Former President Donald Trump, who is set to return to the White House, has proposed creating a new government agency called the External Revenue Service (ERS) to collect tariffs on imported goods. In a recent social media post, Trump suggested that this move would shift the tax burden from American citizens to foreign entities benefiting from trade with the U.S. Critics argue that this plan misleads the public about who ultimately pays these tariffs and question its practicality, given that U.S. Customs and Border Protection already handles tariff collection. The proposal has sparked debate over its potential impact on consumers and whether it can realistically replace existing revenue mechanisms.

On January 20, 2025, Trump plans to inaugurate the ERS as part of his broader strategy to overhaul how the U.S. collects revenue from international trade. He argues that for too long, the Internal Revenue Service (IRS) has been taxing Americans while allowing other countries to benefit disproportionately from trade agreements. According to Trump, the ERS will ensure that foreign entities pay their "fair share" for engaging in trade with the United States. This initiative aligns with his campaign rhetoric promoting high tariffs reminiscent of the 1890s, which he views as a golden era for the country's economic policy.

Economists and policy experts have expressed skepticism about the feasibility of Trump's proposal. Douglas Holtz-Eakin, an economist affiliated with the American Action Forum, noted that the plan is not realistic and could lead to increased costs for American consumers. Tariffs are typically paid by U.S. importers, who then pass these costs onto retailers and, ultimately, consumers. This shift could disproportionately affect middle-class and lower-income households, who spend a larger portion of their income on imported goods. Historically, the federal income tax has been a more effective mechanism for generating revenue, primarily impacting wealthier individuals rather than spreading the burden across all income levels.

Despite the controversy surrounding the ERS, Trump maintains broad authority to impose tariffs under national security provisions granted by Congress. During his previous term, he leveraged this power to introduce tariffs on aluminum and steel imports. However, establishing a new government agency requires congressional approval, and it remains unclear how Trump intends to implement the ERS without legislative support. The proposal has raised questions about the practicalities of creating such an entity and its potential impact on both domestic and international trade relations.

The announcement of the ERS underscores Trump's commitment to revising the U.S. approach to international trade and taxation. While the idea may appeal to some supporters, critics argue that it could exacerbate economic challenges for ordinary Americans. As the inauguration approaches, the debate over the ERS and its implications for the U.S. economy will likely intensify, with policymakers and economists closely watching the developments.