Trump is fulfilling his desire to lower interest rates worldwide, but not within the United States. Currently, it appears that the strong US economy and uncertainty about its own policies have laid the foundation for disagreements between the Federal Reserve and its peers.

The European Central Bank lowered interest rates this Thursday, the Bank of Canada also lowered rates on Wednesday, and the Bank of England may lower rates next week. As the Federal Reserve maintains a reserve mode on interest rates, these measures may strengthen the value of the US dollar and further complicate Trump's trade goals by making imports cheaper and US exports more expensive.

European Central Bank President Christine Lagarde pointed out on Thursday that the renewed trade tensions could even put greater pressure on the eurozone's lagging growth, which could become a reason for lower interest rates in the G20.

Lagarde said when talking about Trump's threat to impose tariffs on a series of countries, the risk of economic growth still tilts downward. We only know that it will have a negative impact on the world.

After the European Central Bank lowered its main policy rate by another quarter of a percentage point, Lagarde said that for European interest rates, "we know the right direction to move forward" will be lower. At what speed, in what order, and on what scale, the data we collect will provide information.

Bank of Canada Governor MacLehose also expressed anger on Wednesday over Trump's tariff threat, as the Bank of Canada cut interest rates for the sixth consecutive time and lowered its growth forecast for neighboring countries of the United States. He said that a prolonged and widespread trade conflict would seriously damage Canada's economic activities.

Next is BoE, which is expected to lower interest rates next Thursday and may move forward at a faster rate than currently anticipated in the future.

Let the Federal Reserve temporarily stand out from the crowd. Although Federal Reserve policymakers expect a rate cut later this year if inflation eases as expected, Federal Reserve Chairman Powell said on Wednesday that there is no reason to rush to the next step.

After the Federal Reserve decided to pause interest rates, Powell told reporters, "We believe things are in a very good position for both policy and the economy, so we don't feel like we need to rush to make any adjustments.

This is not the result that Trump said a week ago. He will "demand" the Fed chairman he appointed in his first term, and he is dissatisfied with the divergence in interest rate policy. Powell's current four-year term is expected to end in May 2026.

I will demand an immediate decrease in interest rates. Similarly, they should decrease around the world, "Trump said in a video speech at the World Economic Forum in Davos, Switzerland last week.

In fact, getting only half of his wishes may be worse than nothing at all, and policy differences between the Federal Reserve and peers could put upward pressure on the US dollar, making import prices lower as Trump seeks to "rebalance" global trade in favor of the US. Following the record breaking US goods trade deficit at the end of 2024, this is already a daunting task.

In terms of Europe, "the policy divergence between the Federal Reserve and the European Central Bank is likely to trigger a strengthening of the US dollar this week." Macquarie global strategists Thierry Wizman and Gareth Berry wrote before the European Central Bank's policy decision on Thursday: "Looking ahead, this will require clarity on European politics, an end to the (Ukraine) conflict, clarity on the nature of the US not imposing import tariffs and European 'concessions', and a more stable GDP trend

Although the Federal Reserve cut interest rates by a full percentage point last year, the US dollar has appreciated by about 7% against a basket of global currencies since September.

The policy differences between the Federal Reserve and its central bank counterparts highlight the different paths taken by the US economy when the world emerged from the deep but brief recession of the COVID-19 in 2020.

Given the complexity of the supply chain and the fact that high inflation is a global phenomenon, central banks have adopted a unified response in an attempt to control it.

However, the causes of price increases are different. Events such as the Russia-Ukraine conflict have led to the intensification of energy price inflation in the euro area, and more aggressive fiscal spending in the United States has led to more demand driven price increases.

Inflation has also decreased comprehensively. But in the United States, this situation occurred when the economy maintained above trend economic growth, while Europe was at the beginning of a recession.

This situation has left Trump with a potential dilemma. In 2024, US output grew by 2.8%, marking the fourth consecutive year that GDP growth far exceeded what is considered the long-term economic potential of 1.8%.

Inflation is almost under control, but the Federal Reserve sees enough uncertainty and risk on its agenda, at least for now.

KPMG Chief Economist Diane Swonk said that the Federal Reserve is indeed in a state of policy uncertainty, and he pointed out that Powell's response to reporters' questions on Wednesday is worth market attention.

Swonk said that as the economy is now shaped by one government, which has issued dozens of executive orders, tariff announcements may be released soon, and "the Federal Reserve doesn't know what the next step is.