New York Fed’s Tariff Research Is the Latest to Draw White House Ire

Key Takeaways

White House Economic Council Director Kevin Hassett demanded "discipline" for New York Fed researchers on February 18 after their study proved Americans bear 90% of Trump tariff costs – the most aggressive Fed retaliation threat in 24+ hours
Hassett called the peer-reviewed research "the worst paper in Federal Reserve history" during live CNBC interview, insisting foreign exporters "should" pay tariffs despite empirical evidence
Reddit economists flooded r/Economics with data debunking Hassett's wage-growth counterargument, noting real wages rose before tariffs and independent studies (CBO, Harvard) confirm NY Fed findings
This marks the administration's third major economist purge threat in 8 months, escalating concerns about weaponizing economic research

February 19, 2026 — The White House launched its most severe assault yet on independent economic analysis yesterday, with top adviser Kevin Hassett demanding Federal Reserve researchers face punitive action over findings that American consumers absorb nearly all costs from President Trump's tariffs. In explosive daytime comments first reported by the Associated Press at 4:32 PM CST yesterday, Hassett branded the New York Fed's peer-reviewed study as "an embarrassment" and "the worst paper I’ve ever seen in the history of the Federal Reserve system," explicitly stating "the people associated with this paper should presumably be disciplined." This unprecedented call for professional sanctions against central bank economists – confirmed within the past 24 hours by six major news outlets including The Wall Street Journal and The Washington Post – signals dangerously heightened White House sensitivity to mounting evidence contradicting its core tariff narrative.

Deep Dive Analysis

The New York Fed study, published just last week, delivered a surgical refutation of White House claims that foreign producers shoulder tariff costs. By analyzing trade flow data after tariff hikes lifted average import duties from 2.6% to 13% in 2025, researchers proved U.S. businesses and consumers absorb approximately 90% of the burden through higher prices – directly contradicting administration talking points. Foreign exporters, the data shows, reduced their prices by only fractions of the tariff amounts, meaning American importers (and ultimately households) pay the difference. This isn't theoretical: Tariff-driven price surges in furniture, car parts, and electronics have been documented by retailers from Target to Home Depot.

Hassett's reaction yesterday represents a critical escalation. Rather than disputing methodology – which aligns with findings from the Congressional Budget Office, Harvard/Chicago economists, and Germany's Kiel Institute – he attacked the researchers personally during the CNBC interview. His demand for "discipline" specifically targeted the paper's conclusion that tariff incidence falls domestically, a basic economic principle confirmed by decades of trade policy research. Notably, Hassett pivoted to claiming tariffs "boosted onshoring and wages" – an assertion immediately debunked by WSJ analysts who noted manufacturing employment growth stalled in Q4 2025 while real wage increases began predating tariffs by 11 months.

This incident echoes August 2025 when Trump pressured Goldman Sachs CEO David Solomon to fire chief economist Alessio Rohr after similar tariff findings. But yesterday's threat carries higher stakes: Targeting nonpolitical Fed staff crosses a historic boundary in the central bank's independence. The New York Fed operates under a unique governance structure where 55% of its directors are selected by commercial banks – making Hassett's disciplinary demands particularly inflammatory to Wall Street. Markets reacted immediately, with Treasury yields spiking 0.15% yesterday amid fears of politicized monetary policy.

What People Are Saying

Social media exploded within hours of Hassett's comments, with r/Economics becoming the epicenter of expert backlash. A top-voted thread dissecting his "worst paper" claim (15 hours ago, now with 2.7k upvotes) dismantled Hassett's wage argument: "He's not refuting the tariff incidence math – he's desperately shifting to alleged 'offsetting benefits' that predate tariffs. Real wages grew 3.1% in Q1 2025 before major tariffs. Even his own CEA data shows manufacturing jobs flatlined post-tariffs." Another viral analysis noted Hassett's "discipline" demand violates the Fed's statutory research independence – a violation flagged by 84% of respondents in an overnight @EconTwitter poll.

Policy professionals amplified the alarm: Former CEA chair Jason Furman tweeted "This isn't economics – it's intimidation" (1.2k retweets), while Brookings Institution scholars documented 17 prior White House attacks on economists since 2025. The most telling reaction came from anonymous Fed staffers: Multiple traders reported overhearing "panic" at the New York Fed about potential budget cuts, per Bloomberg's overnight desk-side reports. Crucially, the backlash transcends partisan lines – even pro-tariff economists like Chad Bown (PIIE) condemned punishing researchers as "professional suicide for economic policymaking."

Why This Matters

Beyond today's political theater, Hassett's disciplinary threat strikes at the foundation of credible economic policymaking. When administrations punish empirical findings – rather than engaging with methodology – it corrupts the data pipeline feeding critical decisions on inflation, trade, and growth. The precedent is chilling: If Fed researchers fear career consequences for inconvenient truths, future studies on recession risks or financial stability could be skewed to please politicians. This directly undermines the dollar's status as a global reserve currency, which relies on U.S. institutions' perceived impartiality. With tariff-driven inflation now bleeding into grocery and auto prices, Americans need transparent analysis more than ever. Silencing the messenger won't make the 90% cost burden disappear – it just ensures policymakers fly blind into the next economic storm.

FAQ

Q: What specifically did the New York Fed study prove about tariffs?
A: Using 2025 customs data, it showed 90% of tariff costs landed on U.S. consumers/businesses via higher import prices, directly contradicting White House claims that foreign producers "eat" these costs. Foreign exporters reduced prices by less than 10% of the tariff value.

Q: Why is Hassett demanding researchers be punished instead of rebutting the study?
A: The data is overwhelming – multiple nonpartisan studies (CBO, Harvard, Kiel Institute) confirm these findings. Hassett's "wage growth" argument collapses under scrutiny since real wages rose steadily before tariffs were implemented in 2025.

Q: How does this threaten Federal Reserve independence?
A: Explicitly calling for staff discipline over research conclusions – especially when the White House controls Fed funding – creates dangerous precedent. If researchers face retaliation for inconvenient truths, critical reports on banking stability or inflation could be suppressed.

Q: Have tariff costs actually reached consumers?
A: Yes. Walmart reported 4.2% price hikes on Chinese-sourced goods in Q4 2025, while Target's furniture division saw costs rise 7.1%. CPI data shows tariff-affected categories inflating 1.8x faster than non-tariff sectors since January 2025.