President Hints at Trade War if Fed Doesn’t Cut Rates

Last week, President Donald Trump called on the Federal Reserve to lower interest rates after the August jobs report came in stronger than expected and threatened to cut off trade with several countries if the central bank doesn’t budge.

The Bureau of Labor Statistics reported that U.S. employers added 162,000 jobs last month, well above the 53,000 that economists were anticipating, The Hill reported.

The president lauded the “great” jobs numbers last week before quickly turning his attention to the Fed, which he has long pushed to trim rates.

“Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago!” he wrote in a post on Truth Social. “A STRONG COUNTRY MEANS A LOWER INTEREST RATE – IT’S A BETTER CREDIT.”

“Without the United States agreeing to allow them their big surpluses, and we could stop that immediately, they would no longer be considered financially ELITE!” Trump said. “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.”

Rates Held Steady

The central bank has held rates steady at a range of 3.5 to 3.75% at its last five meetings, as inflation has remained persistently above its target rate of 2%.

Annual inflation was at 3.7% year over year in July, according to the personal consumption expenditures price index, the Fed’s preferred measure of inflation.

However, last week’s job numbers appear to increase the chances that the Fed raises rather than lowers rates, The Hill noted. The latest data eases concerns that higher rates are weakening the labor market and allows the Fed to focus on curtailing inflation.

Traders are now pricing in a 60% chance that the Fed hikes rates by a quarter point at its next meeting this month, according to CME FedWatch, which tracks bets placed on future central bank decisions.

Trump called Fed Chair Kevin Warsh a “great new leader” Friday even as he ramped up pressure on his pick to run the Fed. The president frequently feuded with Warsh’s predecessor, Jerome Powell, over rate cuts, threatening to fire him on several occasions, The Hill noted.

“The Fed Board, with its great new leader, must get smart – BE PATRIOTS for a change,” Trump said. “High interest rates put the U.S.A. at a very unfair disadvantage, and I won’t allow that to happen!”

Vance on Interest Rates

Earlier in the week, Vice President JD Vance chimed in on interest rates.

“We believe that the Fed should be lowering interest rates.” He added, “We’re doing a lot of things to try to keep those interest rates down, but it would be nice to have some help from the Federal Reserve,” Vance said.

And Treasury Secretary Scott Bessent, in a CNBC interview, noted that the Fed typically doesn’t raise rates during a supply shock until there are second- or third-order inflationary effects.