Presidential advisor Kevin Hassett has escalated his criticism of the Federal Reserve Bank of New York, calling for disciplinary action against staff members involved in a recent study regarding trade policy. The research in question suggested that American consumers and businesses bore the primary financial burden of tariffs imposed during the previous administration. Hassett, who served as a senior economic official, argues that the findings are politically motivated and intellectually flawed.
The dispute centers on a technical analysis published by the regional Fed branch which examined the impact of import duties on various sectors of the domestic economy. According to the researchers, the costs associated with these trade barriers were almost entirely passed through to US buyers, rather than being absorbed by foreign exporters. Hassett has challenged this methodology, suggesting that the timing of the report and its conclusions appear designed to influence public perception during a sensitive political window.
Speaking on the matter, Hassett emphasized that the central bank is intended to be a non-partisan institution focused on price stability and employment. He contends that when staff members produce research that aligns too closely with partisan narratives, it undermines the credibility of the entire Federal Reserve System. By calling for discipline, Hassett is signaling a desire for tighter oversight of the research departments within the twelve regional Fed banks, which historically have enjoyed significant academic independence.
Economic experts have noted that the debate over who pays for tariffs remains one of the most contentious issues in modern fiscal policy. While classical trade theory often suggests that consumers pay higher prices when imports are taxed, proponents of aggressive trade enforcement argue that the strategic benefits and shifts in global supply chains outweigh the short-term inflationary pressure. Hassett maintains that the New York Fed study failed to account for the broader competitive advantages gained by domestic manufacturers under the tariff regime.
The Federal Reserve Bank of New York has not yet issued a formal response to the calls for staff discipline. Traditionally, the Fed has defended the right of its economists to publish peer-reviewed research regardless of its political implications. However, the pressure from high-profile figures like Hassett reflects a growing trend of scrutiny toward independent government agencies and their internal cultures.
This friction comes at a time when the role of the Federal Reserve is already under the microscope due to ongoing battles with inflation and interest rate adjustments. Critics of Hassett’s position argue that punishing researchers for their findings could create a chilling effect on economic inquiry, potentially depriving policymakers of essential data needed to navigate complex global markets. Conversely, Hassett insists that without clear standards for objectivity, the Fed risks becoming another arena for ideological conflict.
As the conversation around trade policy continues to evolve, the fallout from this study may lead to new discussions regarding the governance of research at the New York Fed. Whether the institution will bow to external pressure or double down on its commitment to independent analysis remains to be seen. For now, the clash highlights the deep divide between academic economic modeling and the practical realities of high-stakes political strategy.
