Key Takeaways
The US collected $152 billion in tariff revenue from April-July 2025, hitting a record $29 billion in July alone .
Senator Josh Hawley proposes $600/person rebate checks (up to $2,400/family) using tariff income, mimicking COVID stimulus designs .
Economists warn rebates could spike inflation by 0.4-2.6 percentage points and add to the $1.3 trillion FY2025 deficit .
Tariffs cost households $2,400/year on average, disproportionately burdening low-income families .
Alternative uses include reducing the national debt, which costs $55 billion more in interest payments this fiscal year .
Tariff Revenue Surge Reshapes Fiscal Policy Debates
The US Treasury’s tariff revenue hit an unprecedented $29 billion in July 2025, pushing the April-July total to $152 billion. This surge dwarfs historical collections and is accelerating monthly—up from $17.4 billion in April to $28 billion in June . The driver? Sweeping reciprocal tariffs enacted under Executive Order 14257, which imposed variable duties on imports from over 60 countries. Treasury Secretary Scott Bessent projects this could generate $300 billion annually, calling it a "revenue gusher" . But the windfall sparks a policy war: Should it fund consumer rebates or deficit reduction?
Table: Monthly US Tariff Revenue (2025)
Month | Revenue | Growth From Prior Month |
|---|---|---|
April | $17.4B | Baseline |
May | $23.9B | +37% |
June | $28.0B | +17% |
July | $29.0B | +4% |
White House officials claim foreign exporters bear the tariff costs. But Federal Reserve Chair Jerome Powell counters that US firms and consumers pay the bulk, noting "businesses intend to pass costs to consumers" . The Yale Budget Lab confirms this, calculating an average $2,400 annual household burden from higher prices .
Hawley’s Rebate Plan: Stimulus Checks 2.0?
Missouri Senator Josh Hawley’s American Worker Rebate Act (AWRA) aims to return tariff dollars directly to citizens. Modeled after pandemic stimulus checks, it offers:
$600 per adult and dependent child ($2,400 for a family of four)
Phaseouts starting at $75,000 (individuals) and $150,000 (joint filers)
Automatic increases if tariff revenues exceed projections .
Hawley argues, "Hard-working Americans should benefit from tariffs’ wealth return" . But critics blast the design. Tax Foundation economist Alex Durante calls rebates "fiscally irresponsible," noting they ignore tariffs’ regressive nature. Low-income households spend 77% of income on tariff-affected goods versus 31% for high earners . Worse, rebates could magnify inflation. Pandemic-era stimulus boosted inflation by 2.6 percentage points, per St. Louis Fed research . With inflation already at 3%, rebates risk reheating price pressures.
Debt Dilemma: $1.3 Trillion Deficit vs. Tariff Windfall
Tariff revenue arrives as the US grapples with a $1.3 trillion FY2025 deficit. Interest payments alone surged $55 billion this year—now the government’s second-largest expense after Social Security . The new OBBBA Act could add $3.4 trillion to debt through 2034 , making deficit reduction urgent.
Potential tariff revenue uses:
Deficit reduction: Each $100 billion applied cuts 2025’s deficit by 7.7%.
Debt servicing: Saves billions in compounding interest.
Rebates: Puts cash in pockets but risks inflation.
CBO analysis shows tariffs could conventionally reduce deficits by $2.8 trillion over a decade. However, their economic drag (0.6% lower GDP growth) offsets 17% of gains via reduced tax receipts . As Bipartisan Policy Center notes, "Tariff revenue should fund prudence, not populism" .
Economic Side Effects: Trade-Offs in Plain Sight
Tariffs’ macro impacts extend beyond revenue. The Yale Budget Lab finds:
Consumer prices: Jumped 1.8% short-term. Apparel (37%), shoes (39%), and cars (12.3%) saw steep hikes .
Jobs: Payrolls will drop by 494,000 by end-2025; unemployment rises 0.7 percentage points by 2026.
Sectors: Manufacturing grows 2.0%, but construction shrinks 3.5% and agriculture 0.9% .
