Kevin Hassett says Fed economists should be 'disciplined' over tariff study

Core Viewpoint - The New York Federal Reserve's research indicates that U.S. businesses and consumers bear the majority of the burden from tariffs imposed by the Trump administration, leading to significant criticism from White House economic advisor Kevin Hassett, who labeled the findings as an embarrassment [1][6]. Summary by Sections Tariff Burden - The New York Fed's research found that U.S. businesses and consumers are responsible for 86% of the tariff burden, while foreign exports account for 14% as of November 2025 [2]. - The share of the burden on U.S. businesses and consumers decreased from 94% in the January to August period to 92% in September and October [2]. Average Tariff Rates - The average tariff rate increased significantly from 2.6% at the beginning of 2025 to 13% by the end of the year, peaking at around 16% in April and May following the announcement of "Liberation Day" tariffs [5]. Economic Impact - The New York Fed's findings align with other studies indicating that American importers are absorbing nearly all tariff costs, with the bulk of the incidence falling on U.S. firms and consumers [6]. - The Congressional Budget Office (CBO) reported that U.S. businesses would pass on approximately 70% of their tariff costs to consumers, with the remaining 30% affecting profit margins [10]. - The CBO projected that the new tariffs would increase the personal consumption expenditures (PCE) index by about 0.8 percentage points by the end of 2026, with current PCE inflation at 2.8%, exceeding the Fed's 2% target [11]. Defense of Tariffs - Hassett defended the Trump administration's tariffs, claiming that they have benefitted American consumers by reducing prices and increasing real wages by an average of $1,400 last year [12].