Trump threatens to stop trading with countries that have a trade deficit unless the Fed cuts rates

Touting Friday's blowout jobs number, President Trump used the opportunity to weigh in on a new spike in the US trade deficit , threatening embargoes on unfavored countries.

Trump posted on Truth Social , in what appeared to be a directive to the Federal Reserve, to "LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT."

Trump, who has long voiced a desire for lower interest rates, asserted that an embargo could be "BETTER THAN TARIFFS" and said "the Fed Board, with its great new leader, must get smart."

Pressure on the central bank from the president isn't new, but the threat of a trade embargo is. Embargoes would be a new level of disruption for the global economy, and the president likely has the legal authority to follow through.

As Trump noted in his post, the International Emergency Economic Powers Act of 1977 directly gives the president the power to impose an embargo in what is deemed an economic emergency. But, as the Supreme Court ruled in February, it doesn't give the president the power to levy tariffs.

Trump's new threat came after trade data for July painted an unwelcome picture for the president, who has long made zeroing out trade deficits a central promise.

The US trade deficit in goods and services ballooned in July with a new gap of $88.6 billion , the highest level since March 2025. That was a 24.4% surge from June's $71.2 billion.

The data also included a country-by-country breakdown and showed continued US trade deficits with many major trading partners, including Mexico (a $27.5 billion deficit in July), Vietnam ($23.3 billion), China ($15.2 billion), the European Union ($8.9 billion), and many others.

The growing trade deficit was at least partly fueled by AI data center build-out spending, which the president has often touted.

"Let data reign," Trump recently wrote on Truth Social.

Imports of computers surged by 25% between June and July and semiconductor imports jumped 10% as tech companies continued to spend heavily on the facilities.

AI spending also appeared to be fueling Friday's jobs figures in part, with construction jobs (many of which are for those data centers) up by 22,000 jobs in August.

Ben Werschkul is a Washington correspondent for Yahoo Finance.