Critical Perspective on New York Fed’s Tariff Study
Kevin Hassett, the Director of the White House National Economic Council, has voiced strong criticism of a recent New York Fed study that examined the economic impact of tariffs. He argues that the methodology of the study is fundamentally flawed and that its conclusions lack adequate data support.
The study, released on February 12, claimed that nearly 90% of the economic burden from tariffs in 2025 would fall on U.S. businesses and consumers. However, in a CNBC interview, Hassett contended that the study overlooks significant economic factors, making broad conclusions based on an incomplete analysis.
“This paper is embarrassing,” Hassett expressed, criticizing it for generating highly partisan narratives based on analysis that wouldn’t even pass in a first-semester economics course.
His primary concern was the study’s limited focus. The researchers examined whether foreign exporters reduced their prices in response to tariffs, thereby absorbing costs, or whether they kept prices steady, shifting the burden onto U.S. importers. Yet, Hassett argued that this emphasis on price overlooks vital economic elements. He noted, “They focus on prices and don’t take into account changes in import volumes.” The study failed to consider decreased imports, shifts in sourcing, growth in domestic production, or the wage impacts related to local manufacturing.
“If we bring products home and create demand domestically, it will hurt China, it will drive up American wages, and American consumers will be better off,” he added.
Hassett pointed out that real economic outcomes contradict the study’s implications. For example, real wages increased by an average of $1,400 last year, import prices were stable in December compared to the previous year, and core inflation in January reached its lowest annual rate since March 2021.
“If the New York Fed’s analysis is correct, tariffs would not have made consumers richer,” he remarked.
The methodological concerns raised by Hassett echoed criticisms featured in a detailed analysis by Breitbart Business Digest, which highlighted the unreliability of the price data used in the study. Importers often report prices for customs based on transactions involving related parties rather than standard market exchanges, with nearly half of U.S. imports coming from such sources.
The authors of the study—Mary Amity, Chris Flanagan, Sebastian Heise, and David E. Weinstein—argued that their findings were in alignment with those from other studies, including work by Gita Gopinath from Harvard and Brent Niemann from the University of Chicago. The Congressional Budget Office also estimated that foreign exporters would only absorb about 5% of tariff costs.
Despite these assertions, Hassett contended that these studies share similar methodological weaknesses, particularly their focus on short-term price impacts while neglecting broader quantity changes, supply chain adjustments, and evolving wage effects.
His critique was robust enough to suggest that the flaws in the study could lead to consequences for those involved. He stated, “The people involved in this paper probably need to be punished,” describing it as “the worst paper I’ve ever seen in the history of the Federal Reserve System.”
