NY Federal Reserve Tariff Report an ‘Embarrassment’

A study by the New York Federal Reserve claims 90% of the tariff burden is being shouldered by U.S. firms and consumers. White House National Economic Council Director Kevin Hassett joined CNBC’s Joe Kernen on “Squawk Box” to discuss President Trump’s tariffs agenda, and refuted the NY Federal Reserve’s partisan report, providing everyone a quick Econ 101 lesson.

With inflation at only 2.4%, this doesn’t add up. And remember, Economists warned of a 13% tariff spike; so why is inflation only 2.4%?

The Consumer Price Index report for January 2026 shows inflation at 2.4%, down from 2.7% in December and well below the 8% or 9% peaks seen just a few years ago.

Hassett called the New York Federal Reserve report “an embarrassment,” and “the worst paper I’ve ever seen in the history of the federal reserve system,” and said “the people associated with it should be disciplined.”

“Because what they’ve done is put out a conclusion which has created a lot of news that is highly partisan that wouldn’t be accepted in a first semester Econ class.”

Hassett said the bottom line is if you are wondering who bears the burden of something like a tariff… “you’ve got supply curves, demand curves, you shift them around, you’ve got consumer surplus, producer surplus, and then you look and see how it all works out in the end. And they are basically only looking at changes in prices.”

“So they’re assuming that quantities don’t move at all. But guess what? Quantities did move. So the basic theory behind President Trump’s tariffs is that, sure, we are importing stuff from China, but we’ve got producers in the U.S. making the same stuff, at maybe a slightly higher price.

“If we bring the stuff home, create the demand at home, then that will hurt China, and drive up wages in the U.S. and American consumers will be better off.

“So what have we seen? Prices have gone down. Inflation is down and over time, import prices have dropped a lot in the first half of the year, and then leveled off. And real wages were up $1,400 on average last year, which means consumers were made better by the tariffs.

“And so consumers couldn’t have been made better off by tariffs if this New York Fed analysis was correct.

“It’s really just an embarrassment. I can’t imagine who signed off on it, frankly.”