A new study from the Federal Reserve Bank of New York, which found that U.S. consumers and businesses bore the vast majority of costs from tariffs imposed the previous year, is facing strong criticism from the current administration. A senior economic official called the paper “an embarrassment” and “the worst paper I’ve ever seen in the history of the Federal Reserve System.” He argued that the analysis was flawed and had created “highly partisan” news based on methods that wouldn’t be accepted in a basic economics class.
The study’s authors analyzed tariffs instituted during the first eight months of 2025 and concluded that a staggering 94% of the increased costs were absorbed within the United States, with only 6% being borne by foreign exporters. Their research tracked data over a 12-month period, noting that the proportion of costs passed through to U.S. entities did decline slightly by the end of the year, falling to 86% by November.
According to the study, a 10% tariff led to only a small decrease in the prices charged by foreign exporters. While this decline became more pronounced later in the year, the authors maintained that U.S. import prices still rose significantly. They also observed that the higher costs were prompting American firms to reorganize their supply chains. The authors summarized their findings by stating that U.S. firms and consumers continued to bear the bulk of the economic burden from the tariffs.
The administration official countered these conclusions, asserting that the study focused narrowly on price changes while ignoring broader economic factors like supply and demand. He pointed to other metrics, such as lower inflation and rising wages, as evidence that consumers were financially better off overall. “Incomes are up way more than the cost of living, and that’s the real wage gain that this silly Fed study neglects to mention,” he said.
In a separate interview, another senior trade official acknowledged that U.S. consumers do pay the tariffs but disputed the characterization of them as regressive. He argued that since wealthier individuals account for most consumption, the tariffs do not disproportionately impact lower-income groups.
