If there is one thing that characterizes Donald Trump’s policy, it is relentless pressure, blackmail for many, when something obsesses him. The president demanded this Friday that the Federal Reserve (Fed) drastically cut interest rates at the next meeting (September 15-16) or else he will cut trade with countries with which the United States has trade deficits.
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After pressuring Jerome Powell, the president now focuses on Kevin Warsh
Trump issued this broad ultimatum in a post on Truth Social, his social network, in response to a much stronger than expected monthly employment report, urging the central bank and its chairman, Kevin Warsh, to “come to their senses” and cut interest rates.
But that unexpectedly good employment report rather opens the door to a rate hike, as many Fed members had already bet, to combat rampant inflation and avoid overheating the economy. The example is the price of diesel in the U.S., which has reached a record average of $5.85 while the war in Iran disrupts fuel supply worldwide. Since diesel is used in many freight and delivery transport networks, the increase in its price translates into higher transportation costs for a long list of everyday products. And the grocery bill soars for citizens.
This August saw an addition of 162,000 jobs, well above the 53,000 economists had forecast. The unemployment rate remained steady at 4.1%, as expected. In addition to the increase recorded last month, the June and July figures were revised upward. From a destruction of 23,000 jobs in July, it shifted to a more positive figure of 21,000, which only reinforces the idea that the Fed’s real front is inflation, especially since its chairman, Kevin Warsh, accepted last week that he is willing to raise rates to fight it.
Trump believes that if unemployment is good, the country is strong and does not deserve low rates
The Dow Jones reacted along those lines upon learning the labor market information. The futures index fell nearly 170 points by mid-afternoon as it was considered that expectations increased that the Federal Reserve would raise rates immediately.
Trump, who put Warsh at the head of the Fed with a goal as concrete as draining rates, reacted according to the parameters that mark his style: on the attack.
“They just announced extraordinary employment figures, doubling and tripling all forecasts (except mine!). And you haven’t seen anything yet!” he wrote. “Lower interest rates because the United States now has a much stronger credit position than a very short time ago. A strong country means a lower interest rate, it is better credit, very simple,” he stated.
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“We should have the lowest interest rate of any country in the world, like in 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 countries with which we have deficits, something the U.S. Supreme Court, in its ridiculous and very costly decision on tariffs, firmly recognized that the president has absolute right to do. It is better than tariffs!” he emphasized in his outburst. “The Federal Reserve board, with its great new leader, must come to its senses. Be patriots for once. High interest rates put the United States at a very unfair disadvantage, and I will not allow that to happen,” he threatened with his postscript.
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, the successor he chose for Jerome Powell, who always maintained the institution’s independence above the White House leader’s will.
As analysts pointed out, and taken literally, the threat to end trade with countries that maintain surpluses against the United States is extreme. The U.S. records large trade deficits with dozens of countries, including its main trading partners.
The message is launched two months before the midterm elections, in which Americans’ discontent over persistent high inflation is one of the most relevant issues.
Trump has long been demanding lower interest rates and frequently complains about trade deficits with other countries, but in no case does he heed polls and reports about citizens’ complaints that everything has become much more expensive during his administration.
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