President threatens to end trade with countries holding US trade surpluses
President Trump threatened Friday to cut off trade with countries the US runs a deficit with, unless the Federal Reserve lowers interest rates.
In a Truth Social post after a blockbuster jobs report showed the labour market added 162,000 jobs in August, Trump returned to his longstanding claim that rates should be much lower and urged Fed chair Kevin Warsh to “get smart” on his approach to rates.
“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,” Trump wrote.
He returned to the topic later in the Oval Office when asked about the post. “What I’m saying, very simply, is that we should be paying the lowest interest rate in the world,” he said.
But there seems little chance that the central bank will bring rates lower in its September decision, with market expectations indicating a hike is becoming more likely after the stronger-than-expected jobs numbers.
Warsh, who succeeded Jerome Powell as Fed chair this year, has expressed concern over the inflation outlook and hinted in his August address at Jackson Hole that a rate increase could be ahead.
Upward pressure on mortgage rates continues
Mortgage rates, meanwhile, have been on an upward trend in recent months as financial market jitters over the war in Iran and potential for an inflation upsurge sent bond yields higher.
This week, the average 30-year fixed mortgage rate climbed to 6.71%, according to Freddie Mac’s Primary Mortgage Market Survey (PMMS), marking its highest level for over a year.
The Fed has declined to comment on Trump’s threat, but the post marks the first time the president has ramped up pressure on the central bank since Powell’s departure.
Trump and Powell frequently clashed on rate policy, with Trump branding the then-chair as “Too Late” on rate cuts and routinely demanding he slash rates.
He mulled attempting to fire Powell – and while he described Warsh as the Fed’s “great new leader” in his Friday Truth Social post, the missive shows the delicate balancing act Warsh faces between tackling inflation and appeasing the president.
Next meetings could show further division at the Fed
The Fed has three scheduled decisions remaining in 2026: one on September 15-16, another on October 27-28, and the final announcement on December 8-9.
Its last meeting at the end of July showed division emerging among decisionmakers about future rate policy. Beth Hammack, Neel Kashkari, and Lorie Logan all dissented in a 9-3 vote to hold rates steady, with each favoring a quarter-point increase to keep inflation at bay.
In July, the consumer price index (CPI) unexpectedly dropped despite the ongoing war in Iran – on the surface, a positive development and a possible sign that rate hikes might not be required.
But with no end in sight to that conflict, fears about a prolonged shock to global oil prices are strengthening, pushing bond yields higher around the world.
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