"Tariffs reshuffle, don’t revive, economies," notes Yale economist Ernie Tedeschi. "You gain factory jobs but lose farm and construction work."
Globally, Canada’s GDP could contract 2.1%, while the EU grows 0.1% due to US trade deal advantages . These asymmetries complicate "free trade" rhetoric.
Inflation Risk: The Rebate Wildcard
Sending rebate checks now could ignite inflation. Here’s why:
Demand surge: Rebates add disposable income when supply chains are still adapting to tariffs.
Price-wage spiral: Firms raising prices to cover tariffs face workers demanding higher pay.
Fed response: Powell might hike rates further, increasing government borrowing costs .
The Tax Foundation calculates that rebates could add 0.4–2.6 percentage points to inflation—pushing it near 6% . By contrast, deficit reduction acts as an anti-inflationary buffer.
Table: Inflation Impact Scenarios
Policy | Short-Term Inflation Risk | Long-Term Economic Effect |
|---|---|---|
Rebate checks | High (up to +2.6pp) | Negative (higher rates) |
Deficit reduction | Low | Positive (lower rates) |
Tariff repeal | Negative (prices fall) | Positive (GDP +0.5%) |
Policy Alternatives: Beyond Rebates or Debt
Rebates and deficit reduction aren’t the only options. Viable compromises include:
Targeted aid: Limit rebates to households under $50,000 income to offset regressive tariffs.
Business tax credits: Help small firms absorb tariff costs without layoffs.
Infrastructure investment: Fund supply-chain resiliency to reduce import dependence.
The NBER suggests growth policies like high-skilled immigration reform or permitting reforms could boost GDP enough to offset tariff drags . But Hawley’s bill ignores such nuance. As the Tax Foundation argues, "Repealing tariffs beats rebating them" . Eliminating tariffs would save households $2,000/year without fiscal side effects.
Political Showdown: Trump’s Ambivalence Meets GOP Resistance
President Trump voices conflicting priorities. He told reporters, "We’re thinking about a little rebate, but the big thing is paying down debt" . This ambiguity splits Republicans:
Pro-rebate: Hawley frames checks as "Trump dividends" aiding workers .
Fiscal hawks: Push revenue toward deficits, noting H.R.1’s $3.4 trillion debt impact .
Democrats largely oppose both tariffs and rebates. Representative Pramila Jayapal (D-WA) calls the cycle "taxing consumers to fund political gimmicks" . With Senate GOP leaders cold toward Hawley’s bill, its odds appear slim unless Trump forces action .
What’s Next: Tariffs, Trade, and Trade-Offs
August 7 marks a pivot point: Reciprocal tariffs take effect on dozens of countries. White House Economic Council chief Kevin Hassett confirms, "These rates are final deals" . Revenue will likely climb, but so will consumer costs.
Three scenarios loom:
Status quo: Tariffs stay, revenue funds general spending (not rebates/debt).
Rebates: Checks flow mid-2026 if Hawley’s bill passes, risking inflation.
Repeal: Unlikely unless economic pain forces retreat.
The Yale Budget Lab advises monitoring unemployment and inflation data monthly. If job losses exceed 500,000 or inflation hits 5%, expect policy reversals . For now, the windfall remains a tempting—and contentious—tool.
Frequently Asked Questions
Who actually pays US tariffs?
American importers pay duties at the border. But 76-92% gets passed to consumers via higher prices, per Federal Reserve and Yale data .
Will Americans receive tariff rebate checks?
Unlikely soon. Senator Hawley’s bill lacks GOP support, and Trump prioritizes debt reduction. Odds are below 25% .
Do tariffs help the US economy?
Mixed results. They boost manufacturing output by 2.0% but shrink the overall economy by 0.4% and raise unemployment. Net effect is negative .
Why would rebates cause inflation?
Putting cash in hands without increasing goods supply lets demand outpace production. Pandemic stimulus showed this can spike prices by 2.6 percentage points .
Are tariffs a tax on low-income families?
Yes. They cost the poorest households 3.4% of income versus 1.0% for the rich, as basics like clothes and food face steep hikes .