White House National Economic Council Director Kevin Hassett delivered a masterclass in economic realpolitik during a recent Squawk Box appearance, blending tariff advocacy, productivity optimism and subtle hints at his own Fed chair prospects. With President Trump narrowing his search for Jerome Powell’s successor, Hassett’s comments arrive amid market speculation and Davos debates, underscoring a policy pivot toward growth over inflation fears. The interview, aired January 22, 2026, comes as GDP forecasts exceed 5% for consecutive quarters, challenging traditional monetary models.

Hassett dismissed concerns that tariffs burden American consumers, arguing foreign exporters with inelastic supply absorb the costs. “If you think that US consumers are going to bear the tariffs, then the foreign governments wouldn’t care. But if they think that, like the Chinese have inelastic supply to the US, so they’re going to just keep dumping their stuff no matter what, then they really, really care about the tariffs,” he told hosts. This view counters studies like a recent NBER paper claiming $0.96 of each tariff dollar hits U.S. buyers, which Hassett waved off as model flaws ignoring geopolitics such as rare earth leverage.

Tariff Mechanics Under Scrutiny

Empirical data bolsters Hassett’s case: the U.S. trade deficit has shrunk under Trump’s tariff threats, with exporters rerouting goods rather than eating costs. “The fact that countries move so much with the President’s tariff threats says something about who’s bearing the tariff,” Hassett noted, pointing to a three-month CPI moving average at 1.5% annualized despite predictions of 3-4% spikes. Critics like Peter Orszag, formerly of the Obama administration, wager inflation will embed at 4% in 2026, but Hassett insists recent data trends “promisingly” toward disinflation.

Christine Lagarde and Citadel’s Ken Griffin recently cited the NBER work in Davos panels, labeling tariffs a regressive tax, yet Hassett highlighted real wage gains—up under Trump pre- and post-tariffs—outpacing price rises. “Wages are going up more than the cost of buying stuff. And that’s exactly President Trump’s point. So it’s in the data,” he said. A CNBC Squawk Box transcript captures this exchange, linking security, economics and tariffs as “inextricably linked,” echoing Treasury Secretary Scott Bessent’s Davos remarks.

Fed Succession Drama Unfolds

Trump’s Fed chair hunt dominates headlines, with Hassett coy on his role. “We’ll see. I don’t think anything’s final until it’s final in the President’s mind,” he replied to host Joe Kernen’s probing about staying in his TV-savvy advisory post. Trump has publicly praised Hassett’s media prowess, saying he’d miss him as Fed chair, narrowing from five to potentially one candidate. A CNBC report quotes Bessent pegging an announcement next week, with frontrunners including former Fed Governor Kevin Warsh after Trump signaled reluctance to lose Hassett.

The BBC outlines the stakes: Trump must name Powell’s replacement at a pivotal juncture, with 84% of a December CNBC Fed survey expecting Hassett but most preferring alternatives over perceived loyalty risks. Pushback from Trump allies noted in a CNBC article cites concerns he’s “too close to the president.” Hassett advocates for “an independent person who respects the mandates,” name-dropping Alan Greenspan’s 1990s playbook.

Productivity Surge Echoes Greenspan Era

Hassett draws parallels to the late 1990s, when Greenspan let growth rip without inflation via productivity shocks from computing. “The economy is really hot. I think we might end up with two quarters in a row above five now… But inflation is not taking off. And so it’s obvious because productivity is in the fours right now because of AI,” he explained. Data centers and AI are fueling this, muting labor market pressures even as firms delay hires.

Posts on X amplify this: Larry Kudlow urged a Fed chair ignoring tariff “yapping,” while Aaron Rupar highlighted Hassett’s prior AI-labor remarks. Townhall clips show Hassett outmaneuvering CNN’s Kasie Hunt on trade benefits. Yet skeptics like The Atlantic warn Hassett might bend to Trump’s will, eroding Fed independence.

Davos Shifts on Energy and Growth

Davos 2026 felt “radically different,” per Hassett, with climate alarmists pivoting to fossil fuels for AI power needs. He recounted an exchange between Howard Lutnick and Al Gore, where ideologues booed as data trumped dogma. Trump insiders tout 4-5% growth quarters, crediting policy over Fed restraint, with real wages rising despite tariff noise.

Rick Rieder emerges as a dark horse, praised by Hassett as “the best bond guy.” Kernen pressed if the next chair should “let the economy run hot,” prompting Hassett’s mandate-respect call. As Bessent eyes cuts and Trump links tariffs to security—from Greenland to Iran—the policy triad of growth, trade and monetary policy hangs in balance.

Weighing Inflation Risks Ahead

Orszag’s bet underscores persistent doubts: tariffs may yet ignite prices, with exporters fleeing U.S. markets bolstering domestic chains but risking input costs. Hassett counters that models miss behavioral shifts, insisting “the final score really is what happens to the real wage of ordinary Americans.” Recent Reuters coverage quotes him doubling down post-interview.

Markets reacted to Trump’s Hassett retention hints, boosting Warsh odds per prediction markets. With GDP potentially topping 5%, AI productivity in the 4% range and tariffs reshaping trade, Hassett’s worldview posits a Greenspan rerun: hot growth, tame prices. Industry insiders watch if Trump’s pick delivers that judgment or reignites inflation wars.