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White House economic advisor Kevin Hassett on Wednesday called for the New York Federal Reserve to punish economists who published a research paper that found that the bulk of the burden of the Trump administration’s tariffs are falling on U.S. businesses and consumers.
“The paper is an embarrassment. It’s, I think, the worst paper I’ve ever seen in the history of the Federal Reserve system,” Hassett said in an interview on CNBC’s “Squawk Box.”
“The people associated with this paper should presumably be disciplined, because what they’ve done is they’ve 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 continued.
The New York Fed’s research found that U.S. businesses and consumers bore 86% of the tariff burden, while foreign exports bore 14% of the burden as of November 2025. The researchers found that the share borne by U.S. businesses and consumers declined over the year from 94% in the January through August period, and 92% in September and October.
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They also found that the average tariff rate jumped last year as the Trump administration raised the import levies, rising from 2.6% at the beginning of 2025 to 13% at the end of the year. The report found that the average tariff rate peaked at around 16% in April and May, following the president’s announcement of his “Liberation Day” tariffs.
“Our results show that the bulk of the tariff incidence continues to fall on U.S. firms and consumers,” the New York Fed wrote, noting that its findings were consistent with a pair of recent studies on U.S. tariff pass-through showing American importers absorbing nearly all the cost.
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Those findings are also similar to those contained in another analysis by the nonpartisan Congressional Budget Office (CBO), which noted in its recently released 10-year budget and economic outlook that foreign exporters are absorbing about 5% of the tariff costs with the remaining 95% falling on U.S. firms and consumers.
The CBO found that U.S. businesses would pass on about 70% of their tariff costs to consumers, with the remaining 30% coming out of their profit margins. After accounting for domestic producers raising prices because of reduced foreign competition, the “net effect of tariffs is to raise U.S. consumer prices by the full portion of the cost of the tariffs borne domestically (95 percent),” the CBO found.
CBO’s analysis also projected that the new tariffs imposed over the last year will have increased the personal consumption expenditures (PCE) index by about 0.8 percentage points on aggregate by the end of 2026. PCE inflation is the Fed’s preferred inflation gauge and was most recently at 2.8% in November, well above the Fed’s 2% target.
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Hassett went on to defend the Trump administration’s tariffs during the CNBC interview, saying that American consumers are better off for them, while saying the New York Fed’s analysis was an “embarrassment.”
“Prices have gone down. Inflation is down over time. Import prices dropped a lot in the first half of the year, that leveled off, and real wages were up $1,400 on average last year, which means that consumers were made better off by the tariffs,” Hassett said on CNBC.
“So consumers couldn’t have been made better off by the tariffs, if this New York Fed analysis was correct. It’s really just an embarrassment,” Hassett said.
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