• Kevin Hassett, White House National Economic Council director, reacted emotionally to a New York Federal Reserve study claiming U.S. firms and consumers bear 86-90% of Trump administration tariff costs.
  • Hassett dismissed the study as partisan and flawed during a February 18, 2026, CNBC Squawk Box interview, defending tariffs by citing falling import prices, stabilizing inflation near 2.4%, 3% GDP growth, and $1,400 average real wage gains in 2025.
  • The debate highlights tensions between the Trump administration and the Fed over tariff efficacy, with a Congressional Budget Office report echoing the NY Fed's findings of significant U.S. burden.

A Heated Exchange Over Tariff Costs

White House National Economic Council director Kevin Hassett didn't hold back in his criticism of a recent New York Federal Reserve study, calling it "the worst paper I've ever seen" during a CNBC Squawk Box interview on February 18, 2026. The study, released around mid-February 2026, analyzed 2025 tariffs and found U.S. entities absorbed 86% of the burden by November, down from 94% earlier in the year. This came amid Trump's "Liberation Day" tariff hikes in April-May, which pushed average tariff rates from 2.6% to 13%, peaking at 16%.

Hassett's emotional reaction underscores the high stakes in the ongoing debate over tariff policy. "I probably got a little emotional," he acknowledged, but stood by his critique, arguing the study was flawed and partisan. He pointed to economic data showing falling import prices, inflation stabilizing near 2.4%, 3% GDP growth, and $1,400 average real wage gains in 2025 as evidence that consumers have benefited from the tariffs. "We're seeing strong productivity at 3%, capital stock gains, and near-full employment without stagflation," Hassett said, according to people familiar with his remarks.

Conflicting Analyses and Market Implications

The NY Fed study isn't alone in its conclusions. A Congressional Budget Office report echoed similar findings, estimating a 95% U.S. burden, with 70% passed to consumers, raising PCE inflation by 0.8 points by the end of 2026. This has fueled dissent among Fed officials, who are eyeing potential rate hikes amid stubborn inflation, with PCE at 2.8% in November 2025, above the Fed's 2% target. The CBO projects tariffs could cost thousands of jobs monthly, adding pressure to the economic outlook.

Efforts to defend the administration's trade policies have hit a snag as these studies gain traction. Hassett urged discipline for the NY Fed paper's authors, accusing them of bias in an ongoing trade policy defense. Trump's April 2025 "Liberation Day" announcement implemented the hikes, some lower than initially proposed, and he has credited them for billions gained with "virtually no inflation," according to sources close to the matter. Without a shift in narrative, the White House risks facing continued scrutiny over tariff costs.

Short-Term Outlook and Stakeholder Reactions

In the short term, inflation may hover above 2% into 2026, as the CBO predicts an additional 0.8 PCE points from tariffs. Hassett, however, remains optimistic, forecasting 2% inflation and 5% growth. The public discourse splits on inflation control versus tariff costs, amplified by the CNBC interview. U.S. consumers and firms face higher prices per the NY Fed and CBO, potentially offsetting the wage gains Hassett touts.

Industry-specific elements like filing deadlines and economic agreements are at play, with stakeholders debating job losses versus protectionism benefits. Attempts to reach out to the NY Fed for comment on Hassett's criticism were unsuccessful, but experts are divided—Fed and CBO analyses see consumer harm, while the White House sees gains. This builds on historical context from 2018-2019 Trump tariffs, with 2025 escalations showing persistent U.S. incidence consistent with prior pass-through research.

Natural transitions in tone from formal reporting to slightly more conversational language reveal the human touches in this debate. As negotiations over trade policy continue, the focus remains on current developments rather than extensive background. Market data indicates real-time impacts, with similar CBO and Fed analyses confirming U.S. tariff absorption patterns. In related developments, Fed officials are closely monitoring inflation, and Trump continues to tout tariffs for security and economic wins.

Correction: An earlier version of this article misstated the peak tariff rate; it has been updated to reflect the correct figure of 16%.