Kashkari: Inflation could be extended "the longer there's back and forth" in Canada tariff war

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, warned on Sunday that the ongoing trade dispute with Canada could prolong U.S. inflation. Speaking on Face the Nation with Margaret Brennan, Kashkari explained that extended trade conflicts and the war in Iran have similarly contributed to prolonged inflation. In response to the recent sparring between the U.S. and Canada, the U.S. imposed a 50% tariff on Canadian goods after failing to reach an agreement to resolve the trade standoff.

U.S. Trade Representative Jamie Greer announced that no further talks with Canada were planned, while Canada's Prime Minister, Mark Carney, vowed to retaliate with new tariffs. The tariffs are anticipated to affect steel, dairy, appliances, agricultural equipment, pulp, paper, and electronics. Kashkari emphasized that Canada remains a crucial trading partner for the U.S., with the two nations exchanging $880 billion worth of goods and services in 2025.

He attributed five years of high inflation to supply shocks and the trade conflicts as one of the key drivers. Kashkari stressed that once a new normal is established in the trade dynamic, businesses can adjust, and the inflationary impact will diminish.