Trump Threatens to Cut Off Trade with Deficit Countries If Fed Refuses to Lower Rates

President Donald Trump escalated his pressure campaign against the Federal Reserve on Friday, September 4, threatening to halt trade with every country with which the United States runs a trade deficit unless the central bank slashes interest rates. Trump posted what amounted to a public directive to the Fed, writing "LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT."

The threat came on the same day a blowout August jobs report showed nonfarm payrolls grew 162,000, far above the 53,000 economists polled by Dow Jones had expected, with the unemployment rate holding steady at 4.1%. That strong reading raised market expectations that the Fed could raise, not cut, rates at its next meeting, putting Trump's demand at direct odds with where monetary policy appears headed. Fed Chair Kevin Warsh had spent the prior week signaling rates may need to go higher.

Markets responded negatively. The Dow Jones Industrial Average fell 382 points, or 0.7%, while the S&P 500 slid 0.5% and the Nasdaq Composite lost 0.4%, with the hot jobs data driving expectations of tighter monetary policy rather than the easing Trump demanded.