In a remarkable escalation of tensions between the White House and the Federal Reserve, National Economic Council Director Kevin Hassett has called for disciplinary action against economists responsible for a New York Federal Reserve study on tariff impacts. The research concluded that American corporations and consumers absorbed approximately 90% of the costs from increased tariffs implemented in 2025.
Hassett, serving as one of President Trump’s principal economic advisers, denounced the report as ‘an embarrassment’ and ‘the worst paper I’ve ever seen in the history of the Federal Reserve system’ during a CNBC interview. He contended that the analysis wouldn’t meet academic standards for introductory economics coursework and accused the researchers of producing ‘highly partisan’ conclusions that generated misleading news coverage.
The controversial comments emerge as the Supreme Court prepares to rule on legal challenges to President Trump’s expansive global tariff strategy, possibly as early as this Friday. Various small businesses and multiple U.S. states have initiated these challenges, arguing that the administration exceeded its constitutional authority in implementing the tariffs.
Contrary to the Fed’s findings, Hassett asserted that the tariff policy has yielded positive economic outcomes, including reduced prices, lower inflation, and an average $1,400 increase in real wages last year. ‘Consumers were made better off by the tariffs,’ he maintained.
The New York Fed’s research aligns with independent analyses from prominent economic institutions. Germany’s Kiel Institute for the World Economy reported ‘near-complete pass-through of tariffs to US import prices,’ while the National Bureau of Economic Research found the pass-through rate approached ‘almost 100%,’ confirming that American entities primarily bear the financial burden.
This confrontation represents a new front in the administration’s ongoing criticism of the Federal Reserve, which has previously centered on interest rate policies. President Trump has repeatedly pressured the central bank to implement more aggressive rate reductions and has recently targeted specific officials, including Fed Governor Lisa Cook, whom he seeks to remove from her position.
The Fed continues to monitor tariff effects on inflation amidst mixed economic signals. While January meeting minutes revealed internal divisions regarding future rate decisions, recent Labor Department data showed cooling inflation driven by declining energy and used car prices. This moderation has bolstered arguments from Trump and allies that the Fed possesses flexibility to reduce rates without triggering renewed price increases, though some analysts warn that fuller cost pass-through to consumers could stall progress toward the Fed’s 2% inflation target.