President Donald Trump's $2,000 Tariff Stimulus Check Proposal Comes With 3 Potentially Fatal Flaws

Five years ago, the American public and U.S. economy were grappling with the uncertain impacts of the COVID-19 pandemic. State-level lockdowns sent the unemployment rate screaming higher, while the iconic S&P 500 (SNPINDEX: ^GSPC), ageless Dow Jones Industrial Average (DJINDICES: ^DJI), and growth-focused Nasdaq Composite (NASDAQINDEX: ^IXIC) plummeted into respective bear markets from mid-February 2020 to mid-March 2020.

One of the primary catalysts that spurred a reversal on Wall Street after this steep but short-lived bear market was the issuance of stimulus checks from the federal government for most low- and middle-income Americans. Eligible individuals received up to three separate stimulus payments in March 2020, December 2020, and March 2021. The first two stimulus payments occurred during the final year of President Donald Trump's first term in office.

Taking extreme measures and thinking outside the box isn't uncommon for our elected officials during periods where the U.S. economy faces never-before-seen challenges.

President Trump in an Oval Office meeting. Image source: Official White House Photo by Daniel Torok.

But President Trump may not be done exerting his policy influence over the U.S. economy or stock market. On Nov. 9, he outlined an informal tariff stimulus check proposal that has America talking. Unfortunately, some of that discussion revolves around the three potentially fatal flaws this proposal would bring to the table.

President Trump wants to hand out $2,000 tariff stimulus checks

Change is commonplace when a new president takes office. Since being inaugurated for his second non-consecutive term on Jan. 20, Trump has overseen a flurry of direct and indirect changes.

For example, Donald Trump signed the "big, beautiful bill" into law on Independence Day. This tax and spending law featured a handful of the president's promises from the campaign trail, including short-term (tax year 2025 through 2028) tax breaks for select workers receiving overtime pay and tips. It also beefs up the standard deduction for most seniors over four years.

Furthermore, the president unveiled his tariff and trade policy on April 2, which featured a 10% global tariff rate, as well as higher "reciprocal tariffs" on dozens of countries deemed to have adverse trade imbalances with America. This tariff and trade policy is still evolving as trade deals are made.

But the biggest potential change to come, which builds upon the aforementioned implementation of global tariffs, is a proposed tariff stimulus check of at least $2,000 to qualifying individuals. Below is a repost of what President Trump had to say on Nov. 9 about his informal plan on his social media platform, Truth Social:

BREAKING: President Trump announces that he will be paying a "tariff dividend" of at least $2,000 per person.

Stimulus checks are officially back. pic.twitter.com/Dt4UgHVMrT

-- The Kobeissi Letter (@KobeissiLetter) November 9, 2025

Admittedly, we have very few hard details to go on, with the only certainty being that these tariff stimulus checks would exclude high earners.

With the unemployment rate rising to 4.4% in September 2025 -- its highest level since October 2021 -- tariff stimulus checks may be able to jump-start the modestly growing U.S. economy and stunt a slow but steady climb in the unemployment rate.

While this might sound like a foolproof plan to lift economic growth and hiring, Trump's as-of-now informal proposal can easily backfire in three specific ways.

1. Tariff stimulus checks can reignite the U.S. inflation rate

In hindsight, three rounds of COVID-19 stimulus payouts proved to be something of a necessary evil for the U.S. economy. Although this income was essential in helping to stabilize the economy during a period of historic uncertainty, it ultimately expanded U.S. M2 money supply at the fastest pace in history, dating back to 1870.

When cash flows into the U.S. economy at an unprecedented pace, and the supply of goods doesn't correspondingly increase, it leads to demand outpacing supply. This scenario significantly increases the price of goods and services.

Take note that this inflationary effect doesn't occur immediately. While three rounds of stimulus occurred from March 2020 through March 2021, the trailing-12-month inflation rate in the U.S. didn't peak at 9.1% until June 2022.

What makes Donald Trump's proposal of $2,000 tariff stimulus checks so dangerous is that the prevailing rate of inflation has been climbing for months. The president's tariff policies have already led to a modest uptick in collective prices for goods and services. If this informal plan were implemented, there's a reasonable probability that it would significantly increase the U.S. inflation rate.

Federal Reserve Chair Jerome Powell may be put in a tough position if Trump's tariff stimulus proposal is enacted. Image source: Official White House Photo by Daniel Torok.

2. It would open the door to stagflation

The second potential fatal flaw with the president's logic of doling out $2,000 tariff stimulus checks is that this would represent an unsustained catalyst for the U.S. economy and leave it open to stagflation.

Ideally, individuals and families would spend their tariff stimulus payout on goods and services, thereby stimulating the economy and encouraging job growth. But as we saw with COVID-19 stimulus checks, some folks are likely to hold onto their payout for a rainy day and not inject it into the U.S. economy.

The dilemma occurs anywhere from six to 18 months after these proposed payouts are issued. Since this would be a one-time/non-recurring stimulus check, demand for goods and services would soon taper off. In such a scenario, we would likely witness slowing or stagnant economic growth, a resurgence in the unemployment rate, and the possibility of the inflation rate remaining high. These are all ingredients for stagflation, which is nothing short of a nightmare scenario for the Federal Reserve.

If the nation's central bank were to lower interest rates, it would encourage borrowing but could also ignite an already climbing inflation rate. Meanwhile, increasing interest rates to curb inflation would threaten to further hurt a struggling economy and job market.

Trump's tariff stimulus check proposal, if enacted, may put the Fed between a rock and a hard place at some point in the not-too-distant future.

3. Tariff stimulus checks would further widen the federal deficit

The final of three flaws with President Trump's proposal is that the math fails to add up.

According to a recently released analysis from the Tax Foundation, a Washington, D.C.-based think tank, the president's tariff policies are estimated to generate $158.4 billion in revenue in 2025 and $207.5 billion next year. In comparison, the Tax Foundation approximates the cost of Trump's plan to be between $279.8 billion and $606.8 billion. Even though we don't know the specifics of what "high-income people" entails, this analysis suggests that Trump's proposal would cost the U.S. more than the tariff revenue collected during the year.

U.S. debt is rapidly climbing. US Public Debt Outstanding data by YCharts.

It's a similar story for the Budget Lab at Yale, a nonpartisan policy research center. The Budget Lab foresees Trump's tariffs generating $2 trillion in revenue over the next decade. However, the expense of outlaying $2,000 stimulus checks to qualifying individuals would almost certainly exceed the average annual tariff revenue forecast to be collected.

President Trump touted tariffs as a potential means to reduce U.S. national debt. But redirecting tariff revenue to stimulus checks would further widen the federal deficit and worsen our nation's long-term debt situation.

Although Donald Trump's intentions may be positive, his informal plan would potentially have dire consequences for the U.S. economy.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.