11:08 AM EDT, 05/09/2025 (MT Newswires) -- The US government's trade tariffs are likely to raise inflation and unemployment amid an expected economic slowdown, Federal Reserve Governor Michael Barr said on Friday.

Last month, President Donald Trump announced reciprocal tariffs, fueling concerns about their impact on the economy. Trump later paused certain levies for non-retaliating countries. On Thursday, he announced a trade deal with the UK and said pacts with other countries would follow.

Tariffs could disrupt global supply chains as businesses seek to reroute their sourcing and distribution networks, Barr said in prepared remarks for delivery at an economic conference in Iceland. The impact of duties may be more pronounced for small businesses.

"I expect tariffs to lead to higher inflation in the (US) and lower growth both in the (US) and abroad starting later this year," Barr said. "I am equally concerned that tariffs will lead to higher unemployment as the economy slows."

The Federal Reserve on Wednesday left its benchmark lending rate unchanged and warned that upside risks to inflation and unemployment had increased. The world's largest economy contracted at an annual rate of 0.3% in the March quarter, representing the first drop since the first quarter of 2022, the Bureau of Economic Analysis said last week.

"The (Federal Open Market Committee) may be in a difficult position if we were to see both rising inflation and rising unemployment," Barr said.

Markets are looking forward to upcoming trade talks between US and Chinese officials. Trump on Friday floated the idea of lowering tariffs on China to 80% from 145%.

The economy has been resilient, but trade policies "have led to an increase in uncertainty, contributing to declines in measures of consumer and business sentiment," Barr said.

US consumer sentiment fell for the fourth straight month in April as uncertainty around tariffs dampened expectations and pushed the year-ahead inflation outlook to the highest point since 1981, final results from a University of Michigan survey showed late last month.