National Economic Council Director Kevin Hassett launched a broadside against the Federal Reserve Bank of New York for publishing research that found the Trump administration’s tariff policies hurt U.S. companies.
Hassett said the authors of the research should be punished, a new escalation in the Trump administration’s conflict with the Federal Reserve system. The administration has faced pushback for pressuring the central bank to lower interest rates.
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“I mean, the paper is an embarrassment,” Hassett said Wednesday on CNBC when asked about the New York Fed analysis. “It’s, I think, the worst paper I’ve ever seen in the history of the Federal Reserve system. 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.”
The paper was published last week and has received news coverage for finding that over 90% of the costs of the tariffs were being passed along to U.S. companies and consumers rather than foreign exporters during the first 10 months of 2025. That number fell to 86% in November, according to the study.
Hassett pushed back hard on the findings and noted that inflation has moved lower over the past year and that real wages are up.
“Prices have gone down,” Hassett said. “Inflation is down over time. Import prices dropped a lot in the first half of the year, then leveled off, and real wages were up $1,400 on average last year, which means that consumers were made better off by the tariffs. 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. I can’t imagine who signed off on it.”
An official at the New York Fed declined to comment on Hassett’s remarks about punishing Fed staff when contacted by the Washington Examiner.
The remarks, particularly those that Fed researchers should be punished for their study, come at a tense time for the Fed and the White House. Trump has been hounding Fed Chairman Jerome Powell and the Fed board to cut interest rates more aggressively since he entered his second term.
In January, Powell announced that the Justice Department was investigating him and that the central bank recently received grand jury subpoenas related to testimony he gave to the Senate last year about renovation cost overruns at the Fed headquarters building in Washington.
Powell said the inquiry was simply a pretext to pressure him on monetary policy. The extraordinary accusation drew criticism even from some congressional Republicans.
Powell’s term as chairman is up in May, and Trump has nominated former Fed governor Kevin Warsh to replace him. Warsh will face major questions about the Fed’s independence during his confirmation hearing later this year, given the pressure that the White House has put on the Fed over interest rates.
Trump also notably tried to fire Lisa Cook from the Fed’s Board of Governors. That action is being reviewed by the Supreme Court.
The fact that Hassett focused on the researchers is of particular interest, given that Warsh has seemed to suggest in the past that he thinks there may need to be staffing shake-ups at the central bank. According to its most recent numbers, the Fed has just under 3,200 employees at the Board of Governors in Washington and over 20,000 at its regional banks across the country.
Aaron Klein, a senior fellow in Economic Studies at the Brookings Institution, told the Washington Examiner that it would be challenging to reshuffle staff at the Fed’s regional banks, such as New York, which are run by Fed presidents across the country, although changes at the Fed’s headquarters in Washington could be more likely.
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“A big reshuffle of the board is far more likely than changes of the regional banks that are not part of the U.S. government,” Klein said.
It is unclear if Warsh intends to conduct major staffing cuts at the Fed headquarters should he be confirmed, but he has indicated in interviews that there is “dead wood” at the independent agency and that change will involve “breaking some heads.”
