"Prices and Inflation Fell... Consumers Benefited"
The White House has fiercely condemned a report by the Federal Reserve Bank of New York (New York Fed) which found that about 90% of the cost burden from tariffs imposed by the Donald Trump administration is being passed on to Americans and U.S. companies.
On the 18th (local time), Kevin Hassett, White House National Economic Council (NEC) Director, appeared on CNBC and denounced the report as "shameful," calling it "the worst report in the history of the Federal Reserve (Fed)."
He raised his voice, saying, "The person who wrote this report deserves to be disciplined."
According to the New York Fed report released on the 12th, 94% of tariff costs from January to August last year were passed on to U.S. companies and consumers. In September and October, 92% of tariff costs were borne by U.S. companies and consumers, and in November the figure was 86%. These findings run counter to President Trump's confident assertion that high tariffs would be "borne by exporters."
Director Hassett said that New York Fed researchers "reached a highly biased conclusion based on analysis that would not be accepted even in an Economics 101 class, and this created a lot of news coverage."
He also criticized the report for looking only at price changes and not paying sufficient attention to changes in trade volumes. He argued that it focused solely on the rise in import prices caused by higher tariffs, while overlooking the decrease in import volumes and the effect of increased U.S. production. He said, "Of course we import goods from China, but there are companies that produce goods in the United States as well, and the prices may be a little higher," adding, "If we bring these goods back to the United States and create demand here, we can hurt China and raise wages in the United States, thereby easing the burden on U.S. consumers."
Hassett stated that the tariff policy has been successful in reviving U.S. economic activity. "Prices have gone down and inflation has fallen over time. Import prices fell sharply in the first half of last year," he said, adding, "Thanks to the tariffs, consumers have benefited." He claimed that real wages rose by an average of 1,400 dollars (about 2.03 million won) last year.
Hassett, a key economic adviser to President Trump, was once considered a leading candidate for the next Fed chair. His remarks on this day appear intended to underscore the legitimacy and effectiveness of the tariff policy at a time when the U.S. Supreme Court is reviewing whether the policy is unlawful. They can also be interpreted as an argument that the biggest issue ahead of the midterm elections in November, the "cost-of-living burden," has been offset by higher real wages.
However, Hassett's claims contradict not only the New York Fed report but also other recent research findings. Last month, Germany's Kiel Institute reported that the tariff pass-through rate reached 96%, while the National Bureau of Economic Research (NBER) put it at 94%. The bipartisan think tank Tax Foundation stated that last year's tariff hikes were expected to increase the tax burden on each U.S. household by an average of about 1,000 dollars. This figure is projected to rise to 1,300 dollars this year.
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