New York Fed’s Williams says tariff burden falls ‘overwhelmingly’ on the U.S.

In a recent conference in Washington, D.C., New York Federal Reserve President John Williams made a statement that goes against the claims of the White House regarding President Donald Trump’s tariffs. According to Williams, American consumers and businesses are the ones bearing the brunt of the tariffs, contrary to the White House’s assertions.

Williams referenced a study conducted by the New York Fed that found that the majority of the burden from tariffs has fallen on U.S. firms and consumers. The study also revealed that the tariffs have significantly increased the prices of imported goods in the U.S., with the full effects yet to be fully felt.

The study has been met with controversy, particularly after National Economic Council Director Kevin Hassett criticized it, calling it “the worst paper I’ve ever seen in the history of the Federal Reserve system.” Despite the backlash, Williams stood by the findings of the study, emphasizing that the tariffs are not only impacting domestic stakeholders but also hindering the Fed from reaching its 2% inflation target.

Williams estimated that the tariffs have contributed around one half to three quarters of a percentage point to the current inflation rate of about 3 percent. He reassured that he expects the impact of tariffs on inflation to be temporary, with the Fed likely to reach its target by 2027. He also mentioned that the U.S. economy is currently in a good position.

Regarding future policy, Williams stated that the current stance is well-positioned for the Fed to achieve its dual mandate of steady prices and full employment. He hinted that if inflation decreases after the tariff impact subsides, further reductions in the federal funds rate may be necessary to prevent monetary policy from becoming more restrictive.

Market expectations suggest that the Fed may resume cutting rates later this year, possibly in July or September. As the president of the New York Fed, Williams holds significant influence on the Federal Open Market Committee, where he is a permanent voting member.

Overall, Williams’ remarks shed light on the impact of tariffs on the U.S. economy and inflation, highlighting the need for careful consideration of policy decisions in the face of ongoing trade tensions.