Trump to Fed: “Cut Interest Rates or We’ll Halt Trade”

【Financial News New York = Reporter Lee Byung-chul】U.S. President Donald Trump warned the Federal Reserve System (the Fed) that the United States would halt trade with countries running trade surpluses with the United States unless it cuts interest rates. Although stronger-than-expected employment data increased market expectations for a rate hike, President Trump took the opposite view and stepped up pressure on the Fed to cut rates.
On the 4th local time, President Trump wrote on Truth Social, "Cut interest rates. Otherwise, the United States will halt trade with countries running trade surpluses with the United States," adding, "It’s better than tariffs." He continued, "High interest rates put the United States at a very unfair competitive disadvantage."
There is no direct economic-policy link between cutting interest rates and halting trade with countries that run trade surpluses with the United States. Trump’s argument is that the United States has opened up its enormous market, allowing other countries to enjoy trade surpluses with the United States, yet high interest rates have placed the country at a disadvantage in international competition. His remarks are interpreted as meaning that if the Fed does not cut rates to eliminate this disadvantage, he will respond by using trade policy, an authority of the president.
President Trump emphasized, "If the United States does not allow them to maintain their enormous trade surpluses, they will no longer be considered financial elites," adding, "The United States should have the lowest interest rates of any country in the world."
U.S. nonfarm payrolls increased by 162,000 in August, according to data released that day. The figure was nearly three times the market forecast of 56,000, while the unemployment rate remained at 4.1%. As the strength of the labor market was confirmed, market expectations moved in the opposite direction from President Trump’s position. In the interest-rate futures market, the probability of a Fed rate hike in September rose to 65% after the employment report was released. The yield on the 10-year U.S. Treasury note also climbed to around 4.77%.
President Trump pressed the Fed, saying, "You need to be smart. This time, be a patriot." However, Fed Chair Kevin Warsh has recently left open the possibility of raising interest rates to bring inflation back to its 2% target.


[email protected] Reporter Lee Byung-chul Reporter