Trump says he will cease trading with top partners unless Fed lowers rates

By Elisabeth Buchwald, CNN

(CNN) — President Donald Trump threatened on Friday to prevent the US from trading with many nations unless the Federal Reserve lowers interest 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 said in a post on Truth Social. “IT’S BETTER THAN TARIFFS! The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change.”

A trade deficit occurs when a country imports more than it exports. At over $200 billion, the US ran its largest trade deficit with China last year, followed by Mexico and Vietnam. Overall, the US ran a $1.2 trillion trade deficit with all trading partners last year, according to federal trade data.

Trump’s threat came shortly after August’s surprisingly hot jobs report showed that US employers hired 162,000 new workers that month, more than double the level economists anticipated.

The strong report opens the door even wider for the Fed to hike interest rates to fight back against inflation concerns. Officials meet later this month to decide where rates should be.

The Fed declined to comment on Trump’s post.

A rate hike is on the table

After the jobs report was released at 8:30 a.m. ET on Friday, rate hike odds at the upcoming meeting jumped to 60% from 49% on Thursday, according to CME FedWatch.

Fed officials have sent mixed signals ahead of their two-day policy meeting beginning on September 15.

Last week, Fed Chairman Kevin Warsh, whom Trump hand-picked to replace Jerome Powell after repeatedly pressuring the former chair to cut interest rates, signaled that he is open to raising rates if inflation remains too high.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh said in remarks he delivered at the Fed’s annual Jackson Hole symposium.

Fed Governor Michael Barr said this week he’s prepared to vote for a rate hike soon if new inflation data doesn’t indicate any progress bringing price increases back to the bank’s 2% target.

While, Fed Governor Chris Waller said he’s willing to wait longer to see how the economy evolves but that he would support a hike if inflation doesn’t eventually slow.

That’s put a unique emphasis on next Friday’s Consumer Price Index report for August.

The nation’s annual inflation rate has jumped by a full percentage point to 3.4% in July since the war with Iran broke out in February, according to CPI data.

The run-up in inflation has stemmed primarily from a massive jump in gas prices, with oil tankers mostly unable to transit through the Strait of Hormuz. That’s caused businesses to also pay more to transport goods, and many companies have signaled forthcoming price hikes as a result.

If Trump follows through on his threat to cut off trade, it could put further upward pressure on prices. But that assumes US businesses can quickly find alternative suppliers for goods they had been sourcing from those countries. In many cases, that could be extremely difficult, if not impossible. The resulting disruptions could hit businesses and consumers alike, potentially weighing heavily on the broader economy.

Trump’s Fed pressure campaign

It’s not the first time this week Trump has called for lower interest rates. Speaking to reporters in the Oval Office on Monday, Trump said it was “ridiculous” to even discuss raising them.

“It’s ridiculous because success in growth does not cause inflation,” Trump said. “Inflation’s caused for other reasons.”

The comments underscore Trump’s long-running pressure campaign on the Fed to cut interest rates. That includes Trump’s attempt to fire Fed Governor Lisa Cook over unproven allegations of mortgage fraud. The Supreme Court ultimately ruled that Trump did not have the authority to remove her. (Cook has not been charged with any wrongdoing.)

Trump’s Justice Department also opened a criminal investigation last year into Powell’s handling of the central bank’s multibillion-dollar renovation project while he was still chair. The investigation was later dropped, clearing a major roadblock to Warsh’s Senate confirmation.

This story has been updated.

The-CNN-Wire
™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

CNN’s Molly English and Bryan Mena contributed to this report.