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Trump economic adviser criticizes Federal Reserve tariff analysis
A top White House economic adviser has demanded accountability for a Federal Reserve study concluding that U.S. businesses and consumers absorbed 90% of the cost of President Donald Trump's tariffs last year.
Hassett dismisses Fed paper as flawed
Kevin Hassett, director of the National Economic Council, called the New York Fed's report "an embarrassment" and "the worst paper I've ever seen" in the central bank's history. Speaking to CNBC, he argued the analysis was so flawed it "wouldn't be accepted in a first-semester economics class" and suggested those behind it should face disciplinary action.
The study, released as the U.S. Supreme Court considers a legal challenge to Trump's global tariffs, found that American firms and households bore nearly all the financial burden of the 2025 trade measures.
Contrasting claims on tariff impact
Hassett countered the Fed's findings, stating that inflation had fallen, prices had declined, and real wages rose by an average of $1,400 last year-improvements he attributed to the tariffs. "Consumers were made better off," he said.
The New York Fed declined to comment on Hassett's remarks. However, its conclusions align with other independent research, including a report from Germany's Kiel Institute for the World Economy, which found "near-complete pass-through of tariffs to U.S. import prices." The National Bureau of Economic Research similarly determined that the cost of tariffs was "almost 100%" borne by American buyers, not foreign exporters.
Legal and political tensions escalate
Trump has repeatedly criticized the legal challenges to his trade policies, which argue that he exceeded his presidential authority. The Supreme Court is expected to rule on the case as early as Friday.
The Federal Reserve, meanwhile, remains a frequent target of the administration's criticism. Trump has pressured the central bank to cut interest rates more aggressively and recently called for the removal of Fed Governor Lisa Cook. Federal prosecutors have also launched a criminal investigation into testimony by Fed Chair Jerome Powell regarding renovations to Fed buildings.
Fed divided on inflation and rate policy
The Fed held interest rates steady at its January meeting, citing signs of labor market stabilization. Officials noted that inflation cooled last month, with declines in energy and used car prices, which could support arguments for rate cuts.
However, minutes from the January meeting revealed internal divisions. Some officials warned that if companies fully pass tariff costs to consumers, inflation could stall or even reverse progress toward the Fed's 2% target. Others cautioned that persistent inflationary pressures might necessitate future rate hikes.
