Trump has demanded that the Federal Reserve lower interest rates, threatening to halt trade with countries with which Washington has a trade deficit. He published the corresponding post on his social network Truth Social on September 4, 2026.
In the message, Trump declared he was ready to stop trading with debtor countries if the rate is not lowered, calling such a move "better than tariffs." He also cited a U.S. Supreme Court ruling on a tariff case, which, in his words, confirmed the president's authority to take such measures. Separately, Trump stated that the U.S. should have the lowest rate in the world, citing strong employment data as an argument — the economy added 162,000 jobs in August.
That same day, speaking in the Oval Office of the White House, the president reiterated his position: the U.S. is not obligated to trade with countries where deficits have accumulated over the years, and halting such trade, in his opinion, would automatically eliminate the imbalance. Trump mentioned Canada, Mexico, and the European Union, noting he could impose an embargo "with the stroke of a pen."
Trade Deficit Hits 16-Month High
According to data from the U.S. Bureau of Economic Analysis and the U.S. Census Bureau, the overall U.S. trade deficit in goods and services reached $88.6 billion in July 2026 — the highest level in the last 16 months. Several countries were the main contributors to the imbalance.
- Mexico — $27.5 billion
- Vietnam — $23.3 billion
- Taiwan — approximately $18–20.7 billion
- China — $15.2 billion
- Germany — approximately $5.6–6.3 billion
- Ireland — approximately $3.9 billion
The agencies publish the full country-by-country statistics separately.
What Powers is Trump Citing
The president's statements are based on a U.S. Supreme Court ruling from February 20, 2026, in the case *Learning Resources, Inc. v. Trump* and related lawsuits. The court ruled 6-3 that the International Emergency Economic Powers Act (IEEPA) does not grant the president the authority to impose tariffs. However, the text of IEEPA (50 U.S.C. § 1702) directly empowers the head of state to prevent or prohibit imports and exports, and regulate related transactions under a declared state of emergency — it is this provision, not tariff authority, that Trump is now relying on.
A national emergency concerning trade deficits was declared back in April 2025 and extended in March 2026. Presidents have previously used IEEPA to impose embargoes — notably against Iran, North Korea, and specific goods from Russia. In addition to IEEPA, the head of state has other tools for restricting trade — Sections 232, 301, and 122 of relevant legislation. Formally, the Constitution grants Congress the power to regulate foreign trade, but it has delegated broad authority to the president in case of emergencies.
AI Opinion
From the perspective of machine data analysis, the demand to lower the rate under threat of trade restrictions finds a direct historical parallel. The end of 1971 provides a similar example: President Richard Nixon systematically pressured Fed Chairman Arthur Burns to ease policy ahead of the 1972 election. The outcome of that episode was inflation, which, according to a *Journal of Economic Perspectives* study, reached 9.6% in 1973 and required the painful 1980–82 recession to tame. The macroeconomic link here is obvious: attempts to ensure cheap money for short-term economic growth often translate into a long-term inflationary bill. The question arises whether the current confrontation with the Fed will repeat the same scenario a decade later.
