Minneapolis Federal Reserve President Neel Kashkari warned that President-elect Donald Trump's proposed tariffs could affect long-term inflation if global trade partners retaliate.
Appearing on CBS program "Face the Nation" on Sunday, Kashkari said one-time tariffs "shouldn't have an effect long run on inflation. The challenge becomes if there's a tit for tat and it's one country imposing tariffs and then responses and it's escalating. That's where it becomes more concerning, and, frankly, a lot more uncertain."
Trump has proposed universal tariffs on all imports, including a targeted 60% rate on China, as a central economic policy for his second term.
Financial pundits have, however, raised concerns about the inflationary impact of Trump's hardline trade approach, especially as inflation begins to ease and the Fed starts to lower interest rates, CNBC reported.
Last week, the Fed implemented its second consecutive interest rate cut, continuing its efforts to ease monetary policy as inflation nears the central bank's 2% target.
The interest rate was reduced by a quarter of a percentage point, bringing it to a range of 4.5% to 4.75%.
During his first term, Trump escalated tensions with China by implementing a series of tariffs on a wide range of Chinese goods. China retaliated by imposing its own tariffs on U.S. products setting the stage for tensions between the two economic giants.
Trump and his supporters, including Tesla CEO Elon Musk, have openly advocated for the president to have a say in shaping Federal Reserve policy.
However, the Fed has long maintained that its monetary decisions are made independently, focused solely on the health of the U.S. economy, and independent of political pressures or electoral promises.
Kashkari stressed that he is not worried about political pressures affecting the central bank's decisions.
"I'm confident that we will continue to focus on our economic jobs," he said. "That's what should be dictating what we're doing and that is what's dictating what we're doing."
Commenting on Trump's campaign promise to deport illegal immigrants from the United States, Kashkari viewed that such a move would likely disrupt some businesses, Reuters reported.
"If you just assume people are working - either working in farms or working in factories - and those businesses now lose employees, that would probably cause some disruption," Kashkari said. "The implications are not entirely clear to me. Ultimately it is going to be between the business community and Congress and the executive branch to figure out how they would adjust."
