Trump Threatens to Cut Off Trade Unless Interest Rates Fall

President Donald Trump has made a threat to halt trade with countries that run a surplus with the United States, unless interest rates are lowered. In a post on Truth Social, he wrote in capital letters: 'LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.'

The Federal Reserve sets interest rates to promote maximum employment and stable prices, not based on the US's creditworthiness or trade balance. Trump seems to misunderstand how consumer lending works, comparing the Fed's rate decisions to a bank offering lower rates to borrowers with good credit scores.

However, this is unrelated to the federal funds rate set by the Federal Reserve. The actual borrowing costs of the US government are determined by investors in the bond market, not the Fed. Trump's threat to cut off foreign trade would likely raise borrowing costs, as countries that run surpluses with the US accumulate dollars and recycle them into US Treasury securities.

The post came hours after a better-than-expected jobs report showed employers added 162,000 jobs in August, with the unemployment rate holding steady at 4.1 percent. Trump called Federal Reserve Chairman Kevin Warsh a 'great new leader' but warned that the Fed must 'get smart' and urged the board to be patriots.