 |
| President Donal Trump |
Trump’s Tariff Stimulus Plan: Big Promises and Three Major Risks to the U.S. Economy
Key Points
Distributing federal stimulus checks to low- and middle-income Americans was one of the main factors behind Wall Street’s rapid rebound from the sharp but short-lived COVID-19 market crash. Eligible individuals received up to three separate stimulus payments in March 2020, December 2020, and March 2021. Two of those payments were issued during the final year of President Donald Trump’s first term.
Taking bold measures or “thinking outside the box” is nothing new for elected officials when the U.S. economy is under extreme stress.
But Trump may not be done using his political influence on the U.S. economy—or the stock market. On November 9, he floated an informal proposal for customs-funded stimulus checks, sparking national debate. That debate has largely centered on three serious flaws that could undermine the proposal entirely.
Trump Wants to Issue $2,000 Customs Stimulus Checks
Policy shifts are routine when a new president takes office. Since returning to the White House for a non-consecutive second term on January 20, Trump has overseen a series of direct and indirect changes.
For example, Trump signed the “Big, Beautiful Bill” into law on Independence Day—a tax and spending package that delivered several of his campaign promises, including short-term tax breaks (from tax years 2025 to 2028) for certain workers receiving supplemental wages and tips. It also expanded the standard deduction for most seniors over a four-year period.
Additionally, on April 2, the president unveiled his tariff and trade policy, which included a 10% universal tariff rate, along with higher “reciprocal tariffs” targeting dozens of countries with negative trade balances with the U.S. This policy remains under development as more trade deals are negotiated.
But the most sweeping change—hinging on those global tariffs—is his proposal for customs stimulus checks worth at least $2,000 for eligible recipients. Here is an excerpt from Trump’s November 9 statement on Truth Social outlining the unofficial plan:
With unemployment rising to 4.4% in September 2025—its highest level since October 2021—these stimulus checks could help revive a modest-growing U.S. economy and slow the steady climb in joblessness.
But despite appearing like a guaranteed economic boost, Trump's unofficial proposal could easily backfire in three major ways.
1. Customs Stimulus Checks Could Reignite U.S. Inflation
Looking back, the three rounds of COVID-era stimulus payments were a necessary lifeline for the U.S. economy. Those payments stabilized households during an unprecedented crisis—but they also expanded the M2 money supply at the fastest pace in American history, dating back to 1870.
When huge sums of cash flood the economy faster than the supply of goods increases, demand outpaces supply. This dynamic drives prices higher across the board.
This inflationary effect is not immediate. Although stimulus rounds were issued between March 2020 and March 2021, U.S. inflation did not peak at 9.1% until June 2022.
Inflation has been trending upward again in recent months. Trump’s tariff policies have already caused a modest rise in overall prices for goods and services. Implementing customs-funded stimulus checks would almost certainly intensify inflation significantly.
2. The Plan Risks Triggering Stagflation
The second potentially fatal flaw in Trump’s logic is that customs stimulus checks could create an unsustainable economic boost—leaving the economy vulnerable to stagflation.
In the best-case scenario, households would spend these checks on goods and services, stimulating economic activity and boosting job growth. But as seen during COVID-19, many recipients are likely to save the payments rather than spend them, especially if they fear future uncertainty.
This creates a delayed economic dilemma. Six to 18 months after distribution, demand would begin to decline because the checks are a one-time windfall, not ongoing support. That could lead to:
* an economic slowdown or recession,
* rising unemployment, and
* persistently elevated inflation.
These are the ingredients of stagflation—a nightmare scenario for the Federal Reserve.
Cutting interest rates could stimulate borrowing but worsen inflation. Raising rates would cool inflation but risk further damaging an already weakened economy.
Trump’s customs stimulus proposal could place the Fed in an impossible position.
3. Customs Stimulus Checks Would Deepen the Federal Deficit
The third major flaw is financial feasibility.
According to recent analysis by the Washington-based Tax Foundation, Trump’s tariff policies are projected to generate:
* $158.4 billion in revenue in 2025
* $207.5 billion in 2026
By contrast, the Tax Foundation estimates the cost of Trump’s stimulus proposal at $279.8 billion to $606.8 billion, depending on income-eligibility thresholds.
Even without knowing where the “high-income cutoff” lies, this analysis shows the proposal would cost far more than the revenue raised from tariffs.
The same conclusion was reached by Yale University’s Budget Lab, a nonpartisan policy research center. The lab estimates Trump’s tariffs would generate $2 trillion in revenue over the next decade—but stimulus payouts of $2,000 per person would exceed the average annual tariff intake.
Trump has promoted tariffs as a way to reduce the national debt. But diverting tariff revenue into stimulus checks would instead widen the federal deficit and worsen America’s long-term debt problems.
Post a Comment