White House National Economic Council Director Kevin Hassett sharply criticized a recent Federal Reserve Bank of New York study on who pays for tariffs, calling its methodology fundamentally flawed and its conclusions unsupported by the data.
The New York Fed study, published February 12, concluded that nearly 90 percent of the economic burden from 2025 tariffs fell on U.S. companies and consumers. But Hassett argued in a CNBC interview Wednesday that the research ignored crucial economic factors while drawing sweeping conclusions from incomplete analysis.
“The paper is an embarrassment,” Hassett said. “What they’ve done is they put out a conclusion which has created a lot of news that’s highly partisan, based on analysis that wouldn’t be accepted in a first-semester econ class.”
Hassett’s central criticism focused on the study’s narrow methodology. The researchers examined whether foreign exporters lowered their prices in response to tariffs—effectively absorbing the cost—or maintained prices, passing the burden to U.S. importers.
But Hassett said this price-focused approach missed the economic story. “They’re focusing on prices and not factoring in changes in quantities of imports,” he said. The study failed to account for reduced import volumes, shifts in sourcing, increased domestic production, and wage effects from onshoring.
“If we bring the stuff home, create the demand at home, then that will hurt China and drive up wages of the U.S., and American consumers will be better off,” Hassett said.
He pointed to actual economic outcomes contradicting the study’s implications. Real wages rose an average of $1,400 last year, import prices in December were flat year-over-year, and core inflation in January hit its lowest annual rate since March 2021.
“Consumers couldn’t have been made better off by the tariffs if this New York Fed analysis was correct,” Hassett said.
The methodology problems Hassett identified align with criticisms raised by Breitbart Business Digest, which published a detailed analysis of the study’s flaws Tuesday night. That analysis showed that the price data used by the study is not reliable because so much of it comes
from importers reporting prices for customs duties purposes on goods produced by related-parties rather than arms-length transactions. About half of imports into the U.S. are from related parties.
The study’s authors—Mary Amiti, Chris Flanagan, Sebastian Heise, and David E. Weinstein—noted their findings were “consistent” with other research, including studies from Harvard’s Gita Gopinath, the University of Chicago’s Brent Neiman, and Germany’s Kiel Institute. The Congressional Budget Office similarly estimated foreign exporters would absorb only 5% of tariff costs.
But these studies share similar methodological limitations, focusing primarily on short-term price effects while ignoring quantity adjustments, supply chain restructuring, and dynamic wage effects.
Hassett’s criticism was strong enough that he suggested the study’s flaws warranted consequences. “The people associated with this paper should presumably be disciplined,” he said, calling it “the worst paper I’ve ever seen in the history of the Federal Reserve system.”
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