In the near term, the US is entering week two of its shutdown, and that means there’s no way of legislating any move to give effect to Trump’s “dividend”.
There is nothing new about the US economy, and plenty of others, including Australia, introducing a coalface stimulus as an emergency tool to pump-prime during emergencies. Many took this measure during the global financial crisis and again during the uncertain times of COVID.
Stimulus is the “break the glass” emergency fiscal measure to avoid economic catastrophe. And the US economy isn’t in that position at this point. The good news is that fears of the US economy being badly damaged by tariff-infused spikes in inflation have not come to pass – yet.
According to Morgan Stanley chief economist Michael Gapen, US consumers have been anaesthetised to the inflation pain because businesses have, for now, taken the bullet.
Rather than being a big tax on consumers, the tariffs have become a tax on businesses or, as Gapen describes it, a tax on capital.
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He explains that in the second quarter of 2025, American companies largely absorbed the escalating cost of tariffs, offsetting higher non-labour costs with reductions in labour costs and profitability, rather than passing on the tariff costs directly to consumers.
That’s very different from what went down post-COVID, when companies hit with higher costs passed them on to consumers to usher in a period of rapid inflation. But whether US companies will continue to exercise the current level of pricing and profit constraints remains to be seen.
The US public will undoubtedly be on board with the idea of any kind of sweetener, and it will certainly keep MAGA voters happy – that is, unless the cheques turn out to be just another Trump thought bubble.
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