Trump Encourages the Fed to Cut Rates as New Tariff Policies Unfold

The Trump administration is expected to announce new reciprocal tariffs on April 2.

The Federal Reserve building in Washington, on Jan. 14, 2025. Madalina Vasiliu/The Epoch Times

President Donald Trump is urging the Federal Reserve to cut interest rates, a move he hopes would complement his administration’s evolving tariff strategy.

In a Wednesday night post on Truth Social, Trump called on Fed governors to ease monetary policy as the administration’s tariff policies move into a new phase.

“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump wrote. “Do the right thing. April 2nd is Liberation Day in America!!!”

His comments came just hours after the policy-making Federal Open Market Committee, headed by Federal Reserve Chair Jerome Powell, voted to keep interest rates steady while signaling the possibility of two rate cuts before the end of the year.

Even after the Fed retreated from its aggressive fight against inflation late last year by lowering interest rates by a full percentage point, the Fed’s benchmark rate remains at a historically high range of 4.25–4.5 percent.

At his post-meeting press conference, Powell defended the central bank’s cautious approach, citing uncertainty surrounding the “net effect” of the tariffs—sometimes imposed one day and put on hold the next—in combination with the administration’s other efforts such as tax cuts, immigration enforcement, federal spending reductions, and deregulation.

Despite the uncertainty, Powell emphasized that the overall economy has remained resilient. The unemployment rate was a low 4.1 percent in February, while the annual inflation rate eased to 2.8 percent.

“In the meantime, it’s appropriate to wait for further clarity,” Powell told reporters on Wednesday. “And the cost of doing that, given that the economy is still solid, is very low.”

If tariffs drive prices higher, the Fed might need to choose between raising interest rates to curb inflation or lowering them to stimulate economic growth. Powell said Fed officials are now projecting slightly higher inflation for the year than they had three months ago.

“We’re at a stage where we’re still very uncertain about what will be tariffed, for how long, at what level,” Powell said. “We’re going to have to wait and see all of that.”

What to Expect on April 2

Trump’s mention of April 2 refers to the date when his administration is expected to announce new reciprocal tariffs on the United States’s trade partners, with a goal to level trade imbalances and protect domestic industry.

According to Treasury Secretary Scott Bessent, each individual country will receive a reciprocal tariff number that will be high for some and low for others, depending on a broad range of factors.

“On April 2, we’re going to produce a list of other countries’ tariffs,” he said on Tuesday in an interview with Fox Business Network. “We are going to go to them and say, ‘Look, here’s where we think the tariff levels are, non-tariff barriers, currency manipulation, unfair funding, labor suppression, and if you will stop this, we will not put up the tariff wall.’”

The secretary expressed optimism that many of the new tariffs may not actually go into effect, as some countries are already moving to adjust their trade policies ahead of the April 2 announcement.

“Going into April 2, some of our worst trading partners in terms of the way they treat us have already come to President Trump offering ... substantial decreases in very unfair tariffs,” he said.