Kashkari: Canada tariff fight could extend U.S. inflation

The ongoing trade dispute between the United States and Canada could lead to extended inflation in the U.S., according to Neel Kashkari, president of the Federal Reserve Bank of Minneapolis. He likened the situation to the impact of the conflict in Iran on energy prices, suggesting that prolonged trade tensions delay and extend inflationary pressures.

“

The longer there's back and forth on the trade front, just like the longer there's back and forth in the conflict of Iran, the imprint and inflation end up being extended and delayed.

Kashkari's remarks came after the U.S. imposed 50% tariffs on Canadian products on Saturday, following a failure to reach an agreement to resolve the trade standoff. U.S. Trade Representative Jamieson Greer indicated that no further talks were scheduled. In response, Canadian Prime Minister Mark Carney pledged to implement new retaliatory tariffs against the U.S. this week.

The tariffs are expected to affect key sectors such as steel, dairy, appliances, agricultural equipment, pulp, paper, and electronics. This escalation follows a period of tense relations between the U.S. and Canada over trade, a dispute concerning a Detroit-area bridge, and previous threats by President Trump regarding Canada's status. Kashkari emphasized Canada's importance as a trading partner, noting that the two countries exchanged $880 billion in goods and services in 2025, making Canada the second-largest trading partner for the U.S. after Mexico.

“

One of those supply shocks is the trade and tariff conflicts.

Kashkari described the U.S. economic situation as having five years of elevated inflation, largely attributed to supply shocks. He specifically identified trade and tariff conflicts as one of these shocks. He suggested that once a new, steady state in the trade dynamic is reached, businesses can adapt, and the inflationary impact may subside.

“

And so to the extent that we can get to a new normal, a level of whatever the trade dynamic is going to be, once we can get to that steady state, then businesses can adjust, and the inflationary impact can fade into the background.