Potential tariff rebate checks might seem appealing, but they could potentially pose significant risks
The American Worker Rebate Act, proposed by Sen. Josh Hawley last week, aims to redistribute tariff revenue to lower and middle-income Americans in the form of rebate checks. If passed, this bill could amount to a significant cash injection for families, with at least $600 per adult and dependent child promised.
However, the proposal has sparked concern among deficit hawks, who fear that redirecting a chunk of the tariff revenue could undermine the effort to reduce the national debt. The tariff revenue, which has seen a significant increase in recent months, is a major source of income for the federal government. In July alone, the United States collected almost $30 billion in tariff revenue, which is 242% more than the same month last year. Since April, tariff revenue has totaled about $200 billion, triple the same period of 2024.
The goal of President Trump remains in place to use tariff revenue to ease massive budget deficits. However, the President has expressed openness to using tariff revenue for rebate checks to taxpayers. If tariff revenue surpasses forecasts, the Hawley bill allows for even bigger rebate checks to get delivered.
Experts caution that such a policy could potentially lead to increased inflation in the U.S. economy. The increased consumer spending could push prices up, worsening inflationary pressures, especially if supply chains remain disrupted or tariffs continue to raise costs. The CARES Act stimulus checks during the COVID-19 pandemic encouraged spending in a period of constrained supply, contributing to raising inflation by up to 3 percentage points.
Moreover, some companies have absorbed higher tariff costs so far, but as tariffs continue or increase, these costs may eventually be passed on in prices, further complicating inflation dynamics. The timing and structure of such rebates, often requiring congressional approval, also affect their inflationary impact.
The US stock market is at or near all-time highs, but David Kotok, co-founder of Cumberland Advisors, warns that layering rebate checks on top of tariffs risks causing a more widespread and lasting inflation increase.
In summary, while tariff rebate checks might offer short-term financial relief for some consumers, the overall effect could be inflationary by increasing demand amid persistent supply and tariff-related cost pressures. It's a delicate balance between providing relief and managing the economic consequences.
- The American Worker Rebate Act, if passed, could impact not only the finance and business sectors through potential tariff revenue redistribution, but also the overall politics and general-news landscape, as this policy could lead to inflationary pressures and economic consequences.
- Concurrently, the proposed tariff rebate checks, while intended to provide financial aid to lower and middle-income Americans, have the potential to impact the economy, particularly in terms of inflation, as increased demand may exacerbate persistent supply and tariff-related cost pressures.
