Minneapolis Federal Reserve President Neel Kashkari said Friday that recent market movements suggest investors are beginning to turn away from the U.S. as the world’s safest investment destination, as President Donald Trump’s escalating trade war fuels uncertainty.

Speaking on CNBC’s Squawk Box, Kashkari pointed to the rising Treasury yields and a weakening U.S. dollar—trends that, he said, go against typical market responses during heightened tariff tensions.

“Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting,” Kashkari said.

The yield on the 10-year Treasury note has jumped sharply this week, following Trump’s announcement of a 10% across-the-board tariff on U.S. trading partners, along with threats of even steeper levies—though the president pulled back from some of those threats on Wednesday.

Meanwhile, the U.S. dollar has fallen more than 3% against a basket of major global currencies, signaling a potential loss of confidence in traditional U.S. safe-haven assets.

“Investors around the world have viewed America as the best place to invest, and if that’s true, we will have a trade deficit,” Kashkari explained. “Now, one of the ways that expresses itself is in lower yields across asset classes in America. If the trade deficit is going to go down, it could be that investors are saying, ‘OK, America no longer is the most attractive place in the world to invest,’ and then you would expect to see bond yields go up.”

While Kashkari said he is observing signs of strain in the markets, he noted that he does not see major dysfunction or dislocation in financial systems at this point.

Although Kashkari is not a voting member of the Federal Open Market Committee (FOMC) this year, he will vote in 2026. He emphasized that his current focus is on ensuring inflation expectations remain anchored and said that interest rates are likely to stay steady until there is more clarity on fiscal and trade policy—echoing sentiments from other central bank officials.