Kevin Hassett, the White House’s resident tariff optimist, has identified a new threat to the republic: a fairly standard economics paper.
The director of the national economic council and Trump loyalist described a new study from the Federal Reserve Bank of New York as “an embarrassment” – indeed, “the worst paper I’ve ever seen in the history of the Federal Reserve system”.
The authors, he added, should “presumably be disciplined”.
Their offence? Concluding that Americans pay most – nearly 90 per cent – of the cost of US tariffs. Foreign exporters trimmed prices a little, but nowhere near enough to absorb the levies.
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The economics are uncontroversial – multiple independent analyses confirm what standard economic theory predicts – but the politics is another story.
President Donald Trump has insisted the burden of tariffs “has fallen overwhelmingly on foreign producers” and with the current US administration, a paper suggesting otherwise can get you a public dressing-down.
This isn’t an isolated outburst. Trump previously called on Goldman Sachs to replace its chief economist, Jan Hatzius, over his tariff predictions. He fired Erika McEntarfer at the Bureau of Labour Statistics for apparently delivering jobs data he didn’t like.
More recently, US treasury secretary Scott Bessent complained about “fake news” following a report by Deutsche Bank analyst George Saravelos, saying the bank’s chief executive had called to say it “does not stand by that analyst”.
Could Simon Harris’s savings scheme for the ‘middle classes’ prove to be a sound investment?
As for Hassett, what he meant by “disciplined” is unclear.
The New York Fed is independent, and its papers carry the usual disclaimer distancing the institution from the authors’ views. Still, many at the Fed will surely be relieved that Hassett, until recently viewed as the likely replacement for outgoing Federal Reserve chairman Jerome Powell, will not be in any position to decide what counts as acceptable research (the job is set to go to Kevin Warsh).
Nevertheless, analysts and researchers must surely be treading carefully, given the message they are getting – if your model contradicts the message, revise the model.
