US President Donald Trump frequently boasts about the billions of dollars flowing into the US government’s coffers from sweeping tariffs, calling it historic, unmatched, and a windfall for the nation. But while he celebrates the surge in revenue, many are asking: Where is all that money going -and who is really paying the price?“We have a lot of money coming in, much more money than the country’s ever seen,” Trump said over the weekend, referring to revenue from tariffs.According to the US treasury department, the government collected nearly $30 billion in tariff revenue last month, a staggering 242% increase compared to July last year. Since April, when Trump introduced a 10% tariff on nearly all imported goods, followed by steeper levies, the government has collected a total of $100 billion. That’s three times the amount collected during the same four-month period last year.Trump has floated two main ideas for the tariff revenue: paying down the national debt or returning money to citizens via “tariff rebate checks.”“The purpose of what I’m doing is primarily to pay down debt, which will happen in very large quantity,” Trump said Tuesday. “But I think there’s also a possibility that we’re taking in so much money that we may very well make a dividend to the people of America.”So far, neither has happened.
All revenue collected by the federal government, whether from tariffs or taxes, goes into a general fund managed by the Treasury Department. This fund, sometimes referred to as “America’s checkbook,” is used to pay the government’s ongoing expenses, including Social Security and interest on debt.With the US national debt now exceeding $36 trillion, and a budget deficit of $1.4 trillion this fiscal year, the government continues to borrow to make up the difference. The added tariff revenue has helped narrow the deficit slightly, reducing the amount of new borrowing needed.“It’s not like there’s a better use for the money,” said Brett Ryan, senior US economist at Deutsche Bank, in a comment to CNN.
A bill introduced recently by Republican Senator Josh Hawley proposes distributing “tariff rebate checks” to Americans. However, economists warn that this move could backfire.“They’re the wrong policy to pursue right now,” said Ernie Tedeschi, director of economics at the Budget Lab at Yale and a former economist in the Biden White House, noting that such payouts could fuel inflation.While the government sees a financial boost, the economic pain isn’t invisible. Many businesses have absorbed the higher costs, but not all. Prices for items like appliances, toys, and electronics, which are sensitive to import costs, have been rising, according to recent government inflation data.Major retailers such as Walmart and Procter & Gamble have already issued warnings about upcoming price increases.The uncertainty around trade policy has also had broader implications. Economic surveys indicate that businesses are more cautious about hiring, leading to fewer job openings.“Tariffs are going to have a negative economic effect on the American economy,” Tedeschi said. The Yale Budget Lab estimates the tariffs could reduce US GDP by 0.5 percentage points this year and next.While tariff revenue may offer short-term gains, a slower-growing economy could offset these by reducing income and payroll tax revenue in the long run.Despite the concerns, Trump and his advisers remain optimistic. They argue that the combination of tax cuts, tariff income, and government spending will ultimately strengthen the US economy.
