'Worst Paper I've Ever Seen': Kevin Hassett Goes Nuclear On NY Fed Paper On Tariffs

Kevin Hassett on Wednesday called for researchers at the Federal Reserve Bank of New York to be “disciplined,” after the bank published a paper concluding that 90% of Trump’s tariff costs are falling on U.S. consumers and companies rather than foreign exporters.

“The paper is an embarrassment,” the National Economic Council director said 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.”

The paper examined whether foreign exporters are absorbing tariff costs by cutting prices or passing them on to American buyers.

It found the latter, with the burden landing almost entirely domestically, a conclusion that directly contradicts the White House’s long-held position that foreign countries, not U.S. consumers, pay the price.

Hassett argued the researchers focused too narrowly on prices, ignoring wage growth and onshoring benefits.

He pointed to January CPI at 2.4% and claimed real wages were up $1,400 on average last year as evidence consumers have actually come out ahead.

The comments drew swift reaction online.

Conservative commentator David Frum replied to a viral post about Hassett’s remarks, describing the Trump economic team as divided between “authentic crackpots, cynical cowards, and Epstein alumni.”

The Tax Foundation estimated tariffs cost the average U.S. household $1,000 in 2025, and mainstream economic consensus broadly supports the finding that import taxes are predominantly borne by domestic buyers, not foreign exporters.

What Prediction Markets Say

The Supreme Court is set to rule on Trump’s sweeping tariff regime.

Polymarket traders see just a 26% chance the Supreme Court rules in favor of Trump's tariffs. The case could trigger refunds exceeding $130 billion and reshape American trade policy.

A ruling against the tariffs would effectively validate what the NY Fed paper argued; that the costs were real, domestic, and worth unwinding.

A separate market puts the chances that importers receive refunds at 18%, suggesting importers can’t expect consumers to get their money back even if the court rules against the tariffs.

For traders watching Walmart (NYSE:WMT) and Target (NYSE:TGT), both of which have flagged tariff pass-through risks to margins, the question of who actually pays may be the most important one in the market right now.

Traders will be watching Walmart’s earnings tomorrow for any tariff commentary. The retailer’s customer penetration just hit a record 72% of U.S. households as budget-conscious consumers consolidate their shopping.

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