Earlier this week, President Trump lashed out at "people that are against tariffs."
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In a Truth Social post he promised a "dividend of at least $2000 a person (not including high income people!) will be paid to everyone" [1]. The president has also mentioned using tariff revenue to reduce the national debt, which has crossed $38 trillion.
Unfortunately for the president, the majority of Supreme Court judges appear skeptical that he had the authority to impose the tariffs, and it’s possible the administration will have to refund some or all of the revenue it has collected to American businesses. At a hearing on Nov. 5, the justices heard arguments from the Trump administration and lawyers of those challenging the tariffs.
Chief Justice John Roberts, who is considered a key vote, called the tariffs an "imposition of taxes on Americans … that has always been the core power of Congress."
He said, "It’s been suggested that the tariffs are responsible for significant reduction in our deficit. I would say that’s raising revenue domestically."
Similarly, Justice Sonia Sotomayor, said, “You want to say tariffs are not taxes, but that’s exactly what they are. They are generating money from American citizens.”
The Trump administration has touted the fact that tariffs are bringing in record revenue, but that seems to be at the heart of the question of their legality. In September, the White House said even the "left-wing Congressional Budget Office (CBO) admits President Trump’s tariffs will reduce total deficits by $4 trillion over the next decade." The CBO claims to be strictly nonpartisan.
It’s unclear at this point when we can expect a ruling. According to The New York Times, "the court typically announces its decisions by the end of June or early July, but a decision in this case could come sooner" [2].
Trimming the deficit
Although they have roiled markets, there’s no question that President Donald Trump’s trade policy actions have boosted the federal government’s customs revenues. The good news is this additional money coming in will help reduce the national deficit as well.
In January, before Trump’s tariffs were announced, the CBO had projected that customs revenues would total $80 billion in fiscal year 2025, which is close to the average of the previous five years [3].
However, as a result of the tariff hikes, the total for FY 2025 was $195 billion.
"Historically, tariff revenue has never accounted for more than about 2% of total federal government revenues in the modern era. And with the tariffs that are in place today, that could go up to 5% or perhaps even higher," said Shai Akabas, the vice president of economic policy at the Bipartisan Policy Center, to NPR [4].
Now the CBO says this means there will be a greater budgetary effect as well.
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“We project that increases in tariffs implemented during the period from January 6, 2025, to August 19 will decrease primary deficits (which exclude net outlays for interest) by $3.3 trillion if the higher tariffs persist for the 2025‒2035 period,” said the recent report from the federal agency.
When combined with the reduced need for federal borrowing, this tariff revenue will reduce federal interest costs by an additional $0.7 trillion. Ultimately, the report projected a combined total of $4 trillion in reduced deficits due to the tariff changes between now and 2035.
While these numbers look promising on the surface, there’s more at play in our complex economic system. The CBO says the changes in the tariffs will shrink the size of the U.S. economy due to reduced investment and productivity and make goods more expensive.
Ultimately, someone has to pick up the tab. In many cases, that ends up being the American consumer.
As the tariff revenue pours in, it’s also important to consider who is actually footing the bill. On paper, the importer pays tariffs when importing goods. But, in reality, businesses often try to pass these costs along to the end consumer, which in this case is American households.
How to protect your wallet from tariff impacts
Even Treasury Secretary Scott Bessent has admitted that Trump’s tariffs are being paid by American importers who can pass them off to consumers.
Some businesses have already announced their intentions to raise prices as a result of tariffs. A few notable examples include Walmart, Adidas, Home Depot, and Best Buy among others. Ultimately, these price hikes mean that American households will face higher costs for goods, putting pressure on already tight budgets.
“Trump administration policies are driving up consumers’ cost of living in four specific areas: new cars, health insurance, products for children, and cookout staples and other foods,” said the Center for American Progress [5]. The Yale Budget Lab has said the new tariffs will cost American households $1,800 on average in the short run [6].
As the effects of tariffs unfold, it’s helpful not to panic buy. Although tempting to stockpile your favorite imported goods, that can wreak havoc on your budget. Instead, stick to your regular cadence of purchases.
When you do make a purchase, consider looking for coupons or waiting for a sale. If you want to avoid a tariff-induced price hike, purchasing a domestic product could be an option in some cases. For example, if you need a new piece of furniture, consider looking at domestically made options or even scouting out a second-hand beauty to avoid tariff price spikes. Alternatively, seek out discounts and sales to potentially save on the exact item you have in mind.
If you’ve been holding off on a major purchase that’s coming down the pipeline, moving forward with it sooner rather than later could make sense. For example, if your fridge is on the fritz, replacing it now could help you avoid potentially higher prices later. But since no one can predict the future, it’s best to avoid going on a major shopping spree with the express intention of avoiding future tariff costs.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
@realDonaldTrump/Truth Social (1); The New York Times (2); CBO (3); NPR (4); Center for American Progress (5); Yale Budget Lab (6)
This article originally appeared on Moneywise.com under the title: Trump tariffs ‘imposition’ on Americans, says US chief justice. Why raising revenue ‘domestically’ may make them illegal
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.