized the bank's commitment to returning inflation to the 2% target.

Vice President J.D. Vance also called for an interest rate cut this week, arguing that it would be the "proper and responsible" step in light of the latest inflation data. On the other hand, Chairman of the National Economic Council Kevin Hassett said that the Fed "will do what it wants" and that the administration respects its independence, but added that in his opinion there are strong arguments for leaving the interest rate unchanged. The pressure from Trump comes about two months before the midterm elections, as the American public's dissatisfaction with price levels and persistent inflation continues to be one of the central issues in the political arena.