Cryptocurrency markets experienced a notable uptick following remarks from former U.S. President Donald Trump regarding a proposed tariff dividend. In a post on Truth Social, Trump announced that many Americans could expect to receive a direct payment of “at least” $2,000, excluding high-income individuals. He attributed this potential financial boon to the United States producing “trillions of dollars” in tariffs, suggesting that the funds would both aid in reducing the national debt, currently standing at $37 trillion, and also provide the dividend payout.
This announcement triggered a rally in cryptocurrency prices. Bitcoin surged by 1.93% to trade above $103,000, while Ethereum saw a notable increase of 4.75%, surpassing $3,500. Solana also enjoyed a boost, gaining 2.49% to exceed $160. The CoinDesk 20 index, a benchmark for the cryptocurrency market, increased by more than 1.5%. Nevertheless, this positive momentum comes after a challenging week, where the CD20 index fell nearly 15%. Despite the recent uptick, Bitcoin, for instance, remains down about 5.7% over the week, and Ethereum is down around 7.5%.
Market analysts suggest that the increase in cryptocurrency prices may reflect traders’ expectations of elevated consumer spending and potential inflows into the crypto market once the proposed funds reach individuals. However, some critical voices cast doubt on the feasibility and timing of this tariff dividend.
Experts emphasize that the plan to distribute such a dividend requires action from Congress, as the President does not possess unilateral authority over federal spending decisions. Andy Constan, CEO and CIO of Damped Spring Advisors, noted that the current legislative climate suggests that rapid action from Congress on this matter is unlikely. Furthermore, there are ongoing debates and legal challenges regarding Trump’s tariffs, complicating the prospect of swift legislative approval.
In addition, tax and budget specialists have raised concerns about the existing tariff revenue. According to Erica York, a vice president of Federal Tax Policy, the revenue generated thus far from tariffs does not support the proposed dividend expenditures. York pointed out that a proposal for a $2,000 dividend, if it were to include adults earning under $100,000, would amount to nearly $300 billion in total payouts. However, the revenue accumulated from tariffs has reached only about $120 billion, which falls significantly short of coverage for such a large distribution.
York further explained that after considering the broader economic ramifications of tariff revenue—which effectively offsets about 24 cents of income and payroll tax collections—the actual net revenue from tariffs is closer to $90 billion, revealing substantial challenges in funding the proposed dividend purely from tariff collections.
Overall, while Trump’s announcement has energized the cryptocurrency market in the short term, the long-term viability of the proposed tariff dividend faces significant legislative and fiscal hurdles.
