Every day, it seems like President Donald Trump can’t wait to talk about the impressive tariff revenue the US government has been racking up since he decided to hike taxes on most imported goods.
“We’re bringing in a ton of cash, more than this country has ever seen,” Trump mentioned over the weekend, discussing the influx of tariff dollars.
Indeed, the figures back him up: the Treasury Department reported that the government brought in nearly $30 billion in tariff revenue last month alone. That’s a whopping 242% increase compared to July of last year.
Since April, when he imposed a sweeping 10% tariff on nearly all products along with several other higher taxes that followed, the total amount collected from these tariffs reached $100 billion—three times what the government had gathered during the same four months last year.
But the big question on many people’s minds is: what’s happening to all this cash?
Trump has suggested two main ideas: reducing the national debt and perhaps giving out “tariff rebate checks” to American citizens.
“What I’m aiming to do is mainly reduce debt, and that’s going to be significant,” Trump explained on Tuesday. “But if we really keep collecting at this rate, we could also consider sending money back to the American people.”
As of now, neither of these plans has materialized—at least not yet. It might seem to countless Americans that all the billions coming in from tariffs—which mainly hit US businesses that import goods—are sitting around doing nothing.
However, there’s more than meets the eye here.
Where Does Tariff Revenue Go?
All money that the government gathers through taxes or tariffs goes into a general fund managed by the Treasury Department. This fund, which some call “America’s checkbook,” is used to pay government obligations, including Social Security benefits.
When revenues fall short of expenses, leading to a budget deficit, the government borrows money to cover the gap. Currently, the total debt that the government is accountable for exceeds $36 trillion, an alarming figure that worries many economists as they claim it hinders economic growth.
Just like anyone else who takes out a loan, the government has to pay interest on this debt. The more it borrows, the more it owes in interest, leaving less room for investments in public welfare, like upgrading roads.
While tariff collections don’t completely erase the $1.4 trillion budget deficit projected for the current fiscal year, they have helped shrink it. This means the government doesn’t have to borrow as much as it would without those tariffs.
“There’s no better use for that money right now,” noted Brett Ryan, a senior economist at Deutsche Bank, while talking about tariff revenue.
Will We See ‘Tariff Rebate Checks’?
If Congress decides to back Trump’s plan of redistributing tariff revenue to citizens through “rebate checks,” this could end up widening the deficit, according to Ernie Tedeschi, an economist at Yale’s Budget Lab and a former economist in the Biden administration.
“That’s not the right course of action at this moment,” he stated, suggesting such policies could lead to inflation spikes.
White House representatives did not respond to a request for comment from CNN.
Could Tariffs Eventually Come Back to Hurt Americans?
While it looks good that tariff revenue might improve the government’s finances, it’s not necessarily going to be a smooth ride for consumers.
Many businesses are managing to cope with these elevated costs without jacking up prices right now. Yet, not all companies can do this. For example, tariffs on appliances, toys, electronics, and other products have made many items pricier, as noted in recent inflation reports from the government. Major retailers like Walmart and Procter & Gamble are already warning customers that price increases are on the way.
The uncertainty surrounding tariffs has also led many businesses to delay hiring, resulting in fewer job openings, according to various economic analyses.
“Tariffs are likely to harm the US economy,” Tedeschi told CNN. The Yale Budget Lab forecasts that President Trump’s tariffs will knock half a point off the current and next year’s GDP.
This economic slowing could partially offset the revenue gains from tariffs, because if overall economic growth is stunted, then income and payroll taxes could also decline slightly.
Despite this, Trump and his administration are optimistic, arguing that the just-passed massive tax cuts combined with tariff income will ultimately rev up the US economy in the long run.
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