August’s jobs report came in Friday morning, and it was a good one: 162,000 jobs added, more than double what economists were expecting, unemployment holding steady at 4.1 percent. That’s normally a number worth celebrating. Instead, a few hours later, the president threatened to stop trading with most of the world.
At 9:56am, he posted to Truth Social: “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.” No target rate, no list of countries — just a threat aimed at nearly every nation the U.S. buys more from than it sells to, which is most of America’s trading partners, over an interest rate decision he doesn’t actually control.
The timing is almost too perfect. A strong jobs report is usually a reason for the Federal Reserve to hold rates steady, or raise them, not cut them. Kevin Warsh — the Fed chair Trump nominated himself, sworn in back in May — said basically that a week earlier at Jackson Hole, warning that inflation needs to fall “clearly and at sufficient speed” or the Fed still has “work to do.” Translation: rates might have to rise, not fall. So good economic news landed, Trump’s own pick to run the Fed signaled he’s watching the data instead of the politics, and the president responded by threatening a trade war against the man he appointed for doing exactly that.
Quick refresher on what a trade deficit actually is, since the word makes it sound scarier than it is. It doesn’t mean anyone owes anybody money. It means Americans bought more from a given country than that country bought from us that year. That’s the whole definition. It’s bookkeeping, not a debt, and it doesn’t require a hostage negotiation to fix.
The Federal Reserve is independent for one reason: so interest rate decisions get made on data, not on whoever’s angriest in the Oval Office that morning. That’s not a flaw. It’s the design. A Fed that cuts rates because a president posts in all caps is a Fed nobody can trust to raise them when inflation actually calls for it — which, according to Trump’s own handpicked chair, might be right now.
I won’t pretend I know whether rates should move up or down next month. That’s a question for people who read yield curves for a living, and I’m not one of them. What I do know: threatening trade with dozens of countries to strong-arm an independent institution isn’t a negotiating strategy. It’s a kid holding his breath until somebody caves.
My two cents: the trade deficit was never the real threat here. The tantrum is.