Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, speaks at the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, California, U.S., May 7, 2024.
David Swanson | Reuters
Minneapolis Federal Reserve President Neel Kashkari said Sunday that President-elect Donald Trump’s tariff proposals could worsen inflation in the long run if global trading partners push back.
One-time fees, Kashkari further said CBS’ ‘View of the Nation’ “Should have no effect on inflation in the long term.”
“The challenge becomes: if there is a tit-for-tat situation and it is one country that imposes tariffs and then responds, and it escalates. That’s where it becomes more concerning, and quite frankly a lot more uncertain,” Kashkari said.
During his first term, Trump effectively 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 series of tariffs against the US.
One of Trump’s key economic proposals for his second term is to impose universal tariffs on all imports from all countries – with a specifically targeted 60% tariff on China.
Economists, Wall Street analysts and industry leaders have repeatedly raised concerns about the inflationary impact of this tough trading approach, especially as inflation is just starting to cool from pandemic-era peaks.
“We have made a lot of progress in reducing inflation,” Kashkari said. “I mean, I don’t want to declare victory yet. We have to finish the job, but we are on the right track at the moment.”
The Fed approved its second straight rate cut on Thursday, continuing its efforts to ease monetary policy as inflation nears the central bank’s 2% target. Kashkari said he expects another cut in December, but that will depend on “what the data looks like at that time.”
As for Trump’s other major policy proposals, such as a sweeping deportation plan for immigrants, Kashkari noted that the inflation threat is still unclear and therefore the Fed is still taking a wait-and-see approach before adjusting its policies.
Trump and his supporters, such as billionaire Tesla CEO Elon Musk, have also been outspoken about their desire to give the president input on the Fed’s policy decisions. The central bank views its political independence as a core feature that allows it to shape monetary policy based solely on the health of the US economy, and not on electoral incentives.
But Kashkari said he isn’t concerned about the politics permeating the Fed’s decisions.
“I am confident that we will continue to focus on our economic jobs,” he said. “That’s what should dictate what we do and that’s what dictates what we do.”