Neel Kashkari, President and CEO of the Federal Reserve Bank of Minneapolis, at the Milken Conference at the Beverly Hilton Hotel in Beverly Hills, California, United States on May 7, 2024 Presentation at 2024 Global Conference.
David Swanson | Reuters
Minneapolis Federal Reserve President Neel Kashkari said Sunday that President-elect Donald Trump’s tariff proposals could increase long-term inflation if global trading partners fight back.
Kashkari said one-time tariffs CBS’s “Face the Nation” “In the long term, there should be no impact on inflation.”
“If it’s tit-for-tat and one country imposes tariffs and then reacts, then the challenge escalates. That’s where it becomes more concerning and, frankly, more uncertain,” Kashkari said.
During his first term, Trump effectively started a trade war with China by imposing a series of import taxes on Chinese goods, prompting the country to retaliate against U.S. tariffs.
One of Trump’s main economic proposals during his second term was to impose universal tariffs on all imports from all countries, with a 60% tariff specifically targeting China.
Economists, Wall Street analysts and industry leaders have repeatedly raised concerns about the impact of such a tough approach to trade on inflation, especially given that inflation is just beginning to cool from its pandemic-era peaks.
“We’ve made a lot of progress in lowering inflation,” Kashkari said. “I mean, I don’t want to declare victory yet. We need to get the work done, but we’re on a good path right now.”
The Federal Reserve cut interest rates for the second time in a row on Thursday, continuing its efforts to ease monetary policy as inflation approaches the central bank’s 2% target. Kashkari said he expected another rate cut in December, but that would depend on the “data situation” at that time.
As for Trump’s other major policy proposals, such as a comprehensive immigration deportation plan, Kashkari pointed out that the threat of inflation is still unclear, so the Fed will still adopt a “wait and see” approach before adjusting policy.
Trump and his supporters, including billionaire Tesla CEO Musk, have also been outspoken about their desire for the president to have input into the Fed’s policy decisions. The central bank views its political independence as a core feature, allowing it to set monetary policy based entirely on the health of the U.S. economy rather than electoral inducements.
But Kashkari said he was not concerned about political factors seeping into the Fed’s decision-making.
“I believe we will continue to focus on our economic work,” he said. “That should determine what we’re doing, and that’s determining what we’re doing.”
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