Trump’s Tariff Dividend Plan Faces Economic Risks and Criticism

Economists told CNN that tariffs are unlikely to generate enough revenue to cover the dividend payments in the size promised by President Donald Trump. Aaron Schwartz/Bloomberg/Getty Images

New York is one of the few phenomena that surveys use to gauge the economy by the level of support for President Trump: tariff use is so extensive that it can be described as unprecedented.

The White House is again weighing a bold move aimed at restoring support for the economy and tariffs: directing tariff revenues in the form of $2,000 dividends to lower- and middle-income Americans.

Obviously, such a payout could win over a specific voter bloc and help people currently facing financial hardship. But behind the political appeal lies serious economic uncertainty, whose logic may be questionable.

According to CNN economists, tariffs clearly will not generate enough revenue to cover dividend payments of the scale promised by President Donald Trump.

If all tariff revenue goes toward dividend payments, there will be little left or even zero to reduce the overall national debt – one of the administration’s key program goals. Moreover, depending on the structure of the dividend distribution, they could contribute to an increase in the overall US debt.

If the payments were distributed among citizens, history suggests many residents would spend part or all of the amount. This could spur demand without a corresponding increase in supply and worsen the cost-of-living problem at the heart of economic discontent.

The Economy, Politics, and the Risks of Tariff Dividend Payments

“All of this is the same wrong recipe if you want to curb inflation and make goods more affordable,” said Erica York, Vice President of Federal Tax Policy at the Tax Foundation, during a phone conversation with CNN.

The risk of price increases explains why direct payments, often called stimulus checks, are typically used only in crisis situations when demand falls – such as during the 2008 financial crisis or the Covid pandemic.

Even during the pandemic, stimulus payments could contribute to inflationary overheating: the Federal Reserve Bank of St. Louis estimated that Covid-era fiscal stimulus added about 2.6 percentage points to annual inflation.

Today, the U.S. economy is unfolding in a different way: unemployment remains low, consumer spending is recovering, but unevenly. Polls and election results point to considerable dissatisfaction due to the cost of living.

For example, a Washington Post poll showed that only 37% of U.S. adults approve of Trump’s management of the economy, while 62% do not support him.

The combination of claims about the United States’ extraordinary power as the “most powerful country in the world” with calls to spend hundreds of billions on dividend payments raises questions about the real economic logic of this idea.

<pAlso note that many Americans are hoping for larger tax rebates as part of tax-and-spending legislation.

“The risk is that if you add a stimulus check to the tax cut rebate, you could overheat the economy. You could overshoot,” said Michael Pearce, Deputy Chief US Economist at Oxford Economics.

According to the Washington Post, support for the Trump administration’s tariffs remains lower than the popularity of his economic policy: about two-thirds of the population disapprove of them.

However, tariff revenues have been rising since Trump’s arrival: the government has already collected about $36 billion for the current fiscal year (as of October 1), and in total from tariffs since the start of his tenure roughly $221 billion. The administration has not yet disclosed details about dividend payments, but according to Erica York, even considering people with low incomes and a $100,000 threshold, the amounts for dividend payments could reach about $300 billion – well above the projected $217 billion in new tariff revenues for 2026.

“This is a very unrealistic idea,” York concluded.

“The risk is that if you add a stimulus check to the tax cut rebate, you could overheat the economy. You could overshoot.”

“This is ridiculous, unfair, senseless, and stupid.”