Hassett says authors of New York Fed tariff study should be disciplined: 'Worst paper I've ever seen'

• The New York Fed paper, published February 12, concluded that 90% of tariff burdens are being passed on domestically rather than absorbed by foreign exporters through lower prices
• Hassett countered that the research ignored wage and benefit increases from reshoring production, claiming real wages rose $1,400 on average and consumers benefited from tariffs
• January CPI rose 2.4% year-over-year while import prices were flat in December compared to a year earlier, according to Bureau of Labor Statistics data

Market Summary: White House Criticizes Fed Tariff Study

Key Development:

White House National Economic Council Director Kevin Hassett publicly criticized a New York Federal Reserve study on tariffs, calling it "the worst paper I've ever seen in the history of the Federal Reserve system" and suggesting its authors should be "disciplined."

The Disputed Research:

The New York Fed paper, published February 12, concluded that approximately 90% of tariff costs are being passed onto U.S. companies and consumers rather than being absorbed by foreign exporters. The researchers analyzed whether exporting countries lowered prices to offset tariffs or raised them to pass costs downstream.

Hassett's Counterargument:

The White House advisor argues the study is flawed because it:

• Focuses solely on prices without considering broader economic impacts
• Ignores upward effects on U.S. wages and benefits from reshored production
• Contradicts real-world data showing consumer welfare improvements

Hassett claims tariffs have actually benefited Americans, citing:

• Real wages up $1,400 on average in the previous year
• Declining import prices in the first half of the year
• Overall lower inflation over time

Economic Data Context:

• January CPI: +2.4% year-over-year, up nearly 2% since April 2025 when tariffs began
• Core CPI: +2.5% in January (lowest since March 2021)
• December import prices: flat year-over-year
• December export prices: +3.1%

Market Implications:

This dispute highlights ongoing policy tensions between the White House and Federal Reserve research arms, potentially affecting investor confidence in economic data and tariff policy effectiveness. The controversy may create uncertainty around trade policy direction and its actual economic impact.