Trump threatens to halt trade with deficit countries if Fed refuses to cut rates

President Donald Trump threatened Friday (local time) to halt trade with countries that run surpluses with the United States if the Federal Reserve refuses to cut its benchmark interest rate.

Trump made the remarks on Truth Social after strong US jobs data were released, urging the Fed to lower rates to the lowest level in the world. "Great employment numbers just came out," he wrote. "Now that America's credit is strong, we should lower interest rates to the lowest level in the world."

The threat to cut off trade with surplus countries — an extreme measure — appeared to be Trump's response to the strong jobs figures, which had bolstered expectations of a rate hike and gave him reason to intensify his pressure on the Fed to cut rates instead.

"If they don't lower rates, we will stop trading with the countries we have deficits with," Trump said, adding that the Supreme Court had "strongly acknowledged" in its "foolish and expensive" tariffs ruling that "the president has absolute authority to do so."

"This will be better than tariffs," he added. However, Trump did not name any specific countries with which the US runs a trade deficit.

"The Fed Board, with its great new leader, must get smart," Trump said. "High interest rates put America at a very unfair disadvantage, and I will not let this happen."

It remained unclear whether Trump's remarks were intended as a genuine signal that he would follow through on halting trade or were simply aimed at ratcheting up pressure on the Fed.

CNBC said the threat, taken literally, was "extreme," noting that the United States runs large trade deficits with dozens of countries, including its major trading partners. The New York Times called it "a powerful ultimatum that would deal a severe blow to the economy if carried out."

Meanwhile, the US jobs market improved more than expected last month. Nonfarm payrolls rose by 162,000 from the previous month, the largest gain in five months.

The stronger-than-expected jobs growth has reinforced market expectations that the Fed will raise interest rates this month.