Trump’s Proposal for a New Agency to Collect Tariffs: A Shift Toward Foreign Revenue or Political Rebranding?

President Donald Trump has announced plans to create a new U.S. government agency called the External Revenue Service (ERS), which would handle the collection of tariffs, duties, and other revenues from international trade. The agency, Trump asserts, will be launched on January 20, the day he assumes office for a second term. This proposal reflects Trump’s continued efforts to reshape U.S. economic policy by focusing more on tariffs and foreign revenue rather than relying on domestic taxation through the Internal Revenue Service (IRS).

Trump’s statement, made on his social media platform, Truth Social, argues that the United States has long been taxed excessively by the IRS while allowing foreign nations to benefit from “weak trade agreements.” He claims that under these agreements, the U.S. economy has fueled global growth without receiving fair compensation in return. As part of his economic strategy, Trump asserts that foreign countries making profits through trade with the U.S. will now be expected to “finally” pay their fair share, marking a shift toward a more protectionist approach.

A Bold Vision for Revenue Collection

The External Revenue Service would focus on collecting revenue from international sources, including tariffs and duties on imports. By proposing this new agency, Trump hopes to centralize and streamline the collection of trade-related revenues, which are currently managed by U.S. Customs and Border Protection (CBP). The CBP already collects tariffs and duties as part of its responsibility for regulating international trade. Trump’s plan, however, would introduce a separate agency to handle these operations, suggesting that a more focused approach is needed.

While Trump has not specified whether the ERS would replace or complement the existing structures within CBP or the IRS, the proposal signals a clear break from the current system. This new agency would oversee tariffs on imports, duties on foreign goods, and potentially other revenue from trade-related activities. However, the move raises several questions about its effectiveness. Would it truly streamline operations, or would it add layers of government bureaucracy, an outcome that contradicts Trump’s prior campaign promises to reduce federal spending and efficiency?

Trump’s Tariff Plans and Their Economic Impact

Central to Trump’s proposal is the idea of using tariffs as a tool to generate significant government revenue. Throughout his first term, Trump implemented a series of tariffs, most notably on Chinese imports, as part of his broader “America First” trade policy. He argued that such measures would reduce the U.S. trade deficit and protect American industries. This rhetoric has continued into his 2024 presidential campaign, with Trump pledging to impose even more stringent tariffs on key trading partners, including China, Canada, and Mexico.

Key elements of his tariff plan include:

• A 10% tariff on all global imports.

• A 25% tariff on goods from Canada and Mexico, conditional on their cooperation in addressing illegal migration and drug trafficking across the U.S. border.

• A 60% tariff on imports from China, aimed at addressing unfair trade practices and intellectual property theft.

However, the economic implications of such measures are complex. According to estimates from the Tax Foundation, a 20% tariff on all imports would generate approximately $4.5 trillion in revenue over 10 years. However, this forecast assumes minimal negative economic effects, and a more realistic projection sees a reduced net revenue of $3.3 trillion after factoring in the economic damage such tariffs could inflict. For comparison, the IRS collected nearly $4.7 trillion in taxes in fiscal 2023 alone.

Despite these projections, Trump’s tariff proposals have raised concerns among economists and trade experts. Higher tariffs would likely increase consumer prices, raise production costs for businesses, and provoke retaliatory measures from foreign countries. Countries affected by the tariffs could impose their own duties on U.S. exports, resulting in a loss of global market share for American companies and a reduction in overall trade.

Political Reactions and Criticism

Trump’s tariff-heavy approach has been criticized by both political opponents and economic analysts. Some argue that the proposed External Revenue Service is little more than a rebranding exercise—an attempt to give the appearance of new action without fundamentally altering the status quo. Critics suggest that the establishment of this new agency would duplicate the functions already performed by the IRS and CBP, leading to inefficiencies rather than improved revenue collection.

Senator Ron Wyden, the top Democrat on the Senate Finance Committee, has denounced Trump’s tariff proposals, claiming they would result in a “multi-trillion-dollar tax hike on American families and small businesses.” Wyden’s criticism reflects the broader concern that higher tariffs would ultimately be paid by U.S. consumers in the form of higher prices for imported goods, offsetting any potential benefits from the increased tariff revenue.

Furthermore, economic columnists such as Heather Long of The Washington Post have called Trump’s proposals “clever marketing” designed to appeal to his base without addressing the underlying issues. According to Long, the creation of a new agency may sound like a bold move, but it will not shield American consumers from the price hikes and economic disruptions that would likely accompany the implementation of these tariffs.

Trump’s Broader Trade Philosophy

Trump’s proposal to create the External Revenue Service and implement higher tariffs reflects his broader skepticism toward free trade agreements. During his first term, Trump prioritized renegotiating trade deals, such as the U.S.-Mexico-Canada Agreement (USMCA), and sought to reduce the U.S. trade deficit by imposing tariffs on countries like China. Trump’s economic philosophy views trade deficits as a sign of American weakness, and he believes tariffs can be used to level the playing field and create a fairer trading system.

Yet, this approach remains divisive. Some supporters believe that protecting U.S. industries through tariffs is a necessary strategy to boost domestic production and reduce reliance on foreign manufacturing. Others argue that such protectionist policies are short-sighted and could harm the global competitiveness of U.S. industries in the long run.

Bottomline

The External Revenue Service proposal highlights Trump’s continued focus on using tariffs as a primary tool for generating revenue and protecting US industries. While the idea of a new agency may appeal to some, critics argue that it risks creating inefficiency and economic disruption. With global trade tensions and the U.S. trade deficit still at the forefront of his economic policy, Trump’s vision for tariff-driven revenue will likely continue to shape the national debate on trade and taxation.