In an editorial, the Wall Street Journal says:

The White House this week opened a new front in its war on the Federal Reserve: a fight about Fed research on the consequences of President Trump’s tariffs. If the tariffs are such an unambiguous economic and political winner, why is the Administration so defensive about them?

The flap concerns the analysis we told you about last week by four economists at the Federal Reserve Bank of New York. They found that American households and businesses are bearing nearly 90% of the cost of the Trump tariffs, contrary to Mr. Trump’s claim that foreigners will pay.

Clearly the White House is worried that voters might conclude this research aligns with their own experience. Kevin Hassett, director of the National Economic Council, took to CNBC Wednesday to pan the New York Fed research as “the worst paper I’ve ever seen in the history of the Federal Reserve System” and suggested the people who wrote and published it should be “disciplined.” Disciplined how? Put in stocks? For a tariff paper?

The Fed analysis aligns with other research into the distribution of tariff costs from Harvard economists and Germany’s Kiel Institute—and with common sense. There isn’t widespread evidence that foreign producers are cutting their prices to offset the tariffs, the main mechanism by which foreigners would “pay” for the border taxes.

Nor is the dollar strengthening, which is the other possible mechanism for making foreigners pay (we’ll spare you the equations). Instead the tariffs are causing an increase in post-tariff prices of those goods that are still imported, alongside a modest decrease in the volume of imports. Americans pay higher prices, or “pay” in the form of less choice. [Continue reading…]