A political clash is brewing between the White House and central-bank researchers after Kevin Hassett publicly suggested punishment for the authors of a Federal Reserve Bank of New York analysis that challenges the administration’s tariff narrative. In a February 18 interview with CNBC, Hassett said the research was “an embarrassment,” called it “the worst paper” he had seen in the Federal Reserve System, and argued that people associated with it “should presumably be disciplined.”
The dispute centers on who ultimately pays for tariffs. The Trump administration has repeatedly suggested that foreign producers bear the burden of import taxes, but the New York Fed research (and other recent analyses) argues that most of the cost lands at home—on U.S. consumers and firms—through higher import prices and shifted supply-chain expenses. Hassett accused the authors of producing a “highly partisan” conclusion built on analysis he said wouldn’t pass a basic economics class.
The challenged work, published February 12 on the New York Fed’s Liberty Street Economics site, examines the sharp rise in U.S. tariffs during 2025 and estimates who absorbed the “economic burden.” Using import data through November 2025, the authors report that nearly 90% of the burden fell on U.S. firms and consumers. The post explains “tariff incidence” and why the split depends on whether foreign exporters cut prices when tariffs rise. If exporters keep prices unchanged, tariffs pass through into higher import prices—meaning the importer and, ultimately, domestic buyers bear the cost. The authors say their earlier work on the 2018–2019 tariffs found little evidence exporters lowered prices, implying high pass-through, and they find a similar pattern for 2025—though with some variation over the year.
For January–August 2025, it finds 94% of incidence on U.S. importers; in September–October, 92%; and in November, 86%—suggesting foreign exporters absorbed a somewhat larger share late in the year but that U.S. buyers still carried most of the load.
It’s coming at a moment when tariffs are a signature economic tool for Donald Trump. The episode underscores a broader tension: tariff policy is being fought not only in markets and Congress, but also in the arena of economic evidence—where official claims about who pays can materially shape public support, inflation expectations, and the politics of cost of living.
