the truth edit: what tariffs really do — and why the rebate math falls apart
as the 2025 cycle heats up, tariffs have become the political cure-all of the moment: a way to punish foreign competitors, reward american families, and rebalance a system many feel is leaving them behind. the rhetoric is bold. the economics are far more stubborn.
this is what we actually know — from the data, not the slogans.
tariffs raise prices here, not abroad
it sounds intuitive to say tariffs make “other countries pay.” but every major economic study over the last decade — and the federal reserve bank of st. louis’ 2025 analysis — shows the opposite: tariffs are paid by americans.
the st. louis fed estimates that the most recent round of tariffs accounts for a meaningful portion of current inflation, contributing to the cost increases families feel on imported goods. imported fruit, cars, electronics, building materials — anything with a global supply chain — becomes more expensive the moment tariffs rise.
this isn’t political interpretation. it’s how tariffs work.
the $2,000 rebate promise doesn’t add up
the proposal circulating in washington is simple:
raise tariffs → generate revenue → send every american a $2,000 check.
the problem is that tariff revenue is one of the most volatile and unreliable sources of federal income. it depends on how much americans import, how foreign governments retaliate, whether supply chains shift, how currency values move, and how quickly companies adjust.
historically, even under aggressive tariff regimes, revenue has come in far below the hundreds of billions required to fund universal rebate checks.
and as economists note, the more tariffs disrupt trade, the less revenue they generate going forward. the system cannibalizes itself.
tariffs hit small and mid-sized businesses first and hardest
in political speeches, companies are told to simply “move production.” in reality, supply chains take years to rebuild.
many small and mid-sized businesses rely on specialized inputs from overseas — parts, components, packaging, raw materials — that cannot be swapped out in a single quarter. when tariffs rise suddenly, these firms face three choices, all bad:
raise prices
absorb losses
freeze hiring and investment
economic think tanks describe this as policy-induced paralysis: companies spend more time navigating the rules than building, hiring, or innovating. productivity falls. uncertainty rises. that uncertainty becomes its own tax.
the hidden fiscal trade-off
tariffs may raise some revenue, but they also slow trade and reduce output in other parts of the economy. that means:
corporate tax receipts fall
income tax receipts fall
consumer spending softens
so while tariffs bring money in one door, money leaks out the other. the net effect is often smaller than the headline projections. this is why economists consistently warn that tariffs are a weak and unstable fiscal tool.
the bureaucratic loop: raising prices just to refund them later
even if the government could generate enough tariff revenue to write every household a check, the process itself is inefficient:
tariffs raise prices upfront
americans pay more
government collects that extra money
bureaucracy processes it
eventually, checks go out
it is one of the most roundabout ways to deliver relief.
economists across the ideological spectrum argue a simpler alternative: reduce upfront costs, rather than inflate them only to redistribute the difference.
the bottom line
tariffs are not a magic engine of revenue. they are a consumer tax with wide-ranging effects — higher prices, supply-chain strain, business uncertainty, and a fiscal picture that doesn’t support the promises being attached to it.
families feel the cost of living in real time. businesses feel the friction. and the math behind the boldest tariff promises doesn’t survive contact with basic economics.
in a year defined by economic anxiety, clarity matters. and clarity starts with understanding what tariffs actually do — not what we’d like them to do.
