Donald Trump has shown little sign of changing his bombastic style in his second term
Trump frequently spoke about replacing U.S. income taxes with revenue from tariffs during his presidential campaign. AFP

President-elect Donald Trump announced on Tuesday his intention to establish a new government agency called the "External Revenue Service" to manage tariffs, duties, and all revenue collected from foreign sources.

In a social media post, Trump shared that the "External Revenue Service" will officially launch on his presidential inauguration day, Jan. 20, 2025. He criticized the Internal Revenue Service (IRS), asserting that Americans have been overtaxed for years.

"January 20, 2025, will be the birth date of the External Revenue Service," Trump wrote in a Truth Social post, marking the day he will be sworn in for his second, non-consecutive term. "For far too long, we have relied on taxing our Great People using the Internal Revenue Service (IRS)."

"Through soft and pathetically weak Trade agreements, the American Economy has delivered growth and prosperity to the World, while taxing ourselves," the president-elect wrote.

"It is time for that to change. I am today announcing that I will create the EXTERNAL REVENUE SERVICE to collect our Tariffs, Duties, and all Revenue that come from Foreign sources."

"We will begin charging those that make money off of us with Trade, and they will start paying, FINALLY, their fair share," he added.

Uncertainty About The Role And Structure

However, Trump's post did not provide many details about how the new agency would function or whether it would replace existing departments responsible for collecting tariffs and taxes.

Currently, U.S. Customs and Border Protection (CBP) handles tariffs and duties, while the IRS collects taxes on foreign income. It remains unclear whether the proposed External Revenue Service would take over these responsibilities, or whether it would create a new layer of bureaucracy.

This could contradict the goals of Trump's informal "Department of Government Efficiency," a project led by entrepreneur Elon Musk and former biotech executive Vivek Ramaswamy. Their initiative focuses on cutting government spending and streamlining operations, aiming to find trillions in budget savings, Reuters reported.

Blasting Trump's proposal, Senator Ron Wyden, who is on the Senate Finance Committee, stated: "No amount of silly rebranding will hide the fact that Trump is planning a multi-trillion-dollar tax hike on American families and small businesses to pay for another round of tax handouts to the rich."

Potential Impact On U.S. Trade

During his presidential campaign, Trump frequently spoke about replacing U.S. income taxes with revenue from tariffs. However, economists have expressed skepticism about the feasibility of such a plan.

The Tax Foundation estimates that a 20% universal tariff on all imports would generate $4.5 trillion over the next decade. But after considering negative economic effects, net revenue would drop to $3.3 trillion—still less than the $4.69 trillion the IRS collected in fiscal year 2023.

Trump has also proposed a 10% tariff on global imports, a 25% punitive duty on goods from Canada and Mexico until they address issues like drug trafficking and migration, and a 60% tariff on Chinese goods.

Experts warn that such steep tariffs could disrupt trade, increase costs for consumers, and provoke retaliatory measures from other countries, which could hurt U.S. exports.

Originally published on IBTimes