In a bold move, U.S. President-elect Donald Trump announced plans to establish a new government agency, the External Revenue Service (ERS), aimed at collecting tariffs, duties, and all revenue from foreign sources. This initiative comes as Trump prepares to implement new import tariffs following his inauguration next week.
Trump took to social media to share the news, declaring that this new agency will be launched on January 20, the day he officially begins his second term. The President-elect emphasized that Americans have long been burdened by high taxes imposed by the Internal Revenue Service (IRS), stating that it was time for foreign entities benefiting from U.S. trade to contribute their fair share.
A Shift in Trade Policy
In his post, Trump criticized what he described as weak trade agreements that have allowed the global economy to thrive at the expense of American taxpayers. He pledged to change this dynamic, declaring that foreign traders and corporations will no longer escape paying their fair share. This plan includes charging foreign entities profiting from U.S. markets through tariffs and duties, a move aimed at improving U.S. trade relations and boosting domestic revenue.
However, it remains unclear whether the External Revenue Service will take over the current role of U.S. Customs and Border Protection or whether it will complement existing agencies like the IRS, which already handles international income tax collections.
Potential Impact on U.S. Economy
While Trump’s plan is ambitious, there are concerns over its practical viability. Economists, including those at the conservative-leaning Tax Foundation, have pointed out that Trump’s idea of replacing income taxes with tariff revenue is unlikely to generate sufficient revenue. A 20% universal tariff, for instance, could generate $4.5 trillion over ten years, but this figure would still fall short compared to the IRS’s $4.69 trillion gross tax collection in fiscal 2023 alone.
Furthermore, critics, including Senator Ron Wyden, have raised alarms over the potential consequences of such a move. Wyden warned that Trump’s proposal could result in a massive tax hike on American families and small businesses, ultimately paying for another round of tax cuts for the wealthy.
Trade Experts Weigh In
Trade experts also caution that Trump’s proposed tariffs, which include a 10% tax on global imports, a 25% tariff on imports from Canada and Mexico, and a 60% tariff on Chinese goods, could disrupt trade flows, increase costs, and lead to retaliatory measures from foreign governments. Such actions may have wide-reaching effects on U.S. exports, further complicating an already strained trade landscape.
As the inauguration approaches, all eyes will be on the potential creation of the External Revenue Service, and whether this new initiative will transform U.S. trade and tax policies as Trump envisions.
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