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The Best Way to Provide Relief Is to Repeal Tariffs, Not Offer Tariff
Rebate Checks
July 31, 20254 min readBy: Alex Durante

As US businesses and consumers face higher costs of goods due to the Trump administration’s tariff policies, Senator Josh Hawley (R-MO) has introduced
the American Worker Rebate Act (AWRA) to rebate tariff
revenue to American households to provide financial relief. The proposal
takes a similar approach to the stimulus checks issued during the COVID-19 pandemic. However, a better way to provide relief would be to simply repeal
the tariffs altogether.
Details of the Proposal

The proposed tariff rebate checks would function similarly to the economic impact payments, colloquially referred to as the COVID-19 stimulus checks, passed in 2020 and 2021. The first round of those payments offered
households up to $1,200 per filer, with a smaller amount for qualifying dependents, phasing out at 5 percent when incomes exceeded $75,000/$150,000
for single/joint filers.

The AWRA would apply the same thresholds and phaseout to the tariff rebate, offering up to a $600 tax
credit per filer and qualifying dependent.

The rebate credit could be claimed in advance of filing and could also
increase if tariff revenue continues to climb. The tariffs have raised
about $150 billion in revenue so far this year, and will likely raise more
if the reciprocal tariffs go into effect on August 1 as scheduled.
Rebate Proposal Would Add to US Debt and Risk Inflation

While tariffs have undoubtedly raised costs for American firms and consumers—since Americans and not foreigners ultimately pay the
tariff—rebating the revenue to consumers would be fiscally irresponsible
and also risk increasing inflation. Tariffs are a poor way to raise revenue generally, but the revenue that is collected should be used for deficit reduction rather than rebates.

Tariffs are not an efficient way to raise revenue because imports fall as tariffs increase, eventually reducing the revenue that can be collected
when those rates become punitively high. Their revenue-raising potential
falls further when accounting for their negative impacts on economic
growth, as tariffs impose costs on businesses and consumers.

However, to the extent that tariffs do raise some revenue, with the US
running persistent deficits and the cost of servicing the debt becoming
more expensive in recent years due to high interest rates, it would be prudential to use that revenue for deficit reduction rather than rebates.

The recently passed One Big Beautiful Bill Act (OBBBA) will also increase deficits further over the next 10 years—by $3.8 trillion on a dynamic
basis, including interest costs.

The tariff rebate becomes even less defensible when considering that the current economy does not present the need for additional economic stimulus.
GDP grew at 3 percent in the second quarter, and the unemployment rate in
June held steady at 4.1 percent. With inflation still hovering around 3 percent, a tariff rebate could risk pushing that number higher, although
this would depend on how the Federal Reserve responds. If the Federal
Reserve were to raise interest rates, this would offset the inflationary
impact of the tariff rebate but increase the interest costs for the
government even more.
Better Ways to Promote US Economic Growth

Replacing tariffs with spending cuts and other deficit-reducing tax
reforms, such as a broad-based consumption tax, would help address the burgeoning US debt, while reforms like a flat individual income tax
combined with a distributed profits tax could boost both government coffers
and long-run wage growth. Policies that address our national debt and
promote US economic growth are available, if policymakers are willing.
Big Picture

Both the Trump administration and Senator Hawley have been reluctant to acknowledge that the tariffs have harmed American households, and have
framed a rebate as sharing the “wealth” that the tariffs have allegedly generated. This is misguided. Policymakers should recognize the benefits of free trade and that tariffs are a poor way to raise government revenue. If
they want to give taxpayers relief from the tariffs, the most effective solution is also the simplest: repeal the tariffs altogether.

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