Economists tell CNN that tariffs are unlikely to generate enough revenue to pay for dividend payments the size President Donald Trump has promised. Aaron Schwartz/Bloomberg/Getty ImagesNew York —
One of the only things that polls worse than the Trump economy is the president’s almost unprecedented use of tariffs.
The White House, in an apparent bid to turn sentiment around on both the economy and tariffs, is once again floating a bold idea: redeploying tariff revenue to fund $2,000 dividend checks to lower- and middle-income Americans.
It’s easy to see how these tariff rebate payments could win over skeptical voters and help people who are struggling financially. Yet beyond the political appeal, it’s hard to make sense of the economic logic behind this idea.
Economists tell CNN that tariffs are unlikely to generate enough revenue to pay for dividend payments the size President Donald Trump has promised.
If all the tariff revenue is blown on dividend payments, there would be nothing left to chip away at the $38 trillion national debt – one of Trump’s other promises. Depending on how they are structured, dividend payments could even add to America’s mountain of debt.
If rebate checks are distributed, history shows that many Americans would likely spend some or all of their cash from Uncle Sam. This would increase demand without boosting supply, which could worsen the cost-of-living problem at the heart of Americans’ frustrations with the economy.
“All of this is exactly the wrong recipe if you want to get inflation under control and make things feel more affordable,” Erica York, vice president of federal tax policy at the Tax Foundation, told CNN in a phone interview.
Break-the-glass moment?
The risk of raising prices is why direct payments, typically called stimulus checks, are normally reserved for emergencies when demand is low – such as during the 2008 financial crisis or the Covid pandemic.
Even during the pandemic, stimulus checks may have been partly to blame for the ensuing inflation crisis. The St. Louis Federal Reserve estimated that US fiscal stimulus during Covid contributed 2.6 percentage points to annual inflation.
The New York Stock Exchange on Monday. Polls and recent election results underscore how upset many Americans are with the cost of living. Michael Nagle/Bloomberg/Getty Images
Of course, the US economy today is in a very different place: Unemployment is relatively low. Consumer spending has been resilient, albeit unequal.
Polls as well as recent election results underscore how upset many Americans are with the cost of living. For example, a recent Washington Post poll found that only 37% of US adults approve of Trump’s handling of the economy. Far more, 62%, disapprove.
It’s hard to square Trump’s oft-stated claim that the United States is the “hottest country anywhere in the world” with his call for spending hundreds of billions of dollars on dividend payments.
Keep in mind that many Americans are expected to receive larger tax refunds this spring due to Trump’s sweeping tax and spending cut law.
“The risk is if you add a stimulus check on top of a tax cut refund, you’re going to overheat the economy. You could overdo it,” said Michael Pearce, deputy chief US economist at Oxford Economics.
A $300 billion price tag?
Trump’s tariffs are even less popular than his handling of the economy, according to the Post poll: Roughly two-thirds disapprove.
But it’s absolutely true that tariff revenue has skyrocketed since Trump took office.
The federal government has already collected $36 billion in tariff revenue since the fiscal year started October 1, according to US Treasury Department data. That’s more than triple what was collected at this point last fiscal year.
Since Trump took office, the federal government has collected $221 billion in total tariff revenue (both preexisting tariffs and new ones).
The administration has not laid out specifics for Trump’s tariff dividend proposal. According to York of the Tax Foundation, even if children were excluded and the income cutoff was $100,000, dividend checks would cost roughly $300 billion.
That is far above the $217 billion in new tariff revenue the Tax Foundation has projected for 2026.
“It’s a very unrealistic idea,” York said.
Containers are seen at the Port of Long Beach on September 9 in Long Beach, California. Tariff revenue has skyrocketed this year since Donald Trump took office. Apu Gomes/Getty Images
‘Pointless and dumb’
York also estimated that about three-quarters of the projected tariff revenue could get derailed if the Supreme Court rules against Trump’s use of emergency powers to slap tariffs on imports.
The White House did not respond to questions from CNN about who would qualify for a tariff dividend payment, what such a program would cost, or whether the administration has analyzed the impact on inflation and the federal deficit.
However, a White House official defended the trade agenda.
“President Trump’s tariffs are resetting global commerce, securing manufacturing investments, and safeguarding our national and economic security – and they’re also raising billions in revenue for the federal government,” the official said. “The Administration is committed to putting this money to good use for the American people.”
Douglas Holtz-Eakin, who served in the administration of President George W. Bush when tax rebate checks were delivered in 2001, said the Trump idea “makes no sense.”
“There is no economic foundation to this. I doubt any of it is going to work,” said Holtz-Eakin, now president of the American Action Forum, a center-right think tank.
Justin Wolfers, economics professor at the University of Michigan, told CNN in a phone interview that it makes no sense to tax people with tariffs – and then give people the money back in the form of checks.
“This is insane, unfair, pointless and dumb,” Wolfers said. “If tariffs are making Americans poorer, the simplest and fairest way to stop that is not to tariff.”
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