Trump threatened to stop trading with countries if the Fed does not cut rates
US President Donald Trump demanded that the Federal Reserve lower interest rates and threatened otherwise to stop trading with countries with which the United States has a trade deficit. For now, this is a public threat from the president — no decisions on imposing a trade embargo have been announced.
Trump made the statement on Friday, September 4, after the release of unexpectedly strong US labor market statistics. He stated that the US, as a strong economy, should have among the lowest interest rates in the world.
“Cut the rate, or I will stop trading with countries with which we have a deficit,” — Trump said.
The president also called a possible cessation of trade “better than tariffs” and again urged the Fed leadership to pursue a more accommodative monetary policy. At the same time, Trump did not explain which specific countries Washington might stop trading with, which goods would fall under restrictions, and under what conditions such a measure could be introduced.
Trump reacted to strong employment data
The reason for yet another pressure on the Federal Reserve was the August US labor market report. According to the Bureau of Labor Statistics, the American economy created 162,000 nonfarm jobs, and the unemployment rate remained at 4.1%.
Trump called the results significantly better than expectations and stated that a strong economy means higher creditworthiness of the country, and therefore, in his opinion, the US should obtain lower borrowing costs.
However, for the Fed, a strong labor market by itself is not an argument for an immediate rate cut. Sustained employment growth can support consumer demand and inflationary pressure, so the central bank considers the labor market, price dynamics, and other economic indicators simultaneously when making decisions.
US trade deficit has sharply increased
Trump’s statement came a day after the release of new data on US foreign trade. In July, the trade deficit in goods and services increased by 24.4% — from a revised $71.2 billion in June to $88.6 billion.
US exports decreased by $6.6 billion to $310.7 billion, while imports increased by $10.8 billion to reach $399.3 billion. Since the beginning of the year, the trade deficit remains 29.6% lower than in the same period of 2025.
Among the major partners with which the United States continues to have a trade deficit are Mexico, Vietnam, China, and the European Union. Therefore, a literal implementation of Trump’s threat could potentially affect a significant portion of American international trade.
Trump’s pressure on the Fed continues
Trump has repeatedly demanded that the US central bank lower the cost of borrowing, claiming that high interest rates put the US at a disadvantage compared to other countries.
However, decisions on rates are made by the Federal Open Market Committee, not the White House. The new threat became an unusual development in the conflict over monetary policy: the president effectively tied the decision of an independent central bank to the possibility of imposing restrictions on foreign trade.
At the moment, the Trump administration has not presented an executive order, a legal mechanism, or a list of countries against which the threat could be implemented. Therefore, the statement should be viewed as political pressure on the Fed, rather than as a decision already made to stop trading.
Based on: Yahoo Finance, US Bureau of Labor Statistics, US Bureau of Economic Analysis
