Money Distribution ≠ Bull Market? Trump’s New Policy vs. Pandemic Stimulus, Key Differences Hidden Market Answers

The $2,000 “Tariff Dividend” plan announced by Trump differs significantly from pandemic-era stimulus policies. Its impact on the economy and markets requires a comprehensive assessment based on the current environment. Below is a detailed analysis based on the latest information:

1. Policy Foundations and Funding Feasibility

a. Funding Sources in Question

Trump claims tariff revenues will cover the cost of payouts, but actual data shows U.S. tariff income in the first three quarters of 2025 was only $195 billion. Covering 150 million adults at $2,000 each would require $300 billion, far exceeding current income. Even if future tariff revenue increases to $500 billion annually, it would only support a one-time payout, making long-term sustainability unlikely. Additionally, the Congressional Budget Office (CBO) estimates total tariff revenue over the next decade at approximately $3.3 trillion, far below Trump’s claimed “tens of trillions.”

b. Legality Challenges

The U.S. Supreme Court held a hearing on November 5, 2025, regarding the legality of Trump’s tariff policy, with most justices questioning whether the president has the authority under the International Emergency Economic Powers Act to impose such taxes. If ruled illegal, not only would the payout plan fail, but the government might also have to refund hundreds of billions in collected taxes, potentially triggering a fiscal crisis.

c. Fiscal and Debt Pressures

The U.S. federal debt has surpassed $37.9 trillion, with annual interest payments exceeding $1 trillion. Using tariff revenue for payouts would worsen the deficit, with debt-to-GDP ratio projected to rise from 120% to 134% over ten years. Rating agencies like S&P warn that such measures could undermine fiscal sustainability and increase sovereign credit risk.

2. Economic Environment and Policy Constraints

a. Significantly Elevated Stagflation Risks

In 2025, the U.S. economy shows signs of “stagnation”: GDP growth appears robust (Q2 at 3.8%), but core demand indicators (final sales to domestic purchasers) grew only 1.2%, with weak consumption being the main factor. Inflation pressures persist, with September CPI year-over-year at 3%, core PCE remaining between 2.6%-2.9%, and unemployment expected to rise to 4.5% by year-end, indicating a “low growth, high inflation” dilemma.

b. Limited Federal Reserve Policy Space

Despite a 25 basis point rate cut to 3.75%-4.00% in October 2025, policymakers are divided on further easing. Cleveland Fed President Loretta Mester emphasized “inflation remains above target, policy should be restrictive,” while Vice Chair Jefferson noted “caution is needed after approaching neutral rates.” Market expectations for a December rate cut have fallen from 66.9% to 52.7%, making monetary policy less aligned with fiscal stimulus.

c. Dual Pressure from Tariff Policies

Trump’s tariffs have already caused consumers to bear 50%-70% of the costs. In 2025, tariffs are expected to cause $1.2 trillion in losses for global companies, with two-thirds borne by U.S. importers and households. Continued tariff hikes could further raise prices, weaken real purchasing power, and offset the short-term consumption boost from payouts.

3. Market Reactions and Historical Comparisons

a. Short-term Sentiment and Long-term Risks

Following the policy announcement, U.S. stock futures and gold prices initially rose, reflecting market expectations of consumption stimulus. However, analysts warn that high valuations (S&P 500 P/E of 25) and liquidity constraints (TGA account exceeding $1 trillion) could limit gains. Bank of America notes that if the Fed halts rate cuts, stock market corrections could significantly increase.

b. Key Differences from Pandemic Stimulus Payments

Economic Cycle Position: During the pandemic, stimulus checks were issued when the economy was in deep recession with large demand gaps; currently, the economy is overheating, and payouts could worsen supply-demand imbalances.

Policy Transmission Pathways: Pandemic stimulus checks directly converted into consumption (about 40% spent on goods), whereas tariffs’ dividends first impact corporate profits or government transfers, with lower transmission efficiency.

External Environment: Pandemic-era disruptions in global supply chains meant stimulus mainly influenced domestic inflation; today, tariff policies trigger global trade frictions, increasing imported inflation pressures.

c. Lessons from History

In 2020-2021, stimulus payments led to a savings rate soaring to 34%, followed by the highest inflation in 40 years, forcing aggressive Fed rate hikes. Currently, U.S. household savings rate has fallen to 4.1%, debt-to-income ratio is at 98%, and consumer sensitivity to short-term stimuli has decreased. Additionally, during the pandemic, corporate investment was protected by policies, but high interest rates and tariffs now suppress capital expenditure.

4. Implementation Pathways and Uncertainties

a. Legislative and Administrative Barriers

The payout plan requires congressional approval, but internal Republican concerns over deficits are rising. The Senate has passed resolutions opposing Trump’s tariff policies. Treasury Secretary Yellen hinted that dividends might be delivered via tax cuts (e.g., eliminating tip taxes), which would significantly reduce actual impact.

b. Political Dynamics and Timing

The Supreme Court is expected to rule on tariff legality by January 2026. If the ruling is unfavorable, the payout plan could be entirely derailed. With the 2026 midterm elections approaching, Trump might attempt to pre-emptively “advance” tariff revenues to fund dividends, but this could trigger legal disputes and market trust issues.

c. Alternative Policy Options

If the payout plan stalls, Trump might shift focus to expanding infrastructure investments or extending tax cuts under the “Big and Beautiful” Act. However, these policies face funding gaps and legislative hurdles, making it difficult to quickly boost market confidence.

5. Conclusion

Trump’s $2,000 “Tariff Dividend” plan faces significant flaws in legality, fiscal sustainability, and economic rationale. Its market impact may be characterized by “short-term emotional trading and long-term risk exposure.” Compared to the comprehensive easing during the pandemic, current policies must contend with stagflation, debt crises, and global trade tensions, making the “stimulus equals bull market” path unlikely. Investors should monitor key events:

- December 2025: Fed rate decisions, Supreme Court tariff ruling updates

- January 2026: Government shutdown resolution, October CPI data

- Policy alternatives: If stimulus plans fail, the pace of infrastructure or tax reform policies

In an environment of high uncertainty, defensive assets (gold, government bonds) and inflation-hedging sectors (energy, consumer staples) may offer better allocation options.