President Trump on Thursday put renewed pressure on the Federal Reserve to cut interest rates, arguing the strength of the U.S. dollar is hurting American manufacturers.
In a series of tweets, Trump accused the Fed of hindering U.S. exports by keeping interest rates relatively high compared with other economic powers. He suggested the central bank should weaken the dollar by lowering interest rates.
{mosads}“As your President, one would think that I would be thrilled with our very strong dollar. I am not! The Fed’s high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers like Caterpillar, Boeing, John Deere, our car companies, & others, to compete on a level playing field,” Trump said in the series of tweets.
“With substantial Fed Cuts,” Trump added, “the dollar will make it possible for our companies to win against any competition.”
The president has long pressured the Fed to match rate cuts and other stimulus implemented by central banks in China and the European Union amid his trade battles. Higher borrowing costs tend to strengthen the dollar, making American-made goods relatively more expensive in foreign markets.
“We have the greatest companies in the world, there is nobody even close, but unfortunately the same cannot be said about our Federal Reserve,” Trump tweeted. “They have called it wrong at every step of the way, and we are still winning. Can you imagine what would happen if they actually called it right?”
While a weaker dollar can help U.S. exporters, presidents and Treasury secretaries have long touted a strong dollar as a pillar of financial strength. Trump’s comments Thursday in favor of weakening the dollar breaks from more than two decades of strong-dollar policy and furthers his intrusion on the Fed’s independence.
Trump’s remarks may also sour the deteriorating trade relationship between the U.S. and China, which the Treasury Department formally accused of currency manipulation Tuesday.
China’s central bank allowed the value of its currency, the yuan, on Monday to fall below a 7-to-1 exchange rate with the dollar, opening a new front in the trade war that began in July 2018. Stocks plummeted soon after, but stabilized shortly after the yuan rose above the 7-to-1 range.
The Fed cut interest rates last week for the first time since the 2008 financial crisis, and may do so again in September if trade tensions between the U.S. and China escalate.
Fed Chairman Jerome Powell told reporters last week that while the U.S. economy remains solid, the central bank decided to cut rates as insurance against global threats — including blowback from Trump’s trade policy.
“There isn’t a lot of experience in responding to global trade tensions,” Powell said. “They evolve in a different way, and we have to follow them.”