WASHINGTON: US President Donald Trump has threatened to halt trade with countries where the United States runs a trade deficit unless the Federal Reserve lowers interest rates.
Trump issued the warning on Friday, September 4, in a post on Truth Social, saying: “Lower the rate, or I’ll stop trading with countries with which we have a deficit.”
He also stepped up his criticism of Federal Reserve Chairman Kevin Warsh, whom Trump described as his “great new leader”, urging the Fed board to “BE PATRIOTS for a change.”
Trump ties trade policy to Fed rates
The warning came just hours after the US Labour Department reported that employers added 162,000 jobs in August, more than twice economists’ expectations.
The unemployment rate remained unchanged at 4.1%, according to the report.
The United States currently runs trade deficits with several major trading partners, including China, Mexico and Canada. The overall US trade deficit stood at around $1.2 trillion last year.
Trump has repeatedly pushed the Federal Reserve to reduce borrowing costs, arguing that lower interest rates would support the US economy.
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Warsh signals inflation concerns
Trump’s latest comments came after Warsh indicated at the Jackson Hole economic symposium last week that higher interest rates could potentially be needed to tackle persistent inflation.
US inflation remains above the Federal Reserve’s 2% target, with the rate cited at 3.4%.
Following the latest jobs report, the probability of a rate increase at the Federal Reserve’s September meeting rose to around 60%.
The Federal Reserve has not immediately commented on Trump’s latest remarks.
Uncertainty over trade threat
Trump’s post also referenced a recent Supreme Court decision concerning presidential authority over tariffs.
It remains unclear whether the threat would apply to every country with which the US runs a trade deficit or how such a policy could be implemented.
The Federal Open Market Committee is scheduled to meet on September 15 and 16, when policymakers will assess interest rates and the broader economic outlook.
Trump’s latest warning adds another layer of pressure on the Federal Reserve as officials weigh inflation risks against economic growth and labour-market conditions.
