Trump Threatens Trade Cutoff, Demands Fed Rate Cut

President Donald Trump demanded Friday that the Federal Reserve slash interest rates, threatening to halt trade with countries carrying trade surpluses against the United States if the central bank refuses to act — an escalation well beyond his earlier tariff campaigns.

Trump posted the ultimatum on Truth Social in large capital letters, writing that the Fed should lower the rate or he would stop trading with countries with which the U.S. runs a deficit. He later told reporters in the Oval Office that he was under "no obligation" to allow trade to continue, and floated banning all commerce with Canada as a concrete example.

Speaking at the White House, Trump argued that an embargo could be more powerful than tariffs and said he could implement one with "one swipe of the pen." He pointed to the International Emergency Economic Powers Act of 1977 — a statute that grants the president broad authority to restrict commerce during a declared economic emergency — as the legal vehicle for such action. The Supreme Court ruled in February that the same law does not authorize tariffs, but analysts noted it may well cover a full embargo.

The president's comments came hours after the Labor Department released a blowout August jobs report showing 162,000 positions added, more than triple what economists had forecast. Strong job growth raised the probability of a Federal Reserve rate hike at its Sept. 15-16 meeting to roughly 60 percent, according to CME Group's FedWatch tool — the opposite of what Trump wants.

The same morning brought trade data that clearly irritated the White House. The U.S. goods-and-services deficit ballooned to $88.6 billion in July, the highest level since March 2025 and a 24.4-percent jump from June's $71.2 billion. Country-by-country figures showed a $27.5 billion gap with Mexico, $23.3 billion with Vietnam, $15.2 billion with China and $8.9 billion with the European Union.

Part of the surge traces directly to the AI data-center build-out — computer imports jumped 25 percent between June and July, and semiconductor imports climbed 10 percent. Trump himself has championed that spending; asked about data centers on Friday, he said he would want as many as possible if he were running a state.

The Fed's new leader — unnamed in Trump's post but identified only as its "great new leader" — drew a pointed presidential directive to "get smart" on rates. Pressure from a sitting president on the central bank is not new, but explicit embargo threats tied to monetary policy mark a departure from past practice.

Markets took the day's crosscurrents badly. The Nasdaq, the Dow Jones Industrial Average and the S&P 500 each fell after Trump's remarks circulated, even as the underlying jobs numbers were strong.