John Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, speaks at an Economic Club of New York (ECNY) event on Thursday, September 4, 2025 in New York, USA.
David Dee Delgado | Bloomberg | Getty Images
New York Fed President William Williams said Tuesday in remarks rebutting White House claims that U.S. consumers and businesses are taking most of the hit from President Donald Trump’s tariffs.
“Tariffs are overwhelmingly domestic, and New York Fed analysis shows that most of the burden falls on U.S. businesses and consumers,” Williams said at a conference in Washington, D.C. “Additionally, tariffs have already significantly increased the price of U.S. imports, and their effects are likely not yet fully felt.”
The research cited by Williams has generated considerable controversy over the past few weeks.
In a white paper posted on the New York Fed’s website, a team of researchers found that up to 90% of the additional costs of tariffs are passed on to domestic producers and consumers. President Trump and other White House officials had insisted that exporters would absorb costs rather than raise prices.
National Economic Council Director Kevin Hassett intensified the controversy during an appearance on CNBC when he suggested researchers should be “disciplined” for what he called “the worst paper in the history of the Federal Reserve.” Hassett later retracted his criticism.
Williams, addressing the issue publicly for the first time, said that not only are the tariffs ingrained in the country, but they are also preventing the Fed from achieving its 2% inflation target.
“My current estimate at this point is that the tariff increase contributes about 0.5 to three-quarters of a percentage point to the current inflation rate of about 3%,” he said. “The FOMC defines price stability as 2% inflation over the long run. Tariffs have temporarily stalled progress toward that goal.”
On the bright side, Williams expects the impact on inflation from the tariffs to remain temporary and said the Fed will reach its goal by 2027, adding that the U.S. economy “seems to be on good footing.”
Regarding current policy, he said the Fed is “well positioned” to achieve its dual mandate goals of price stability and full employment. If inflation declines after the impact of the tariffs wears off, “eventually, further reductions in the federal funds rate would be justified to prevent monetary policy from becoming inadvertently restrictive.”
Based on current futures prices, the market expects the Fed to resume rate cuts later this year, likely in July or September. As president of the Federal Reserve Bank of New York, Mr. Williams has special influence on the Federal Open Market Committee and is a permanent voting member.
