President Donald Trump Wants to Give Low- and Middle-Income Americans a $2,000 Tariff Stimulus Check — but It Would Come With Unintended Consequences
Despite numerous policy changes under President Trump and his administration, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite are all rising to record highs in 2025.
In a post on Truth Social, President Trump outlined an informal plan to provide taxpayers (except high-income earners) with a stimulus payment of at least $2,000 funded by tariffs.
The short-term benefits of Donald Trump’s proposal would outweigh the damage it could do to the US economy.
When the stock market crosses the 2025 finish line in less than seven weeks, we’ll likely look back on another extraordinary year for Wall Street. widely followed S&P 500(SNPINDEX: ^GSPC)ageless Dow Jones Industrial Average(INDIKS: ^DJI)and stock-weighted growth Nasdaq Composite(NASDAQINDEX: ^IXIC)all reached multiple all-time highs this year.
What makes these astounding gains even more impressive is that they occurred amidst a modestly rising unemployment rate; inflationand officially ended on November 12, making it the longest federal government shutdown in history.
However, President Donald Trump may not be able to use his policy influence on the US economy and stock markets.
President Trump makes statements. Image source: Official White House Photo: Shealah Craighead, courtesy of the National Archives.
Last week, the president rolled out an informal tariff stimulus check proposal that had some taxpayers buzzing with excitement on social media message boards. But what Donald Trump may not realize is that his potential plan to put more money in the pockets of American citizens will have many unintended consequences.
President Trump and his administration have made some meaningful changes since taking office for his second non-consecutive term. For example, the Social Security Administration has been weakened in the wake of layoffs, and the clawback rate for Social Security overpayments has been increased to 50% from 10% during Joe Biden’s presidency.
Trump also oversaw passage of the “big, beautiful bill,” his flagship tax and spending bill. This law made permanent the individual tax brackets under Trump’s previous tax and spending law, the Tax Cuts and Jobs Act. It also introduced some short-term tax relief for select workers who receive overtime pay and tips.
But the president’s most profound sign may be his tariffs and trade policy. In early April, he announced a broad global tariff rate of 10% and would impose higher “reciprocal tariffs” on dozens of countries with negative trade imbalances with the United States.
Now President Trump aims to put money directly into the hands of Americans through tariff stimulus checks. The following post from social media platform
The thesis behind the tariff stimulus check is simple: It puts money into the public’s pockets, and that money will likely flow to American businesses. This should support economic activity and potentially support the recently weakened job market. We have seen similar tactics implemented in the form of fiscal stimulus checks from the federal government during the COVID-19 pandemic.
While the prospect of most taxpayers receiving up to $2,000 sounds attractive on paper, this (as of now) unofficial offer comes with some potentially dangerous consequences.
Image source: Getty Images.
For starters, it’s unclear whether enough tariff revenue would be brought in to cover the president’s proposal to pay “at least $2,000 per person” to qualifying individuals.
While we don’t yet know the determining factors of this relaxed proposal, the U.S. government’s total tariff revenue in fiscal year 2025 was approximately $195 billion (fiscal year ends September 30). While tariffs are only expected to increase by around $200 billion annually for the federal government over the next decade, the cost of paying for this incentive could be more than the tariff revenue collected in a given year, according to an analysis by the Yale Budget Lab.
The second issue that may be most concerning is the potential for tariff incentive checks to reignite the current rate of inflation. The rapid increase in the M2 money supply during the COVID-19 pandemic caused the current inflation rate to rise to 9.1% in October 2022, a four-decade high.
A study published in January 2023 on the Federal Reserve Bank of St. Louis website (“Supply-Demand Imbalance During the COVID-19 Pandemic; The Role of Fiscal Policy”) details the effects of COVID-19 fiscal policy on consumption and price stability. That analysis suggested that fiscal stimulus during the pandemic increased the current inflation rate by “about 2.6 percentage points.” We will likely witness similar inflationary pressures resulting from the tariff incentive control.
Another real concern if President Trump moves forward with this proposal is what happens six to 18 months after the stimulus checks are spent or set aside? This stimulus will likely provide a short-term boost to U.S. economic activity and employment, but the payoff may prove problematic.
Assuming that tariff incentive checks will increase the current rate of inflation (which is already happening in Trump’s tariff and trade policy), we may witness the puzzle pieces regarding stagflation falling into place. This is a scenario where inflation and unemployment rise while economic growth remains stagnant or contracts. Stagflation is a nightmare scenario for the Federal Reserve because there is no easy way to fix it.
Last but not least, Donald Trump’s tariff stimulus check overlooks the elephant in the room: America’s ballooning national debt. It is not yet clear whether tariff revenues will reduce the annual federal deficits that are driving up the U.S. national debt. If the president were to use some or all of the annually collected tariff revenue to pay stimulus, it would make the U.S. debt situation much more precarious.
While President Trump’s unofficial plan may be well-intentioned, it is likely to cause more problems in the long term than it will solve in the short term.
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