Donald Trump the former US President and current president elect recently announced plans to establish a new federal agency called the External Revenue Service (ERS). This agency aims to collect revenue from foreign sources including tariffs and duties.
Trump’s vision marks a significant departure from traditional IRS tax collection methods emphasizing a shift towards holding foreign nations accountable for their financial obligations to the United States.
Let us dive into what this proposal entails, its implications for Tariffs and how it compares with existing systems for revenue collection.
Table of Contents
Trump’s Vision for the External Revenue Service
Trump unveiled his plan for the ERS on Truth Social, outlining its purpose as the primary collector of tariffs, duties and other revenue from foreign trade. According to Trump the US economy has historically shouldered a disproportionate burden through taxes while supporting global prosperity through lenient trade agreements.
In his own words, Trump stated:
“Through soft and pathetically weak trade agreements, the American economy has delivered growth and prosperity to the world, while taxing ourselves. It is time for that to change.”
The agency’s operations are expected to commence on January 20, 2025, aligning with Trump’s potential second inauguration.
How the ERS Differs From Current Systems
Currently, the responsibility for tariff collection lies primarily with US Customs and Border Protection (CBP). Revenue collected from tariffs is deposited into the General Fund of the United States.
Meanwhile, the Department of Commerce and the Office of the US Trade Representative (USTR) oversee tariff establishment and enforcement.
If implemented the ERS could potentially streamline the revenue collection process although critics argue that it may create additional bureaucracy.
For more on tax-related updates, check out PATH Act Refund Dates in 2025 – What You Need to Know About Timing, Status, and Delays.
Proposed Tariffs and Their Potential Impacts
Trump has floated the idea of imposing significant tariffs on foreign goods including:
- A 10% to 20% universal tariff on all imports.
- A 25% tariff on goods from Canada and Mexico if they fail to curb drug trafficking and illegal immigration.
- A 60% tariff on imports from China citing unfair trade practices and drug smuggling allegations.
While Trump claims these measures would ensure foreign entities pay their fair share experts caution that such tariffs could lead to higher costs for American consumers.
Challenges and Criticisms
Critics, including Senator Ron Wyden, argue that Trump’s plan amounts to a tax hike on American families and small businesses. Others highlight the risk of inflation and retaliatory tariffs from other countries which could harm US exports.
Wall Street economists have also expressed skepticism noting that broad-based tariffs could disrupt trade flows and spark economic instability.
A Look at Revenue from Tariffs Under Trump and Biden
Interestingly, tariff revenue has increased under President Biden’s administration compared to Trump’s tenure:
- Tariff revenue under Trump: $89.1 billion.
- Tariff revenue under Biden (as of March 2024): $144 billion.
This rise is attributed to the continuation and expansion of tariff policies on goods particularly from China.
Key Differences in Revenue Collection
Aspect | Current System | Proposed ERS |
Primary Collector | U.S. Customs and Border Protection | External Revenue Service |
Overseers of Tariffs | Department of Commerce, USTR | Centralized under the ERS |
Key Objective | Enforcement of existing tariffs | Increased foreign revenue collection |
Potential Impact | Established process | Risk of additional bureaucracy |
Implications for Global Trade
Should the ERS become operational it could reshape global trade relationships. Increased tariffs may:
- Encourage foreign nations to renegotiate trade agreements.
- Result in retaliatory tariffs raising costs for American exporters.
- Shift supply chains as businesses seek to avoid high tariff zones.
For readers interested in understanding how other fiscal policies may impact Americans, explore our article: Who Can Receive Up to $7,830 IRS Refund: Check Eligibility Requirements.
FAQs
1. What is the purpose of the External Revenue Service?
The ERS aims to collect tariffs, duties and revenue from foreign sources, reducing reliance on domestic tax collection.
2. How does Trump’s tariff plan differ from current policies?
Trump’s plan includes higher tariffs on foreign imports and the establishment of a dedicated agency for revenue collection unlike the current system overseen by multiple agencies.
3. Could these tariffs increase costs for Americans?
Yes, higher tariffs are often passed on to consumers, leading to potential price increases on imported goods.
Bottom Line
Trump’s proposal to create the External Revenue Service represents a bold move to shift the financial burden from American taxpayers to foreign entities. While the plan has garnered both support and criticism its implementation remains uncertain. Questions about feasibility, potential economic fallout and trade repercussions continue to spark debate.