WASHINGTON — President Donald Trump called for lower borrowing costs, saying U.S. interest rates should be below 1%, after the Federal Reserve raised its benchmark rate by 0.25 percentage point to a range of 3.75% to 4.00%.
Trump wrote on Truth Social on the 16th that U.S. interest rates should be below 1% because the country has by far the best credit standing in the world. He said the United States is booming with new investment, and that if it halted trade with every country running a deficit — that is, most countries — it could earn at least $1.5 trillion a year. Trump added that the word "deficit" is merely an elegant way of describing a loss, and that the United States is supporting nearly every country in the world, a situation he said cannot continue any longer. He demanded that U.S. interest rates be lowered, and quickly.
The Federal Reserve raised its benchmark rate by 0.25 percentage point to a range of 3.75% to 4.00% that day. It was the first rate increase in three years and two months, since July 2023. The decision was unanimous, indicating that Chair Kevin Warsh also voted in favor of the increase. Trump had repeatedly pressed for rate cuts ahead of the Fed's decision. Bloomberg said the relationship between Trump and Warsh would be put to the test.
After the Fed's decision, White House deputy press secretary Kush Desai told Fox News that the increase was a highly regrettable decision and was not backed by particularly compelling economic reasoning.
Trump has never directly explained the link between U.S. interest rates and the trade deficit. Some in the market read his comments as pointing to how high U.S. rates strengthen the dollar and widen the trade deficit.
Investors have viewed Trump's threat to halt trade as unlikely to become actual policy, given the scale of the fallout it would cause. But Trump recently signaled that limited trade suspensions are possible, giving notice that starting on the 29th the United States will halt imports of certain Canadian products, including alcoholic beverages, dairy goods and motorcycles, under Section 338 of the tariff law.
