White House Advisor Calls for Discipline of Federal Reserve Economists Over Tariff Study
Kevin Hassett, director of the White House’s National Economic Council, has publicly criticized and called for potential disciplinary action against economists at the Federal Reserve Bank of New York for a recent study examining the impact of U.S. Tariffs. The study concluded that American companies and consumers bear the vast majority – approximately 90 percent – of the cost of tariffs imposed by the Trump administration.
Study Findings and Criticism
The New York Fed’s research, published on February 12, found that while foreign exporters did slightly lower prices, it was insufficient to offset the tariff burden. This meant that U.S. Businesses and consumers largely absorbed the increased costs. Hassett dismissed the paper as “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve system,” suggesting those involved should be “disciplined.” CNBC, AP News
Hassett argued that the researchers ignored key aspects of how tariffs function and focused solely on price changes, failing to account for potential benefits like increased wages and production onshore as companies bring manufacturing back to the U.S. Politico
Broader Context and Administration Response
This is not the first instance of the Trump administration challenging economic analysis that contradicts its narrative on trade. President Trump has previously criticized economists whose predictions differed from his views, including calling for the replacement of Goldman Sachs’ chief economist, Jan Hatzius, and firing Erika McEntarfer at the Bureau of Labor Statistics. AP News Treasury Secretary Scott Bessent has also disputed reports he deemed unfavorable, even prompting a call from a bank CEO regarding an analyst’s findings. AP News
The New York Fed operates independently, and its papers include disclaimers stating the views expressed are those of the authors and not necessarily those of the institution. Yet, Hassett’s comments have raised concerns about potential pressure on researchers to align their findings with the administration’s policies. Notably, Hassett was previously considered a potential replacement for Federal Reserve Chairman Jerome Powell, a position that will now likely go to Kevin Warsh. Politico
Independent Confirmation of Tariff Costs
The New York Fed’s findings are consistent with several other independent analyses, including studies by economists at Harvard and the University of Chicago, the Kiel Institut (a German think tank), and the Congressional Budget Office. AP News These studies collectively suggest that the economic burden of U.S. Tariffs largely falls on domestic consumers and businesses.