Trump threatens to cut off trade with deficit countries if Fed doesn't cut interest rates

First published: 9/04 22:38

Update time:9/05 10:17

Trump calls for the Fed to cut interest rates. (AFP)

[Reporter Wei Guojin/Taipei Report] After the U.S. employment report for August was released that was higher than expected, U.S. President Trump issued an ultimatum to the Federal Reserve (Fed) to cut interest rates on the social platform "Real Community". He threatened that if the Fed did not cut interest rates, he would cut off trade with countries that maintain trade deficits with the United States.

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He posted, "Great jobs data just came out, far beating all expectations (except mine!). You've never seen this, 162,000 new jobs in August! Lower interest rates because America's credit profile is much stronger than it was not long ago. A strong country means lower interest rates, and its credit is better , it's that simple! We should have the lowest interest rates in the world, just like in the past, other countries will not have huge surpluses without the US allowing it, we can stop this immediately and they will no longer be considered financially outstanding countries. Lower interest rates or I will stop trading with the countries we have deficits with."

The message showed Trump was resuming his pressure campaign on the Fed, which had slowed since he appointed Washer to succeed Jerome Powell as Fed chairman.

From a practical perspective, threatening to cut off trade with deficit countries is too extreme. The United States runs huge trade deficits with dozens of countries, including major trading partners. The White House did not immediately respond to CNBC's request for comment. The post was published just before the U.S. midterm elections, in which Americans’ dissatisfaction with continued high inflation was a major issue.

The U.S. Department of Labor announced on the 4th that 162,000 new non-farm jobs were added in August, much higher than the revised 21,000 new jobs in July and the 53,000 analysts expected. It was the highest number of new jobs in a month since March. The unemployment rate remained at 4.1%, in line with expectations.

The Wall Street Journal and CNBC both pointed out that the Federal Reserve has repeatedly stated that the labor market is stable. This report is consistent with this view and may turn the Federal Reserve's attention to the inflation data released next Friday. The August Consumer Price Index (CPI) will be the last important data before the Federal Reserve's policy meeting on September 15 and 16. Zentner, chief economic strategist at Morgan Stanley Wealth Management, said, "The better-than-expected employment report may increase doubts about raising interest rates, but the outcome still depends on next week's inflation data. If inflation eases more than expected, the Fed may ignore potential inflation signals released by the labor market."

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