What's Happening?
White House economic advisor Kevin Hassett has publicly criticized a recent study by the New York Federal Reserve, which concluded that U.S. companies and consumers are bearing the majority of the costs from tariffs. In an interview with CNBC, Hassett described the study as an 'embarrassment' and suggested that the authors should be disciplined. The study, published on February 12, analyzed whether countries exporting to the U.S. were absorbing the tariffs or passing the costs onto consumers and companies. It found that approximately 90% of the added costs were being passed on, although the impact lessened over time. Hassett argued that the study failed to consider the positive effects of tariffs, such as increased wages and benefits from onshoring
production. He claimed that the tariffs have led to a better standard of living, citing a rise in real wages and a decrease in inflation.
Why It's Important?
The criticism from a high-ranking White House official highlights the contentious nature of tariff policies and their economic impact. The New York Fed's study challenges the administration's narrative that tariffs have minimal negative effects on consumers. If the study's findings are accurate, it suggests that tariffs could be contributing to higher consumer prices, contradicting claims of economic benefits. This debate is significant as it influences public perception and policy decisions regarding trade and tariffs. The outcome of this discourse could affect future trade negotiations and economic strategies, impacting industries reliant on international trade.
What's Next?
The controversy surrounding the study may prompt further scrutiny of tariff impacts by other economic institutions and researchers. It could lead to additional studies or revisions of existing analyses to address the criticisms raised by Hassett. The White House may also use this opportunity to reinforce its stance on tariffs, potentially influencing upcoming trade discussions. Stakeholders, including businesses and consumer advocacy groups, may respond by lobbying for or against tariff policies based on the perceived economic outcomes.
