Official White House Photo by Molly Riley
- Trump said he will use tariff revenue to send $2,000 checks to Americans.
- While a welcome short-term infusion for cash-strapped Americans, it could cost them in the long run.
- The combination of tariffs and a cash injection into the economy could drive up inflation.
Most Americans would probably welcome an unexpected $2,000 infusion to their bank accounts, courtesy of their federal government.
It might, however, be too good to be true.
President Donald Trump said Saturday in a Truth Social post that the government would use revenue from tariffs to send the cash to "everyone" except "high-income people."
It's not the first time the president has floated this idea. He dangled the prospect of sending checks to Americans in fundraising emails over the summer.
The idea is reminiscent of the pandemic-era relief checks, when the government sent three rounds of payments directly to eligible Americans totaling over $800 billion.
Like those pandemic checks, however, a new round of tariff dividend payments, while offering some short-term gain, could ultimately cause long-term pain for the average consumer.
Giving consumers more cash to spend creates more demand for goods, which can lead to higher prices. The tariffs themselves can also lead to higher prices as businesses pass the higher cost of imports on to their customers.
All of this could throw a wrench in the Federal Reserve's plan to keep cutting interest rates, and could eventually lead to rate hikes if inflation runs persistently hot. That could hurt American wallets over the long run and erase any gains they receive from a one-time check as the cost of consumer goods, securing loans, and buying a house increases.
Trump's idea to redistribute tariff revenue to Americans comes at a time when consumers, while seeing some relief, are still struggling with living costs after years of high inflation. Prices for everything, from groceries to rent, have increased in recent years. The president largely defeated former President Joe Biden on a promise to lower those prices, a message that resonated with struggling Americans.
For Trump, the tariffs serve as a catch-all solution to address multiple problems. Beyond paying down the debt and putting cash in people's pockets, his administration has also argued before the Supreme Court, which is now weighing the legality of the sweeping tariffs, that they are meant to provide leverage for the US government in its trade negotiations with foreign powers.
Sending $2,000 checks to hundreds of millions of Americans, however, would put a major dent in the Trump administration's ability to resolve the debt crisis.
Ultimately, even if Trump is serious about the payments, they would likely need approval from a Congress that is deeply divided. The government has been shut down now for 40 straight days with no end in sight, forcing hundreds of thousands of federal employees to go without pay.
So, probably best not to count on that $2,000 infusion anytime soon, or ever.