Why Trump really wants lower interest rates

You’ve probably noticed the ongoing war between Donald “It’s all about me” Trump and Federal Reserve Chair Jerome Powell.

Interest rates are often discussed as

abstract numbers that affect “the economy” or “the markets.” But anyone relying heavily on debt—especially large-scale real estate developers—know that small changes in interest rates can mean enormous personal savings.

Given that Trump’s entire career has been built on leveraging large sums of someone else’s money to finance his properties, then refinancing repeatedly as conditions allow, those interest rate cuts he keeps encouraging mean a LOT of money in his own pocket.

I know. You’re shocked, right?

How’s it all work?

It’s helpful to understand that the prime rate is the baseline interest rate banks charge their most creditworthy customers. When the Fed cuts rates, the prime rate usually follows immediately.

You’ll recall that Trump never released his taxes, despite repeated promises to do so. However, court filings, financial disclosures, and investigative reporting suggest his personally guaranteed or directly-controlled debt is roughly $1.2 billion in mortgages, refinancings, variable-rate loans and other assorted debt. And without getting too far into the weeds, every quarter-point drop in interest rates puts roughly $750,000 in interest savings into his pocket EVERY THREE MONTHS.

Of course, YOU will never see those kinds of benefits because your mortgage is probably fixed, your balance is relatively small, and you can’t access aggressive refinancing. Donald Trump is unhindered by all these constraints.

Putting on a public face

Publicly, Trump frames his calls for lower interest rates as an act of economic stewardship. He argues that cheaper money stimulates growth, helps consumers, boosts markets, and keeps the United States competitive with other nations. Those claims are not entirely false. Lower rates do encourage borrowing and spending, and they often lift asset prices.

However, recognizing that any claim from this guy of public benefit is bogus, it’s important to recognize the REAL reasons he’s been consistently, aggressively, and publicly pressuring the Federal Reserve to lower rates.

Debt, not cash

Trump’s entire career has been built on heavy borrowing, repeated refinancing, and long-term debt rollover in his real estate “empire”. This strategy isn’t unusual in that world, though for him interest rates are the single most important input. After all, in the real estate world a small decrease can rescue an underperforming asset without selling it.

Thus, for Trump cheap money is all about maintenance and survival.

It’s also worth considering that liquidity is the Achilles’ heel of highly leveraged developers. Trump may control valuable properties, but those assets can’t be easily sold without losses, taxes, or reputational damage. However, lower rates improve chances of loans being refinanced when rates are falling, replacing maturing debt without injecting cash and freeing up cash flow immediately, without restructuring or asset sales.

Bottom line: rate cuts act as a silent bailout. There’s nothing to vote on, no laws are needed, but financial pressures are eased significantly.

Real estate values increase

Commercial real estate values are closely tied to interest rates.  When rates fall, property values rise, even if the building hasn’t been improved in any way. Translation: lower interest rates mean Trump’s buildings are worth more and his bankers feel better about lending the Trump Organization even more money, despite any operational weaknesses. It makes him look successful without him doing anything.

And because he’s tied his political identity so closely to market performance, Trump treats stock indexes, real estate prices, and headline economic numbers as personal scorecards. He knows that lower interest rates will push stock markets higher, increase consumer confidence, reduce short-term recession risk, and create an arguably false sense of momentum.

Yet anyone paying attention recognizes that based on his tariffs, immigration policies, and instability caused by his war with Europe over Greenland, the long-term consequences of Trump’s economic policies are both inflationary and destabilizing.

Also remember that this guy sees everything in the world through a television lens, and he recognizes that the short-term optics are favorable.  Trump understands that voters respond more to present conditions than to future risk. Rate cuts help produce that present comfort level.

Offsetting stress

Trump is unusually exposed to legal and financial uncertainty. Civil judgments, fines, bonding requirements, and legal fees all require cash or collateral. Lower interest rates indirectly ease these burdens by increasing asset values used as collateral, lowering borrowing costs for legal expenses, and reducing stress on cash flow during litigation. Thus, the rate cuts he’s so desperate to have instituted would give him financial breathing room without acknowledging his distress.

Admittedly, the pressure he’s putting on the Fed is about control, not just policy. For a narcissist, it’s important to show that he’s won any battle. Independent institutions limit Trump’s ability to shape outcomes, while lower rates demonstrate his influence, control, and a weakening of institutional resistance.

Bottom line

The Federal Reserve is expected to drop rates slowly over the next three years (the balance of Trump’s term), lowering them another ¾ of a point by January 2029. This would put it at 3%, which is where Trump wants it today (threatening additional inflation with the sudden drop).  There are two things that Trump pushing for lower interest rates boil down to:

·         They’d put money in his pocket. Assuming a .25% cut at the end of each year would (by the above calculations) mean an additional $9-10 million in Trump’s pocket by the end of his term. Getting the full cuts now would translate into $27 million, with you and I taking the hit when the economy sours due to his greed.

·         They’d make him look more successful than he actually is, not needing to acknowledge financial weaknesses. The next president will have to deal with the negative impacts of his strategies, with Trump undoubtedly saying “Hey, it wasn’t MY fault!”

Powell sees what’s going on, and will probably stick around on the Fed for another two years after his term as Chair expires in May. This means he’ll provide a balance of power to Trump’s effort, hopefully saving the larger economy from the Grifter-in-Chief.

See you at the ballot box!

Rob