National Economic Council Director Kevin Hassett stated on Wednesday that researchers at the New York Federal Reserve, who conducted a study indicating that American businesses and consumers bear 90% of the cost of President Donald Trump’s tariffs, should be “disciplined.” Hassett remarked in an interview, “It’s, I think, the worst paper I’ve ever seen in the history of the Federal Reserve system.” Hassett continued “The individuals involved with this paper should likely face consequences, as they have presented a conclusion that has generated significant partisan news, based on an analysis that would not meet the standards of a first-semester economics course.”
Hassett expressed a significant concern regarding the research, arguing that it concentrated solely on the price-related effects of tariffs, neglecting the implications for the volume of imports. Nonetheless, that assertion lacks complete accuracy. The authors evaluate the tariff burdens by calculating average duty rates across different timeframes. The definition provided is “the total monthly tariff revenue divided by the total value of imports in the month,” indicating that import volume is factored into the calculation. Specifically, they examined how “global supply chains shifted in response to the higher tariffs.”
Similar to Federal Reserve officials involved in interest-rate decisions, researchers at the 12 regional banks and the Board of Governors take significant measures to ensure their independence from external political influences. The research generated aids officials in making more informed decisions by providing a clearer understanding of the current and future economic landscape. The researchers, however, refrain from offering policy recommendations. Hassett emerged as a leading candidate to succeed Fed Chair Jerome Powell, whose tenure at the central bank concludes in May. Last month, Trump declared his nomination of former Fed Governor Kevin Warsh for the position, which is subject to Senate confirmation. Similar to Trump, Warsh has consistently criticized the Fed and Powell, pledging to reform various aspects of the central bank upon confirmation.
The timing of his nomination coincides with a period during which the Trump administration has launched multiple critiques against the Federal Reserve and its enduring autonomy. This encompasses a criminal investigation concerning Powell and the Federal Reserve related to a multibillion-dollar refurbishment of its headquarters, as well as an effort to dismiss Fed Governor Lisa Cook based on unsubstantiated claims of mortgage fraud.