On May 9, Barr of the Federal Reserve said that Trump’s trade policies could push up inflation, lower economic growth and push up unemployment later this year, which may leave policymakers with a tricky decision about which problem to solve. “The scale and scope of the recent tariff increases are unprecedented, we don’t know their final form, and it’s too early to say how they will affect the economy,” Barr said. But he said the risks were obvious. In my view, higher tariffs could lead to disruptions to global supply chains and sustained upward pressure on inflation," he said. He also noted that it will take time for businesses to adjust their distribution networks. Some suppliers, especially small businesses, may not be able to adapt quickly enough and may go out of business, adding to the disruption in the supply chain. “I’m equally concerned that as the economy slows, tariffs will lead to higher unemployment,” Barr said. “So if we see inflation and unemployment rise at the same time, the Fed could be in trouble.”
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