New York Fed's Williams says tariff burden falls 'overwhelmingly' on U.S. businesses and consumers

• A New York Fed analysis found that approximately 90% of tariff costs have been absorbed by U.S. firms and consumers rather than foreign exporters, contradicting Trump administration assertions
• Williams estimates tariffs have added 0.5 to 0.75 percentage points to the current 3% inflation rate, temporarily stalling the Fed's progress toward its 2% target
• The study sparked controversy when White House economist Kevin Hassett called it 'the worst paper' in Fed history and suggested researchers should be 'disciplined,' though he later walked back the criticism

Summary

Key Development: New York Federal Reserve President John Williams publicly stated that U.S. businesses and consumers are bearing the overwhelming burden of President Trump's tariffs, directly contradicting White House claims that exporters would absorb the costs.

Critical Findings:

• A New York Fed study estimates approximately 90% of tariff costs have been passed to domestic producers and consumers
• Tariffs have contributed 0.5 to 0.75 percentage points to the current 3% inflation rate
• The tariff impact has stalled progress toward the Fed's 2% inflation target

Political Controversy:

The New York Fed research sparked significant dispute when National Economic Council Director Kevin Hassett called it "the worst paper I've ever seen in the history of the Federal Reserve system" and suggested researchers should be "disciplined," though he later walked back these comments.

Fed Outlook:

• Williams expects tariff-related inflation to be temporary
• Projects Fed will reach its 2% inflation target by 2027
• Describes the U.S. economy as being on "good footing"
• Current monetary policy is "well positioned" to achieve dual mandate goals
• Suggests further rate cuts may be warranted once tariff effects fade and inflation progresses lower

Market Implications:

Markets anticipate the Fed resuming rate cuts later in 2026, potentially in July or September. Williams' position carries significant weight as a permanent voting member of the Federal Open Market Committee. The remarks highlight ongoing tension between Fed independence and White House economic policy positions, with direct implications for inflation expectations and monetary policy trajectory.