Kevin Hassett Criticizes New York Fed Tariff Study, Calls for Accountability

A new economic study on tariffs has sparked a public clash between the White House and Federal Reserve researchers.

Kevin Hassett, director of the National Economic Council, criticized a recent New York Fed tariff study that concluded most of the cost of tariffs is being borne by U.S. businesses and consumers. In a televised interview, Hassett said the report was deeply flawed and suggested that the authors should face consequences.

“It’s the worst paper I’ve ever seen in the history of the Federal Reserve system,” Hassett said during an appearance on CNBC. He argued that the research overlooked key economic factors and produced a misleading conclusion.

What the New York Fed Study Found

The study, published Feb. 12 by the Federal Reserve Bank of New York, examined how tariffs affect prices in the United States.

Researchers looked at whether foreign exporters reduced their prices to absorb tariffs or passed the added cost along to American buyers. The study concluded that roughly 90% of tariff-related costs were ultimately paid domestically, either by U.S. companies or consumers.

The authors noted that the impact appeared to soften slightly as the year progressed, but the majority of the burden remained within the U.S.

Their analysis focused primarily on price changes and import data.

Hassett’s Criticism of the Report

Hassett argued that the study only examined price movements and failed to consider broader economic effects. He said it did not account for wage growth or benefits tied to increased domestic production.

According to Hassett, tariffs encouraged more onshore manufacturing, which helped lift real wages. He cited data showing average real wages increased by about $1,400 last year.

Hassett also pointed to inflation trends. The January consumer price index rose 2.4% year over year, and core inflation was 2.5%. Both measures are lower than levels seen in prior years.

He argued that if tariffs were truly causing widespread price increases, inflation would not be trending lower.

Inflation and Trade Data Context

Recent data from the Bureau of Labor Statistics shows that import prices in December were flat compared to a year earlier. Export prices rose 3.1%.

Overall inflation has moderated since the tariffs were first announced in April 2025. While some goods categories experienced price increases, broader consumer price growth has eased.

Economists remain divided on how tariffs affect prices over time. Some argue that costs are often passed on to consumers. Others say businesses adjust supply chains, absorb margins, or benefit from domestic production gains.

Broader Economic Debate

The disagreement reflects a larger policy debate.

Supporters of tariffs argue they strengthen domestic industry, protect jobs, and encourage capital investment inside the U.S. Critics argue that tariffs function as a tax on imports, raising costs for businesses and households.

The Federal Reserve’s role is not to set trade policy but to analyze economic conditions. Research papers published by regional Fed banks do not necessarily reflect official policy positions of the central bank.

A New York Fed official declined public comment following Hassett’s criticism.

What This Means for Markets

Investors closely monitor inflation and trade data because both influence Federal Reserve interest rate decisions. If tariffs significantly raise consumer prices, that could delay rate cuts. If inflation continues to cool, policymakers may have more flexibility.

At the moment, inflation readings are trending lower, and markets are weighing whether the Fed could reduce rates later in 2026.

The debate over the New York Fed tariff study highlights how complex economic policy analysis can be. Tariffs may affect prices, wages, supply chains, and investment in different ways, and measuring those effects is not straightforward.

Bottom Line

The New York Fed tariff study found that most tariff costs are absorbed domestically. Kevin Hassett strongly disagreed, saying the research ignored wage gains and broader economic benefits.

As inflation slows and trade policy remains in focus, the discussion over who pays for tariffs and how they affect the economy is likely to continue.

For now, the data shows inflation easing, wages rising modestly, and ongoing debate about the full impact of tariff policy on American households and businesses. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.