US President Donald Trump has said American households may receive a share of the money raised through tariffs, in the form of a dividend. Speaking to reporters in New Jersey before leaving his golf club, Trump stated, "There could be a distribution or a dividend to the people of our country, I would say for people that would be middle income people and lower income people, we could do a dividend."
The comment came just as new US tariffs hit dozens of trading partners. India, notably, received one of the harshest tariff packages, with a 25 percent flat rate on all goods.
Record tariff revenue, real costs
As reported by BBC, quoting official US data, by July, the US had collected $152 billion in tariff and excise revenue, compared to $78 billion during the same period last year. June alone brought in $28 billion, triple the monthly average from 2024.
Trump has repeatedly praised the results. After a weak jobs report, he posted, "The good news is that Tariffs are bringing Billions of Dollars into the USA!"
The Congressional Budget Office estimates the new tariffs could reduce US borrowing by $2.5 trillion over the next decade. But it also warned that the economy would shrink relative to where it would be without them.
India hit harder than most
India now faces a 25 percent tariff on exports to the US, higher than the 15 percent slapped on the UK and EU, the 10 percent on Japan, or the 5 percent on South Korea. Washington cited high Indian tariffs on American goods as justification.
The White House confirmed that 69 countries and the European Union will be subject to additional tariffs starting 7 August. Syria tops the list at 41 percent, followed by Laos and Myanmar at 40 percent. Iraq and Serbia will see 35 percent.
Tariffs vs taxes: A shift in strategy
Trump has long argued that tariffs could one day replace income taxes. He often references the 19th-century US economy, before income taxes existed, when tariffs were the government’s primary source of revenue.
Today, that idea is starting to look less symbolic and more real.
As reported by NYT, Joao Gomes, an economist at the University of Pennsylvania’s Wharton School, said, "I think this is addictive. I think a source of revenue is very hard to turn away from when the debt and deficit are what they are."
But the impact on ordinary Americans is becoming harder to ignore. Lower-income households spend a greater share of their income on goods now facing import taxes, which effectively makes the tariffs a regressive form of taxation.
Prices are rising, slowly but surely
Inflation in the US rose to 2.7 percent in June, up from 2.4 percent in May. Stockpiles of imported goods had kept prices in check earlier in the year. That cushion is thinning.
As reported by BBC, researchers at Harvard University’s Pricing Lab, tracking price data from four major US retailers, found that tariff-affected goods and imported items are increasing in cost faster than domestic alternatives.
Appliances, electronics, toys, and books are among the categories where price increases are becoming more noticeable.
The trade deficit is still growing
One of Trump’s main arguments for imposing tariffs was to shrink the trade deficit by reducing imports and boosting US exports.
But so far, the opposite has happened.
Importers rushed to stockpile goods before new duties kicked in. In March, the US goods trade deficit hit a record $162 billion. It dropped to $86 billion in June, but economists say that’s only temporary.
Structural issues in the US economy, such as spending outpacing production are the bigger drivers of the deficit, not just trade policy.
China sends less to the US, more to everyone else
Tariffs on Chinese goods once reached 145 percent. They’re now around 30 percent, but the impact has already been felt.
In the first six months of 2025, Chinese exports to the US fell 11 percent compared to the same period last year. But China quickly found new customers. Exports to India rose 14 percent, to the EU by 7 percent, and to the UK by 8 percent.
A 13 percent increase in exports to Southeast Asia has raised US concerns over "tariff jumping", when Chinese firms route goods through other countries to avoid US tariffs.
More trade deals, but not with the US
While the US has escalated trade tensions, other countries have moved in the opposite direction.
India and the UK signed a trade deal after three years of talks. The EU is pursuing an agreement with Indonesia. Canada is eyeing ASEAN.
Even within Latin America, new partnerships are forming. The European Free Trade Association — Norway, Iceland, Switzerland, and Liechtenstein recently struck a deal with Mercosur countries.
China, meanwhile, has stepped up its trade with Brazil, importing over 10 million tonnes of soybeans in June alone, compared to just 1.6 million tonnes from the US.
Tariff money, but at what price?
Trump has hinted that some of the revenue might be used to pay down debt or fund rebates.
"We have so much money coming in, we're thinking about a little rebate, but the big thing we want to do is pay down debt," he said.
Senator Josh Hawley has proposed sending $600 to many Americans. Democrats, too, are considering using the funds for social programmes.
But there are political risks. Reversing tariffs would likely require Congress to replace the revenue with a new tax, a move few lawmakers are eager to make.
As reported by NYT, Ernie Tedeschi, director of economics at the Yale Budget Lab, said, "Is there a better way to raise that amount of revenue? The economic answer is: Yes, there is a better way, there are more efficient ways. But it's really a political question."
According to NYT, Alex Jacquez, a former Biden official, echoed that sentiment, "This is clearly not an efficient way to gather revenue. And I don't think it would be a long-term progressive priority as a way to simply collect revenue."
Whether Trump’s tariff push proves popular or not, its financial impact is already shaping future policy debates.
As Tyson Brody, a Democratic strategist, put it, "That's a hefty chunk of change. The way that Democrats are starting to think about it is not that 'these will be impossible to withdraw.' It's: 'Oh, look, there's now going to be a large pot of money to use and reprogram.'"
But if tariffs keep raising prices and weakening consumer demand, that pot of money could come with a heavy cost.
Source Name : Economic Times