“Those who oppose tariffs are misguided! We are now the wealthiest, most respected country globally, enjoying minimal inflation and a record stock market. 401(k)s are at an all-time high, and we’re bringing in trillions of dollars while starting to tackle our monumental $37 trillion debt. There’s unprecedented investment in the U.S., with factories springing up everywhere. We will distribute at least $2,000 to everyone (excluding high earners)!”
– President Donald J. Trump, November 9, 2025, TruthSocial
The Allure of Free Money
Politics often feels like a sordid game. To gain office, politicians frequently make unattainable promises, and once in power, they scramble to appear as if they are fulfilling these commitments.
One appealing strategy is the distribution of “free money” to the public, often through spending programs or tax credits. The aim is to guide money towards favored sectors of the economy, such as defense or energy.
Sometimes, politicians go a step further by sending checks directly to citizens that exceed standard welfare or Social Security payments. Such instances include the rebate checks during George W. Bush’s presidency and the stimulus checks issued during the pandemic.
Recently, Washington announced a “tariff dividend” for American citizens, framing a harmful tax as a potential economic benefit.
President Trump’s plan to disseminate funds generated from U.S. tariffs is touted as a windfall from foreign entities. He proposes sending out $2,000 checks around July 2026, conveniently timed just before the mid-term elections. Moreover, he claims this move will somehow help alleviate the national debt.
This scenario illustrates the “seen and unseen” fallacy often overlooked in economic discussions. While billions flow into the Treasury from tariff revenues, we are led to believe this represents newfound wealth ready for distribution. This is the “seen.”
The “unseen” aspect is the negative consequences of generating this revenue through tariffs and the repercussions of injecting these funds back into the economy through direct payments.
Impact on American Consumers
It’s crucial to understand that tariffs do not exclusively target foreign nations—they essentially act as a tax on the very citizens who impose them.
Take, for example, the tariff on imported washing machines. While the importer initially pays this tax to the government, they must subsequently pass the additional costs to consumers, resulting in higher retail prices.
As a result, the U.S. consumer ultimately bears the brunt of this tax, leading to inflated prices for essential goods. This burden disproportionately affects low-income families, who allocate a larger portion of their income towards necessities.
In fiscal year 2025, customs duties amounted to $195 billion. Projections suggest this could rise to approximately $300 billion in the following year. Nevertheless, the revenue collected through tariffs is not a “dividend” from nations like China or Mexico; it is essentially money taken from American consumers and producers.
By inflating costs for materials and finished goods, tariffs diminish the competitiveness of American industries and lower the real wages of consumers.
Reveling in this revenue essentially celebrates a self-imposed decline in national purchasing power.
Consequences of Protectionism
In addition to raising prices, tariffs disrupt the natural economic flow. They serve as tools for central planners aiming to misdirect capital and labor towards sectors that would not otherwise thrive without protection.
These protectionist policies aim to shield domestic jobs in high-cost, inefficient industries from competition. However, resources are finite, and keeping one inefficient sector operational inevitably diverts talent and capital away from more productive areas.
For instance, while 1,000 jobs in the steel industry may be safeguarded, 5,000 jobs could be lost in sectors reliant on steel—like construction or manufacturing—due to inflated material costs, rendering their products less competitive both domestically and internationally.
Ultimately, tariffs drain wealth rather than create it. They make the nation poorer by rewarding inefficiency and punishing productivity. The notion that economic prosperity can come from deliberately choosing to pay higher prices for goods—rather than purchasing them at the lowest available cost—is fundamentally flawed and has been disproven for centuries.
Furthermore, the proposed “dividend” presents its own set of absurdities. The Committee for a Responsible Federal Budget estimates that this initiative could incur costs of $600 billion—double the anticipated tariff revenue for fiscal year 2026.
If the distribution were aligned with the revenue amount, say $300 billion, the government would simply be recycling money collected from American citizens. In this case, there’s no overall gain.
The tariffs’ harmful impact on trade and production remains intact, keeping the cost of goods high, while the overall economy trails behind its potential under free trade.
However, the disparity is even starker, as the payout is projected to reach $600 billion. This shortfall means the government must borrow an additional $300 billion.
The portrayal of reducing debt while simultaneously proposing a $600 billion program based on just $300 billion in revenue is fundamentally contradictory.
The Alluring Offer of Free Money
Channeling $600 billion into the economy through government-backed stimulus checks, even if partially funded by tariffs, may ironically exacerbate the inflation problem that these checks aim to combat.
Rising living costs are a major concern for citizens, leading many to seek additional funds. But what causes these costs to surge?
It boils down to too much money competing for too few goods.
Tariffs restrict the supply of goods by penalizing imports, distorting domestic production, while the dividend checks flood the market with new purchasing power (often borrowed).
This scenario limits the availability of goods while inflating demand, ultimately promising relief while exacerbating the inflation issues already haunting consumers.
In essence, the proposed tariff dividend is not a genuine dividend at all; it is merely a refund of a damaging tax, and part of this refund is dependent on borrowed funds.
Ultimately, expecting to receive something for nothing is a fallacy. A nation’s wealth is derived from production, efficiency, and the division of labor best realized through free exchanges. In contrast, tariffs erode wealth.
Returning collected tariff revenues merely redistributes a net loss, further financed by mounting debt and currency devaluation.
So, why proceed with this plan?
As with many government initiatives, the answer lies in politics. Tariff dividend checks resonate well politically, and Trump excels in this arena.
The allure of free money is simply too enticing for many Americans. In a democratic landscape, where popular sentiment holds sway, that can be all that matters.
[Editor’s note: Join the Economic Prism mailing list and receive a complimentary copy of an important special report titled, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” To explore a special trial deal for MN Gordon’s Wealth Prism Letter, click here.]
Sincerely,
MN Gordon
for Economic Prism
Return from The Irresistible Promise of Free Money to Economic Prism
