Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, speaks at the 2024 Milken Conference Global Sessions at the Beverly Hilton Hotel in Beverly Hills, California, US, May 7, 2024.
David Swanson | Reuters
President-elect Donald Trump's tariff proposals could worsen inflation in the long run if global trading partners respond, Minneapolis Federal Reserve President Neel Kashkari said on Sunday.
Kashkari said on CBS's “Face the Nation” that one-time tariffs “should not have a long-term impact on inflation.”
“The challenge becomes, if there is tit-for-tat, and one country imposes tariffs and then responds and escalates,” Kashkari said, “this becomes more worrying and, frankly, there is a lot of uncertainty.”
During his first term, Trump sparked a trade war with China when he imposed a series of import taxes on Chinese goods, prompting the country to retaliate with its own set of tariffs on the United States.
One of Trump's key economic proposals for his second term is to impose global tariffs on all imports from all countries – with a rate specifically targeted at 60% on China.
Economists, Wall Street analysts and industry leaders have repeatedly expressed concerns about the inflationary impact of this aggressive trade approach, especially as inflation is just beginning to slow from its pandemic-era peak.
“We have made significant progress in reducing inflation,” Kashkari said. “I mean I don't want to declare victory yet. We need to finish the job, but we're on a good path now.”
The Federal Reserve on Thursday approved a second straight interest rate cut, continuing its efforts to ease monetary policy as inflation approaches the central bank's 2% target. Kashkari said he expects another cut in December, but it will depend on “what the data looks like” at that time.
As for Trump's other major policy proposals such as the comprehensive migrant deportation plan, Kashkari noted that the inflation threat remains unclear and thus the Fed is still taking a “wait and see” approach before adjusting its policy.
Trump and his supporters, such as billionaire Tesla CEO Elon Musk, have also been vocal about their desire to give the president input into the Fed's policy decisions. The central bank views its political independence as a key feature that allows it to shape monetary policy based exclusively on the health of the US economy, not electoral incentives.
But Kashkari said he was not concerned about politics permeating the Fed's decisions.
“I am confident that we will continue to focus on our economic functions,” he said. “This is what should dictate what we do and this is what should dictate what we do.”
