Trump Threatens to Cease Trading With Top Partners Unless Fed Lowers Rates

President Donald Trump on Friday issued a sweeping ultimatum to the Federal Reserve, threatening to halt trade with every country the United States runs a trade deficit against unless the central bank slashes interest rates. The dramatic demand came hours after a stronger-than-expected jobs report that many economists say actually makes rate cuts less likely.

WASHINGTON – President Donald Trump escalated his pressure campaign on the Federal Reserve on Friday, threatening to cut off trade with dozens of nations unless the central bank lowers interest rates . The ultimatum, delivered via a Truth Social post, represents one of the most direct presidential interventions into monetary policy in modern history.

"LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT," Trump wrote in all caps . "The Fed Board, with its great new leader, must get smart — BE PATRIOTS for a change. High interest rates put the U.S.A. at a very unfair disadvantage, and I won't allow that to happen!" .

The president's demand came shortly after the Labor Department reported that the U.S. economy added 162,000 jobs in August — more than double economists' expectations — while the unemployment rate held steady at 4.1 percent .

A Strong Economy — and a Rate Hike Warning

The robust jobs report has paradoxically made it more likely the Fed will raise rates, not lower them, according to market indicators. CME FedWatch now puts the probability of a 0.25 percentage point rate hike at the Fed's September 16 meeting at 60 percent, up from 49 percent on Thursday .

The 10-year Treasury yield surged to a one-year high of 4.79 percent after the jobs data, signaling that traders expect fewer rate cuts, not more . Markets interpreted the strong employment numbers as evidence that the economy does not need stimulus and that inflation risks remain elevated.

Trump's Legal Claim: 'Better Than Tariffs'

Trump's post cited a recent Supreme Court ruling, claiming it grants him the authority to cut off trade as an alternative to tariffs.

"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 wrote. "IT'S BETTER THAN TARIFFS!" .

The Supreme Court had earlier invalidated Trump's use of a 1977 economic-powers law to impose tariffs, holding that tariffs are a taxing power the Constitution reserves to Congress . The Court did list several narrower statutes that remain available but did not rule on their scope . Legal experts have noted that Trump's claim overstates the ruling's holding .

The United States ran a $1.2 trillion trade deficit with all trading partners last year, with the largest deficits against China, Mexico, and Vietnam . Cutting off trade with deficit countries would be an extraordinary step affecting dozens of major economies .

Trump's Own Fed Chair Signals the Opposite

Trump's ultimatum was directed at Kevin Warsh, whom the president installed as Federal Reserve chairman after a prolonged campaign to remove Jerome Powell .

Just one week before Trump's post, Warsh told the Jackson Hole symposium that the Fed had "work to do" on inflation, a warning that sparked market bets on rate hikes . The Fed chair has pledged to usher in price stability and recommitted to the 2 percent inflation target, suggesting he may resist political pressure to cut rates prematurely .

Fed officials have sent mixed signals ahead of the September 15-16 policy meeting. Governor Michael Barr said this week he's prepared to vote for a rate hike if new inflation data doesn't indicate progress toward the 2 percent target . Governor Chris Waller said he would support a hike if inflation doesn't eventually slow .

Inflation Remains the Elephant in the Room

Yearly inflation is running above 3 percent, while the Fed's preferred target is 2 percent . Core PCE inflation, the central bank's preferred gauge, ran 3.3 percent year-over-year in July .

Trump, however, believes the U.S. economy's strength should translate into lower borrowing costs.

"A STRONG COUNTRY MEANS A LOWER INTEREST RATE — IT'S A BETTER CREDIT," Trump wrote . "We should have the lowest rate of any country in the world. Very simple!" .

The president also referenced his longstanding fixation on trade deficits, framing the demand as an alternative to tariffs .

Market Reaction and What's Next

The Dow Jones Industrial Average fell 0.68 percent on Friday, while the S&P 500 declined 0.5 percent as investors digested the implications of the jobs report and Trump's ultimatum .

The next major test comes September 11, when the Consumer Price Index report for August is released — five days before the Fed convenes . If inflation data remains hot, it could solidify the case for a rate hike despite Trump's extraordinary pressure campaign.

Economist Jeffrey Roach of LPL Financial said the jobs report changes the September debate significantly: "Given the strength of the payroll report, a rate hike on September 16 appears increasingly likely" .

The Bottom Line

What Trump Demands	What Markets Expect
Immediate Fed rate cut	60% chance of a rate hike on Sept. 16
Stop trade with deficit countries	A trade embargo would affect $1.2 trillion in annual trade
His own Fed chair to comply	Warsh signaled the opposite at Jackson Hole

Whether Trump's "patriots" appeal will sway the central bank — or trigger a constitutional showdown — remains to be seen. For now, markets are betting that the Fed's independent mandate will prevail over presidential pressure, even when that pressure comes with a trade war attached.

This is a developing story. The Federal Reserve has declined to comment on the president's post