Former President Donald Trump, who had previously pushed for a reduction in the benchmark interest rate by the Federal Reserve (Fed) during his term from 2016 to 2020, argued against lowering interest rates before the November election. Trump, who had criticized Fed Chair Jerome Powell for perceived political motivations, pledged to retain Powell’s term if re-election.
According to CNBC, Trump outlined his economic policy for his second term in an interview released on Tuesday. The interview occurred at Trump’s residence in Palm Beach, Florida, two days before his first TV debate against President Joe Biden on the 25th of last month.
Trump suggested the possibility of the Federal Reserve, which currently has the highest interest rate in approximately 23 years, lowering the rate before the upcoming election, potentially before November 5th. “Right now, you have to keep rates where they are,” he said.
Four more Fed interest rate decisions are scheduled this year: July, September, November, and December, with two remaining before the election in July and September. Jerome Powell, who took office during the Trump administration in 2018, declared his intent to return the nearly decade-long monetary expansion policy for economic stimulus to normal levels to prevent the economy from overheating. He raised interest rates four times over about a year during this period.
In contrast, Trump, who advocated for massive tax cuts and fiscal spending expansion for economic stimulus, faced increased financial pressure as the interest to be repaid grew due to the interest rate hike.
Trump openly criticized Powell’s interest rate hikes in 2018 and expressed his desire to replace him in 2019. In June of that year, when asked whether he plans to serve his full term as chair, which ends in 2026, Powell simply replied, “Yes.”
Upon assuming office in 2021, Biden announced his intention to reappoint Powell. Powell began his second term in February 2022 and embarked on a record interest rate hike to combat inflation caused by COVID-19. Despite expressing the need for a rate cut, Biden publicly supported Powell, at least on the public stage.
Even after leaving office, Trump maintained a critical stance toward Powell. In an interview with Fox News last February, Trump said he would not reappoint Powell as Fed chairman if he won the election. Trump characterized Powell as “political,” expressing concern that a reduction in interest rates could be perceived as favoring the Democrats. Trump warned that the Fed could politically help Biden by stimulating the economy with a rate cut before the election.
In the interview released on the 16th, Trump remarked, “If he seems to be doing the right thing in my view, I will let him fulfill his term (retirement in 2026).” According to The Wall Street Journal (WSJ), Trump’s election campaign officials in April reported considering a plan to undermine the independence of the Fed and increase government intervention in interest rate policies after Trump’s re-election.
During the interview, Trump outlined his economic plans for his potential next term. He mentioned considering James Dimon, CEO of American investment bank JP Morgan Chase, as the Treasury Secretary, noting his admiration for Dimon. Trump also criticized Biden’s green economic stimulus policy, the Inflation Reduction Act (IRA), arguing that it would be more cost-effective to lower energy costs by using fossil fuels like oil rather than expensive green energy alternatives. Additionally, he took issue with Biden’s push for electric vehicle subsidies, stating that not all cars can be feasibly converted to electric.
Trump reaffirmed his commitment to reducing the US corporate tax rate and compensating for the shortfall with tariffs on foreign goods. Having previously cut the federal corporate tax from 35% to 21%, he expressed a desire to reduce it to 15% further, saying, “Companies liked the corporate tax rate cut,” and expressing his intent to lower it even further.
Last year, Trump discussed with Fox News, “If foreign companies sell products in the US below cost, they automatically have to pay about 10% in tariffs,” and “We can pay off debt and lower corporate taxes with the income from this.” Last year, he announced on his election pledge site that he would apply a 10% tariff on all imported goods. The Washington Post reported in January that Trump was planning to impose a 60% tariff on imported goods from China. Next month, Trump said on Fox News, “We have to do that,” and “We may have to raise it even more.”
During the interview, Trump gave an ambiguous response about the potential impact of a 60% tariff, remarking that he had imposed a 50% tariff during his first term and was unfamiliar with the idea of a 60% tariff. He justified a 10% tariff by stating that foreign governments impose tariffs higher than 10% on US products.
