Trump is threatening to stop trading with certain countries unless the Fed cuts rates. But are consumers better off with a hike?

“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT,” Trump wrote. “IT’S BETTER THAN TARIFFS! The Fed Board, with its great new leader, must get smart — BE PATRIOTS for a change.”

The U.S. ran a $1.2 trillion trade deficit last year, according to federal trade data and currently has a trade deficit with over 100 countries, including major partners like China, Mexico and Canada. It’s unclear whether Trump’s comment is a credible threat, but stopping trade with these countries would have an immediate effect on the supply chain and overall economy.

Under pressure

The Trump administration has been pressuring the Fed to lower interest rates, arguing that high rates will put the U.S. at an economic disadvantage compared to countries with lower rates.

Fed officials have been sending mixed signals ahead of the decision on Sept. 15. Federal Reserve Chair Kevin Warsh and other Fed members have signaled they are open to raising rates if inflation remains high, despite Trump’s pressure.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh said in remarks he delivered at the Fed’s annual Jackson Hole symposium.

The central bank has kept rates steady all year, with inflation sitting well above the Fed’s 2% target. But Warsh has not specified what exactly he wants to see — and where inflation needs to go — for him to raise interest rates.

Golden years?

While Trump wants rates to come down, that may not be the best outcome for everyday consumers.

Higher rates would increase borrowing costs, impacting everything from car loans, credit card debt and mortgages at a time when affordability is already weighing on households. However, raising rates could help rein in spending and borrowing, which will cool the economy and ease inflation.