WASHINGTON — Frustrated over high borrowing costs, President Donald Trump issued an eyebrow-raising ultimatum earlier this month: He said that he would choke off a vast swath of U.S. trade unless the Federal Reserve voted soon to cut interest rates.

Policymakers are unlikely to deliver on that demand, as the Fed prepares to wrap up a two-day meeting on Wednesday with a decision that could wind up raising rates, not lowering them.

So, the question remains: Will Trump lash out in response?

The uncertainty is the latest chapter in the ongoing feud between Trump and the nation’s central bank, one that has put the political independence of the institution at stake. The president has already attacked the Fed’s members — and tried to fire some of them — and now seems open to leveraging the fate of international commerce in a bid to influence monetary policy.

This time, White House officials have tried to walk a fine line.

On one hand, Trump and his aides have praised Kevin Warsh, the new Fed chair, insisting that they respect his work to address a set of challenges that includes the battle against inflation.

But, at the same time, the White House has been willing to criticize the political motivations of other Fed members, as Trump downplays the fact that inflation remains well above policymakers’ 2% target.

“Whatever he does tomorrow, we’re going to respect the process, and understand that he’s doing what he and the committee think is correct,” Kevin Hassett, the director of the White House National Economic Council, said in reference to Warsh during an appearance on CNBC earlier this week.

“That said,” Hassett continued, “we also don’t think that in a democracy that one is not allowed to talk about policy and economics.”

But Trump did more than talk about the merits of rates when he issued his boldest threat in early September. Repeating his demand for the “the LOWEST RATE of any country in the World,” the president posted to social media: “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.”

If Trump followed through, the move would imperil a significant amount of U.S. trade, and the consequences could be immense for American families and businesses. Yet Trump ignored the concerns, later telling reporters: “And if we’re not going to be treated properly, we’re going to do that.”

In the days to follow, White House officials have been more coy about the president’s intentions. Appearing Sunday on CNN’s “State of the Union,” Hassett revealed little about whether the president intends to follow through with his threat.

“I don’t expect that trade is going to go to zero,” he began, “but I do think that the president has a very strong opinion that interest rates could be a lot lower. And we will just have to wait and see what the Fed decides.”

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This article originally appeared in The New York Times.

By Tony Romm/Alex Kent
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