Trump Threatens to Halt Trade With Deficit Countries Unless Fed Cuts Rates

US President Donald Trump has threatened to halt trade with countries where the United States runs a trade deficit unless the Federal Reserve lowers interest rates, escalating his pressure on the central bank after a stronger-than-expected August jobs report.

US President Donald Trump has intensified pressure on the Federal Reserve to lower interest rates, linking monetary policy to trade with countries running US trade deficits.

Trump made the threat on Sept. 4 after the Labor Department reported that US employers added 162,000 jobs in August, well above economists' expectations of about 55,000.

The unemployment rate held at 4.1%. Financial markets subsequently raised the probability of a Federal Reserve rate hike at its Sept. 16 meeting to about 60%.

Trump argued that high interest rates put the United States at an unfair disadvantage and called on the Fed to lower borrowing costs. He wrote that the US should stop trading with countries with which it runs deficits if rates are not reduced.

The threat comes as the US continues to run a large merchandise trade deficit.

The US goods deficit reached a record $1.24 trillion in 2025, although the overall deficit in goods and services was considerably smaller at $901.5 billion because the country ran a large services surplus.

Trump also invoked the Supreme Court's February ruling in Learning Resources, Inc. v. Trump, suggesting that the decision recognized broad presidential authority to halt trade.

The claim goes beyond what the court actually ruled.

In its Feb. 20, 2026, decision, the Supreme Court held that the International Emergency Economic Powers Act (IEEPA) did not authorize the president to impose the tariffs challenged in the case.

The ruling therefore limited presidential tariff authority under that particular statute; it did not establish an "absolute right" to unilaterally halt trade with countries simply because the United States runs a deficit with them.

A broad cutoff of trade with deficit countries could have significant consequences for US companies and consumers because the United States runs goods deficits with many major trading partners.

Any such policy would also require a legal basis beyond the authority rejected by the Supreme Court in the IEEPA case.