Theresa May's close supporter said "any Brexit" would hit the UK economy as he leapt to the defence of her much-maligned deal.
He conceded that "in pure economic terms" the UK will be worse off under all possible Brexit outcomes.
But the Chancellor said he did not support reversing the referendum decision as it would leave the country "fractured".
Mr Hammond said: "If you look only at economic benefits, yes there will be a cost to leaving the European Union."
His comments came ahead of the publication of analysis of the impact of Theresa May's Brexit deal by the Treasury and the Department for Exiting the European Union.
“If you look only at economic benefits, yes there will be a cost to leaving the European Union”
Chancellor Philip Hammond
The Chancellor added: "It will show that a 'no deal' exit will have a much higher impact on the economy than the deal the Prime Minister has negotiated."
The draft Withdrawal Agreement offers the political benefits of being out with "very little economic cost" to the UK, Mr Hammond said.
Mrs May's Brexit deal would "minimise costs" incurred by Brexit and the trade impediments it throws up.
Mr Hammond told BBC Radio 4's Today programme: "What the Prime Minister's deal does is absolutely minimises those costs, and reduces to an absolute minimum the economic impact of leaving the EU, while delivering the political benefits, in terms of being able to do third-country trade deals, having control of our fishing waters, and the many other issues that will be delivered politically."
Mr Hammond hit out at accusations that he was trying to scare people into backing the Prime Minister's deal.
He told BBC Breakfast: "I'm not trying to scare anybody and I reject the term 'scaremongering'.
"If the Government wasn't doing anything about the possibility that we could leave the European Union in just four months' time with no deal at all, if we weren't making any preparations, I'd be on this programme and you'd rightly be attacking me for not preparing Britain for a possibility which clearly could happen.
"And in that case we know, for example, that there will be significant delays at the Channel ports because customs procedures will have to be introduced where they don't exist now, and that will slow down the flow of vehicles and therefore the flow of good coming into Britain and going out of Britain.
"Of course we have to prepare for that, we have to make arrangements that will, as far as possible, minimise any disruption that will be caused by that no-deal exit."
Mrs May's Brexit deal will be debated for five days before a vote on December 11.
She has also challenged Labour leader Jeremy Corbyn to a TV debate, which he says he will "relish" accepting.