Minneapolis Federal Reserve President Neel Kashkari publicly expressed concerns on Sunday that former President Donald Trump’s proposed tariff policies may raise inflationary risks. Speaking on a live television show, Kashkari said while a single instance of tariffs wasn’t likely to have much impact on underlying long-term inflation, rising trade tensions—especially when foreign trading partners retaliate-would lead to a more uncertain and inflationary environment.
Trump has returned as the US President in 2024 and he has given a plan for establishing universal tariffs on all imports, but with an especially aggressive 60 percent tariff on Chinese goods. The plan bears some similarity to the trade war that Trump commenced during his first term and occasioned by his imposition of tariffs on Chinese imports and subsequent equal measure from China. Kashkari also warned that such tit for tat trade measures would reignite inflationary pressures just as the US economy has started to recover from the inflation spikes that were triggered by the COVID-19 pandemic.
Kashkari pointed out that this makes it more threatening and unstable when a tit-for-tat dynamic begins with one country imposing tariffs for what is perceived as retaliation by the other and thus entered into an escalator cycle. This warning is done against the backdrop of growing alarm by economists, corporate and Wall Street analysts, who have sounded the alarm over possible inflation fallout from Trump’s aggressive trade policies, as inflation appears to be moderating.
Kashkari also emphasized the progress of inflation being lower. The Federal Reserve has done a great job of bringing inflation to and closer to its 2% goal, he said. The Fed just cut its interest rate for the second straight meeting, and that policy message is clearer that monetary policy has become more accommodative, and further rate cuts might come based on future data. Kashkari said that central bank will probably cut rates for a third time this year in December, pending various economic reports coming out in the days ahead.
Regarding other aspects of Trump’s policy proposals, such as mass deportations of immigrants, Kashkari said the Fed is still cautious and is waiting for more information on likely inflationary impacts. He also reaffirmed the Fed’s intent to preserve its political independence in light of pressure from Trump and his allies, who have threatened greater influence over central bank decisions. Kashkari accepted the job and assured the public that, as Federal Reserve officials have always done, they would continue to base their actions solely on what is best for the overall health of the U.S. economy and not on political considerations.