Hassett: Trump economy is running pretty close at 31

Hassett: Trump economy is running pretty close at 31

Hassett Criticizes Fed Research on Trump Tariffs, Sparks Debate on Economic Impact

White House National Economic Council Director Kevin Hassett has condemned a recent Federal Reserve Bank of New York study analyzing the economic effects of President Trump's tariffs, calling it "the worst paper I've ever seen in the history of the Federal Reserve system" and suggesting the researchers involved should be disciplined. The study, co-authored by New York Fed economists and a Columbia University professor, found that U.S. businesses and consumers bore approximately 86% of the tariff burden as of November 2025, with foreign exporters absorbing the remaining 14% according to the analysis.

Hassett argued the analysis was methodologically flawed and politically biased, claiming it ignored the benefits of tariffs in boosting domestic manufacturing and lowering inflation. He cited declining import prices and a 2.4% annual inflation rate in January 2026 (measured by the CPI) as evidence that tariffs have improved consumer welfare according to his assessment. However, the study's findings align with a Congressional Budget Office (CBO) report, which estimated that 95% of tariff costs are ultimately passed to U.S. firms and consumers, with foreign exporters absorbing only 5% as the CBO projected.

Critics of Hassett, including former Fed research director Claudia Sahm, have questioned his credibility, citing his history of controversial projections, such as the 1999 book Dow 36,000 and a disputed 2020 White House pandemic forecast as noted by observers. The debate underscores broader tensions between the Trump administration and the Fed, which is currently navigating a Justice Department investigation into Fed headquarters renovations and a Supreme Court case involving former board member Lisa Cook as reported.

While Hassett maintains that tariffs have enhanced economic outcomes, the Fed's independent research highlights their uneven distributional effects. The CBO further projects that recent tariffs could raise the PCE inflation index by 0.8 percentage points by late 2026 according to the CBO's analysis. As the administration and central bank continue to clash, the economic implications of Trump's trade policies remain a contentious focal point for investors and policymakers alike.