‘I will stop trading’: Donald Trump warns Federal Reserve; Why is US President threatening his own central bank
US President Donald Trump has stepped up pressure on the Federal Reserve, warning that he could stop doing business with countries that run trade deficits with the United States if the central bank does not cut interest rates.
In a post on his Truth Social platform on Friday, September 4, Trump wrote, ‘Lower the interest rate or I will stop doing business with countries where we have a deficit.’
Trump argued that high interest rates in the US are putting the country at an unfair disadvantage. He said the US should have the lowest borrowing costs in the world.
Trump’s threat could have wider economic impact
If Trump were to actually halt trade with countries where the US runs a deficit, the consequences could be more serious than those caused by tariffs, as the US relies heavily on imports from several of these nations.
A sudden disruption in trade could affect supplies and lead to a sharp rise in prices. This could push inflation higher and put additional pressure on the US economy.
Kevin Warsh faces a difficult choice
Trump’s remarks have put Federal Reserve Chair Kevin Warsh in a difficult position.
Cutting interest rates could go against the Fed’s policy approach and create fresh concerns for the US economy. But refusing to follow Trump’s demand could further increase tensions between the White House and the central bank.
The Federal Reserve is scheduled to hold its next policy meeting on September 15 and 16, when its interest-rate decision will be closely watched.
Strong US jobs data complicates rate cut expectations
Trump’s comments came just hours after the release of stronger-than-expected US employment data, making the possibility of an immediate rate cut more complicated.
The US economy added 162,000 jobs in August, far above economists’ expectations of around 53,000 to 55,000 jobs. The unemployment rate remained at 4.1%.
Following the report, traders increased their bets that the Federal Reserve could raise interest rates at its September meeting rather than cut them.
Why does Trump want lower interest rates?
Trump has argued that lower borrowing costs would strengthen the US economy, support growth and improve the country’s overall economic position.
After the jobs report, he said strong economic growth would not necessarily trigger inflation concerns. His argument is that a strong economy does not automatically require a tight monetary policy.
Trump has also said that the US, as a strong borrower, should be able to operate with much lower interest rates.
China, Mexico and Vietnam among major trade deficit partners
Trump’s threat could have significant consequences because the US runs trade deficits with many of its biggest trading partners.
China accounted for the largest share of the US trade deficit last year, at more than USD 200 billion. Mexico and Vietnam followed.
Overall, the United States recorded a trade deficit of around USD 1.2 trillion with all of its trading partners last year.
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First published on: Sep 05, 2026 02:50 PM IST
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