Trump Threatens to Halt Trade with Deficit Countries Unless Fed Cuts Interest Rates

The president said he could halt trade between the United States and countries with which it has a trade deficit if the central bank doesn’t do his bidding.

· President Donald Trump threatened to restrict or halt U.S. trade with countries where the United States has a trade deficit unless the Federal Reserve sharply cuts interest rates.

· Trump demanded that the Fed reduce borrowing costs to what he described as the lowest interest rate in the world.

· The President argued that the U.S. economy is strong enough to support immediate rate cuts, despite concerns that lower rates could increase inflationary pressures.

· The Federal Reserve has kept interest rates unchanged since December while assessing whether inflationary pressures are temporary or persistent.

· Some Fed policymakers have indicated that they could even consider raising interest rates, depending on upcoming inflation data.

· Trump's threat could potentially affect trade with a large number of major U.S. trading partners, including:

o Canada

o Mexico

o European Union countries

o China

· The U.S. goods and services trade deficit rose to its highest level in 16 months in July, according to recently released government data.

· Economists note that part of the trade deficit reflects strong U.S. domestic demand, including increased imports of electronics and equipment supporting artificial intelligence and data centres.

· Trump, however, continues to view trade deficits negatively and has relied heavily on tariffs and trade restrictions to reduce them.

· He suggested that the United States could dramatically reduce its trade deficit simply by stopping trade with countries with which it runs deficits, and specifically mentioned the possibility of ending trade with Canada.

· Financial markets reacted negatively, with U.S. stocks falling during the day amid concerns about the jobs report, monetary policy and the possibility of further trade disruptions.

· Trump's comments represent his latest effort to increase pressure on the politically independent Federal Reserve and its policymakers.

· The Fed's next interest-rate decision will depend significantly on upcoming inflation data, with policymakers divided over whether inflation risks require a rate increase or whether rates should remain unchanged.

· Fed Governor Christopher Waller indicated that a strong inflation report could support a rate hike, while continued evidence of easing inflation could justify maintaining current rates.

· Fed Governor Michael Barr similarly said the Fed could wait if inflation continues to moderate but should act decisively if inflation remains persistently high.

· Overall, Trump's threat links U.S. trade policy directly with Federal Reserve monetary policy, raising concerns that aggressive trade restrictions and pressure for lower interest rates could increase economic uncertainty, disrupt global commerce and potentially worsen inflation.

[ABS News Service/05.09.2026]

President Trump threatened on Friday to halt a broad swath of U.S. trade unless the Federal Reserve slashed interest rates, issuing a series of sweeping ultimatums that could prove costly to the economy if he were to carry it out.

The Fed is a politically independent institution, and it has long kept rates steady as it tries to tame years of persistent inflation. Mr. Trump’s demand risked undermining that work, all the while choking off commerce in ways that could harm American families and businesses.

The president delivered his threat on a day that began on a positive note for the White House. Newly released hiring figures showed that employers added about 162,000 jobs in August, evincing a labor market that has successfully weathered a range of shocks under Mr. Trump — from the global trade war he commenced last year to the war with Iran that has intensified recently.

On social media, Mr. Trump heralded that development, before seizing on the employment figures to issue new demands. He called on the Fed to reduce borrowing costs to “the LOWEST RATE of any country in the World.”

The Fed has kept rates steady since December, as it tries to discern whether recent economic turbulence is a short-term problem or a longer-term driver of higher prices. Contrary to the president’s calls for cuts, some Fed policymakers have signaled they are considering whether to raise rates, perhaps as soon as this month, after failing for more than five years to bring inflation down to the central bank’s 2 percent target.

But Mr. Trump insisted on Friday that the U.S. economy was “STRONG” and, as a result, could afford to reduce rates immediately. Such a move could actually worsen inflation, but Mr. Trump did not acknowledge the risk as he signaled he could interrupt global trade.

“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT, which the U.S. Supreme Court, in its ridiculous and very costly Tariff decision, strongly acknowledged ‘the President’ has an absolute right to do,” Mr. Trump said.

The president doubled down during a brief appearance in the Oval Office, where he lamented that other countries had lower rates than the United States.

“If we don’t trade with them, they don’t have any money to pay the bills,” he said. “And, if we’re not going to be treated properly, we’re going to do that. And all we have to do to cut our trade deficit with a country is not trade with them.”

Globally, the U.S. trade deficit in goods and services rose to its biggest gap in 16 months in July, according to government data released this week. The list of countries with which the United States has a trade deficit is lengthy, including its neighbors, Canada and Mexico; nations in the European Union; and others including China. Together, that represents a substantial amount of the products that American families buy and U.S. businesses import.

Some economists see the imbalance as a sign of strength for the United States, one caused partly by surging domestic demand for the electronics that help to power artificial intelligence. But Mr. Trump disagrees and has sought to apply substantial tariffs globally in the hopes of driving down the imbalance.

“We could do tremendous good for ourselves by just not trading with countries,” Mr. Trump said Friday.

He also mused aloud that the United States could “end all trade with Canada,” before pivoting back to his attack on the Fed. “What I’m saying very simply is that, we should be paying the lowest interest rate in the world,” he said.

Mr. Trump’s remarks hardly appeared to help matters on Wall Street, contributing to a down day for stocks that only further stoked his ire. While the dip began shortly after the release of the jobs report, the drop in the financial markets nonetheless recalled the tumult that characterized the earliest days of the president’s punishing global trade war.

It also marked Mr. Trump’s latest attempt to apply pressure to the Fed, even after securing the confirmation of his handpicked chairman, Kevin M. Warsh. The president has made no secret about his views on monetary policy or the lengths he is willing to go to achieve them, even targeting — and trying to oust — Fed officials who do not share his stance.

The Fed’s decision on interest rates later this month hinges in part on inflation data coming out next Friday. Investors started to ratchet up bets about a possible increase after Mr. Warsh signaled in a speech last week that he was open to the idea. He did not explicitly call for a rate increase.

Other top policymakers this week conveyed different degrees of urgency around the need to raise rates.

On Thursday, Christopher J. Waller, a Fed governor, said a “hot” report on inflation from the Bureau of Labor Statistics would compel him to support a rate increase. But if there is further evidence that inflation was not getting worse, he said, he would be inclined to hold rates steady.

“What’s the cost of waiting one meeting? Hiking 25 basis points one meeting right now is not going to bring the C.P.I. down to 2 percent,” Mr. Waller said, referring to the bureau’s Consumer Price Index. “You want to take a chance to see if disinflation continues, but I’m not taking a big chance on it.”

Michael S. Barr, a Fed governor, said on Tuesday that if inflation data showed continued signs of progress, then the Fed could afford to take more time to assess if rate rises were needed.

“However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates,” Mr. Barr said.