Kevin Hassett Criticizes New York Fed Tariff Study, Calls for Accountability 1080p caption

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

The controversy centers on a recent report from the Federal Reserve Bank of New York, which examined who ultimately pays for tariffs. The study concluded that roughly 90% of tariff-related costs are absorbed domestically — by U.S. businesses and consumers — rather than foreign exporters lowering their prices to offset the duties.

Kevin Hassett, director of the National Economic Council, strongly criticized the findings. In a televised interview, he called the paper deeply flawed and argued it failed to consider broader economic effects, including wage growth and gains from increased domestic production.

Hassett pointed to recent data showing real wages rising and inflation cooling. The latest consumer price index shows inflation at 2.4% year over year, with core inflation at 2.5% — both significantly lower than prior peaks. He argued that if tariffs were broadly driving up prices, inflation would not be trending downward.

The New York Fed study focused primarily on price and import data, analyzing whether foreign producers absorbed tariff costs. Researchers found that most of the burden remained inside the U.S., though they noted the impact softened slightly over time.

This debate reflects a broader economic divide. Supporters of tariffs argue they strengthen domestic industry and boost wages. Critics contend tariffs function as a tax on imports, increasing costs for businesses and households.

For markets, the issue matters because inflation trends influence Federal Reserve interest rate decisions. If tariffs meaningfully raise consumer prices, rate cuts could be delayed. If inflation continues easing, policymakers may have more flexibility.

The bottom line: inflation is cooling, wages are rising modestly, and economists remain divided over the long-term impact of tariff policy. The debate over who truly pays for tariffs is far from settled.

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