FREE international trade is clearly the driving force behind the unprecedented global economic growth we have witnessed in the last five decades. But United States President Donald Trump’s policy of enhancing tariffs on imports from countries with trade surpluses is damaging and against the very principles that have fuelled this growth.
It is true that the US faces a huge trade deficit with several countries, including China, India, Japan, Vietnam, Canada and member states of the European Union.
That Trump wants to rebalance the trade with these countries is the reason behind his decision to impose higher tariffs, which he announced earlier this year. However, imposing higher tariffs on imports leads to higher inflation, which, in turn, harms the US economy, and politically undermines the administration and the Republican Party.
The Trump administration has now realised that tariffs are causing higher inflation. Persistent inflation has delayed interest rate downward cuts by the US Federal Reserve Board, causing additional economic strain.
In order to offset the impact of rising prices, Trump has now come up with an idea of giving $2,000 as ‘tariff dividend’ to all American citizens having an annual income less than $100,000. The estimated cost to the US of proposed tariffs dividend will be around $300 billion.
The financial and economic impact of enhancing tariffs on imports and then compensating the American people with tariff dividend to counter inflation is just about nothing. In other words, the idea of tariff dividend is practically tantamount to a U-turn on Trump’s tariff policy.
Ejaz Ahmad Magoon
Doha, Qatar
Published in Dawn, December 20th, 2025
