Trade tensions are part of an "umbrella of uncertainty" around the U.S. economic policy and are weighing on businesses and markets, according to Patrick Harker, president of Federal Reserve Bank of Philadelphia.

"It's not a healthy thing for the economy overall," Harker said Monday, referring to tariffs and talk of more trade barriers. "That said, we do want fair trade."

On Sunday, President Donald Trump said he would ratchet up tariffs on $200 billion worth of imports from China, escalating the trade war between Washington and Beijing as talks between two of the world largest economies continue this week.

Trump's threats rocked stock markets on Monday, reversing gains in recent months that have propelled equities to new records.

While speaking at the Global Interdepdence Center's monetary and trade conference at Drexel University, Harker said that he was expecting one interest rate hike of 0.25 percent this year and possibly one more in 2020.

As for inflation, Harker said it would take more data to convince him that inflation requires changes to the Fed's monetary policy.

The latest first quarter GDP reading "was a pleasant surprise, but it's possible that drag usually seen in first quarters will show up in the second quarter," Harker said in prepared remarks.

Harker expect American's GDP to expand by "a bit above 2 percent" in 2019 and about 2 percent in 2020 while seeing the unemployment rate hitting 3.5 percent.

After his speech, Harker took questions ranging from infrastructure, China's Belt Road initiative, and Trump's tweets about further trade barrier threats.

"Through our outreach to business leaders, the headline issue we hear about is policy uncertainty" at the national level, Harker said.

"Uncertainty in the board room is not a good thing. So people are waiting" to make investment and capital commitment decisions, he said. "What we hear is 'please just leave everything alone for a while'," he added.

Uncertainty surrounding healthcare policy and drug pricing, for example, "weighs heavily" on Philadelphia's largest employers - health systems, medical schools, and universities.

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