Why You Shouldn't Start Spending Trump's Tariff Rebate Yet
The drumbeat around the possibility of a $2,000 tariff rebate check for Americans is starting to intensify. President Donald Trump floated the idea again on Monday, telling reporters that the government is going to issue dividends to millions of Americans by the middle of next year. While it is natural to get excited about the possibility of a $2,000 check landing in your bank account, financial experts say that there are several obstacles standing in the way of these rebates. Here are some of the potential roadblocks facing the president as he tries to roll out this plan.
Money is Not There
The simplest reason that the idea of a tariff dividend faces an uphill battle is that the money is not there to fund it. The tariffs are generating substantial amounts of money for the government. According to the latest estimates from the Tax Foundation, the new tariffs are expected to raise $158.4 billion in total revenue this year. An additional $207.5 billion is expected to come in on the backs of the tariffs in 2026.
The Trump administration has not released any details about how these dividends would be distributed, making it difficult to ascertain where the money will come from. Even if the White House directs all of the tariff revenue back to the American public, the math is not there to support these distributions.
According to an analysis by the Tax Foundation, even if the Trump administration imposes an individual income cutoff of $100,000, the checks would still cost the government $279.8 billion. This figure is well over the projected tariff revenue figures. The gap would become even more insurmountable if the dividends went out to all tax filers and their dependents.
Compounding the math even more is the fact that the White House has already said that it will use this tariff revenue to offset the cost of the spending package that it recently signed into law.
Stimulus Checks Could Backfire
The idea of a stimulus check sounds good on paper. But economists warn that these large payouts could backfire. Boosting demand for goods without increasing the supply naturally increases prices.
You only have to go back to the 2021 stimulus checks to see how the infusion of cash into the pocketbooks of everyday Americans drove up prices and contributed to rising inflation. In addition, pledging tariff revenue to pay for stimulus payments could also drive up Treasury yields. These yields drive the benchmark number for a variety of loan rates. The result could be that it would become even more difficult for small businesses to borrow money or for potential homebuyers to secure an affordable mortgage rate.
Critics of the plan to send out stimulus checks to boost the economy believe that cutting income taxes for all Americans is a better way to combat inflation. This is why stimulus checks are typically a last-ditch effort reserved for emergencies such as the 2020 COVID-19 pandemic.
Opposition by Congress and the Supreme Court
The president would also need to garner support from both Congress and the Supreme Court to push through these stimulus checks. Even those within Trump's own party will likely push back on spending billions of dollars on these dividends. This is particularly true as the national debt continues to climb. The debt hit a whopping $38 trillion in late October.
Trump would also likely encounter pushback from the Supreme Court. The majority of the justices on the highest court in the land expressed skepticism earlier this month regarding the president wanting to lean on executive emergency powers to impose his tariff plans. This means that the planned tariffs could get struck down by the Supreme Court, wiping away Trump's plans to give that revenue back to the American people.
Based on all of these potential obstacles, it is not surprising to learn that the prediction platform Polymarket places only an 11% chance that the president will be able to pass through this tariff dividend by the end of March. Economic analysts are mostly aligned in their beliefs that it would take a major plunge in the economy to justify these stimulus checks. For example, the White House could argue that sending money directly to Americans is necessary to prevent a recession.
Unless that worst-case scenario develops, investors and economists are not optimistic that the $2,000 tariff dividend checks will become a reality. In other words, do not start spending that money yet.
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