Trump demands the Federal Reserve cut rates or threatens to cut trade with countries with trade deficits

If something characterizes Donald Trump's politics, it is the incessant pressure, blackmail for many, when something obsesses him. The president this Friday demanded that the Federal Reserve (Fed) drastically cut interest rates at the next meeting (September 15-16) or, otherwise, he will cut off trade with countries with which the United States maintains trade deficits.

Trump issued this wide-ranging ultimatum in a post on Truth Social, his social network, in response to a much stronger-than-expected monthly jobs report, urging the central bank and its president, Kevin Warsh, to “come to their senses” and cut interest rates.

But this unexpectedly good employment report rather opens the door to an increase in these rates, as many members of the Fed were already betting, to combat rampant inflation and avoid overheating of the economy. The example is in the price of diesel in the US, which has reached a record of $5.85 on average while the war in Iran disrupts fuel supplies around the world. Since diesel is used in many freight and delivery networks, the increase in its price translates into higher transportation costs for a long list of everyday products. And the supermarket bill skyrockets for citizens.

This August there was an addition of 162,000 jobs, well above the 53,000 that economists predicted. The unemployment rate remained stable at 4.1%, as expected. In addition to the increase recorded last month, the figures for June and July were revised upwards. From a destruction of 23,000 jobs in July, it went to a more positive figure of 21,000, which only reinforces the idea that the Fed's true front is inflation and even more so when its president, Kevin Warsh, accepted last week that he is willing to raise rates to combat it.

Along these lines, the Dow Jones reacted on the stock market when the information on the labor market was known. The futures index fell nearly 170 points by mid-afternoon as expectations grew that the Federal Reserve would raise rates immediately.

Trump, who put Warsh at the head of the Fed with a goal as specific as lowering rates, reacted according to the parameters that define his style: to attack.

"They have just announced extraordinary employment figures, which double and triple all forecasts (except mine!). And you still haven't seen anything!" he wrote. "Lower interest rates because the United States now has a much more solid credit position than it did very recently. A strong country means a lower interest rate, it is better credit, very simple," he said.

"We should have the lowest interest rate of any country in the world, just like the old days. If the United States stopped allowing them to maintain their huge surpluses, and we could end that immediately, they would no longer be considered part of the financial elite," he continued.

"Lower the rates or I will stop trading with the countries with which we have a deficit, something that the US Supreme Court, in its ridiculous and very costly decision on tariffs, firmly recognized that the president has an absolute right to do. It is better than tariffs!", he stressed in his outburst. "The Federal Reserve board, with its great new leader, must come to its senses. Be patriotic for once. High interest rates place the United States at a very unfair disadvantage, and I will not allow that to happen," he intimidated with his note.

The message is a clear sign that Trump is resuming his pressure campaign against the Fed, a pressure that had relaxed since the appointment of Warsh, his chosen successor to Jerome Powell, who always maintained the independence of the institution above the will of the president of the White House.

As analysts stressed, and taken at face value, the threat of ending trade with countries that maintain surpluses against the United States is extreme. The U.S. runs large trade deficits with dozens of countries, including its largest trading partners.

The message is launched two months before the midterm elections, in which Americans' discontent over the persistence of high inflation is one of the most relevant issues.

Trump has long called for lower interest rates and frequently complains about trade deficits with other countries, but he never pays attention to surveys and reports of citizens' complaints that everything has become much more expensive during his administration.