The White House is expressing strong disapproval of a recent Federal Reserve Bank of New York study concluding that American consumers and businesses bore the vast majority of the cost of tariffs imposed by the Trump administration. Kevin Hassett, a senior economic advisor to the White House, went further, publicly criticizing the research and calling for disciplinary action against its authors.
The New York Fed’s analysis, published on , found that approximately 90% of the tariff burden was shouldered domestically as of late 2025. Initially, in the period from January through August 2025, a staggering 94% of the costs were absorbed by U.S. Entities. While this figure dipped slightly to 86% by November 2025, the study clearly indicates that the intended beneficiaries of the tariffs – domestic industries – did not experience the anticipated relief from foreign competition through price increases passed on to importers.
Hassett’s criticism was blunt. In an interview with CNBC on , he labeled the paper “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve system.” He suggested that the researchers responsible should be “disciplined,” a statement that has raised eyebrows given the Fed’s traditional independence from political interference. A New York Fed official declined to comment on Hassett’s remarks.
The controversy underscores the ongoing debate surrounding the economic impact of the Trump administration’s trade policies. While proponents argued that tariffs would incentivize domestic production and protect American jobs, critics maintained they would ultimately harm consumers and businesses through higher prices. The New York Fed study appears to support the latter view, contradicting claims that foreign exporters were absorbing the costs of the tariffs.
The findings align with a report released earlier this month by the nonpartisan Tax Foundation, which estimated that the 2025 tariffs represented the largest U.S. Tax increase since 1993. The Tax Foundation calculated a $1,000 per household tax increase in 2025, projected to rise to $1,300 in 2026. This suggests a significant financial burden on American families, despite the stated goals of the tariff policy.
Interestingly, despite the imposition of substantial tariffs, the feared surge in consumer price inflation has not materialized. The annual inflation rate for January came in at a modest 2.4%, a figure Hassett highlighted in his CNBC interview. He argued that prices have actually decreased, suggesting the tariffs haven’t translated into widespread inflationary pressures. However, the New York Fed study suggests this may be due to companies absorbing the costs rather than a genuine reduction in prices.
Hassett’s critique of the New York Fed’s methodology centers on the assertion that the researchers focused solely on price effects, neglecting to account for potential shifts in import volumes and the impact on domestic production. He contends that bringing production back to the U.S. Could boost wages and demand, ultimately benefiting American consumers. However, the study’s authors maintain their analysis is sound and reflects the observed pass-through rates of the tariffs.
The dispute highlights a fundamental disagreement over how to assess the economic consequences of trade policy. The New York Fed’s approach focuses on the immediate impact on prices and consumer welfare, while Hassett emphasizes potential long-term benefits related to domestic production and employment. The debate is further complicated by the difficulty of isolating the effects of tariffs from other economic factors.
The call for disciplinary action against the researchers is particularly noteworthy, given the Fed’s independence. Such a move could be interpreted as political interference in the central bank’s research activities, potentially undermining its credibility. The incident raises questions about the appropriate level of engagement between the White House and the Federal Reserve on matters of economic policy.
The Congressional Budget Office (CBO) also weighed in with its own estimates, finding that only 5% of the tariff burden was borne by foreign exporters, while 30% fell on U.S. Firms and a substantial 70% was passed on to American families. This corroborates the New York Fed’s findings and further suggests that the tariffs largely functioned as a tax on U.S. Consumers.
The situation remains fluid, and further analysis will be needed to fully understand the long-term effects of the Trump administration’s tariffs. However, the New York Fed’s study and the ensuing controversy have reignited the debate over the costs and benefits of protectionist trade policies, and the White House’s response has raised concerns about the independence of economic research within the Federal Reserve system.
