Trump Floats Creating ‘External Revenue Service’ for Tariffs (2)

President-elect Donald Trump said he would create an “External Revenue Service” tasked with collecting tariffs on foreign imports, the latest indication that the Republican aims to carry out his promises for sweeping trade levies when he retakes office.

“I will create the EXTERNAL REVENUE SERVICE to collect our Tariffs, Duties, and all Revenue that come from Foreign sources,” Trump said in a post to his Truth Social network on Tuesday.

“We will begin charging those that make money off of us with Trade, and they will start paying, FINALLY, their fair share. January 20, 2025, will be the birth date of the External Revenue Service,” he added.

US President-elect Donald Trump

Photographer: Valerie Plesch/Bloomberg

The president-elect didn’t provide any details of whether he planned to pursue the creation of a new government agency, or if his proposal was largely a branding exercise for existing government functions.

Democrats immediately mocked the idea.

“Seems like a ‘concept of a plan,’ huh?” said Representative Richard Neal of Massachusetts, the top Democrat on the House tax-writing committee, referring to Trump’s vague promise in a debate last year to revamp health care.

Tariffs are currently collected by Customs and Border Protection, whose agents review paperwork, perform audits, and collect levies and penalties, with the money then deposited into the Treasury Department’s General Fund. They account for less than 2% of federal revenue.

But the exercise underscores Trump’s desire to frame tariffs on foreign imports as a way to offset costs for his policy agenda that would otherwise be directly shouldered by taxpayers. Trump was elected on vows to levy tariffs on both allies and adversaries, casting them as tools to bring in more revenue to the US and compel companies to bring back manufacturing jobs — as well as offset the growing deficit.

Source: Source: Office of Management and Budget

Analysts greeted the news with skepticism and highligted that the CBP already collects that revenue, a function dating back to the era of Alexander Hamilton. They also noted that tariff revenues aren’t an external source given that they are paid for by US consumers.

“This is gimmicky branding that will duplicate an existing federal agency to collect customs revenue,” said Brian Riedl, a senior fellow at the Manhattan Institute and former Republican staff member at the Senate Finance Committee. “It is not collecting external revenue, it is collecting a tax” on Americans who pay for tariffs, he added.

Creating a new revenue agency would require a vote in Congress and likely wouldn’t change much about the process of gathering tariff revenues, said Ernie Tedeschi, who is director of economics at Yale University’s Budget Lab and a former Biden administration official.

“A new agency would require Congressional authorization and funding, and since it would just be taking over existing CBP functionality, it’s unlikely much of the day-to-day mechanics of collecting tariff revenue would change dramatically,” Tedeschi said.

Tariff Uncertainty

During the campaign, Trump floated minimum tariffs of 10% to 20% on all imported goods, and 60% or higher on shipments from China. In November, he also vowed to hit Canada, Mexico and China with additional levies if the countries did not do more to help secure US borders and prevent the flow of undocumented migrants and illicit drugs.

Mainstream economists warn that Trump’s threatened tariffs are poised to raise prices for US consumers — exacerbating public anxiety over inflation — redirect or reduce trade flows, and fail to bring in the revenue the president-elect has predicted. While Trump won the support of many Wall Street executives and corporate leaders, uncertainty over his plans to institute tariffs have rattled markets and the business community.

Read more: Trump Team Studies Gradual Tariff Hikes Under Emergency Powers

Members of Trump’s incoming team have been discussing slowly ramping up tariffs month by month, an approach aimed at boosting their leverage in negotiations with other countries while also avoiding a spike in inflation, according to people familiar with the matter.

That proposal is in its early stages and has not yet been presented to Trump, the people said.

(Updates with comments from analysts in paragraphs 9-12)

--With assistance from Enda Curran.

To contact the reporters on this story:
Hadriana Lowenkron in Washington at hlowenkron@bloomberg.net;
Gregory Korte in Washington at gkorte@bloomberg.net

To contact the editors responsible for this story:
Justin Sink at jsink1@bloomberg.net

Meghashyam Mali, Magan Crane

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