Fed's Kashkari Warns of Stagflation Risks From Trump Tariffs

Minneapolis Federal Reserve President Neel Kashkari has warned that President Donald Trump’s trade tariffs could trigger stagflation—a mix of stagnant growth and persistent inflation. In an interview with Bloomberg TV, Kashkari said the tariffs represent a significant supply shock that is likely to push prices higher while weakening economic growth.

Kashkari emphasized the Fed’s current uncertainty regarding the direction of inflation and the labor market, noting that it’s unlikely the central bank will have enough clarity to adjust interest rates by September. “Uncertainty is something that we are dealing with at the Fed,” he said, underscoring the unpredictable impact of the evolving trade environment.

He further warned that American consumers have yet to feel the full effects of Trump’s tariffs. “There’s no question that the shock of tariffs is stagflationary,” Kashkari stated, adding that the extent of the damage depends on how high the tariffs rise and how long they remain in place. He indicated that if tariffs are rolled back quickly, their inflationary and growth-dampening impact may be limited.

Kashkari also addressed recent volatility in U.S. Treasury yields, noting that global investors are reassessing their confidence in U.S. assets amid rising debt concerns. The surge in yields comes as Moody’s recently downgraded the U.S. sovereign credit rating, highlighting growing worries over fiscal health.

Trump’s trade policy has remained a key source of market uncertainty, especially after several reversals on major tariff decisions. His aggressive stance on China led to a prolonged trade war, although recent talks in May signaled a temporary de-escalation.

With inflation risks rising and policy clarity lacking, Kashkari’s remarks highlight growing concerns at the Federal Reserve about the long-term economic impact of protectionist trade measures.