Trump's 'External Revenue Service' will collect from importers, not 'foreign sources'

Fox Business ^ | 1/16/2025 | Eric Revell

[bert]

One expert said, 'The agency name is more branding than substance'

President-elect Trump on Tuesday announced plans to create a new "External Revenue Service" that would be tasked with collecting revenue from tariffs, but economists are pushing back and noting that U.S. importers bear the brunt of the cost of tariffs rather than firms overseas.

"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. It is time for that to change," Trump wrote in a post on the Truth Social platform.

"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. January 20, 2025, will be the birth day of the External Revenue Service," he added.

Tariffs are taxes on imports, which in most cases are paid by the U.S.-based importer to an existing federal agency, U.S. Customs and Border Protection (CBP). That dynamic has prompted pushback from economists who say the name of the proposed External Revenue Service represents an effort to obscure who pays for tariffs.

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"The president-elect may try marketing his higher tariff agenda as an external tax, but messaging does not change that higher tariffs will be paid by the people and businesses in the United States who import goods," Erica York, vice president of the Tax Foundation, told FOX Business.

"Tariffs are not external revenue; they are taxes on U.S. importers that shrink both the U.S. economy and U.S. incomes. Higher tariffs will create a drag on the U.S. economy and will threaten to offset the benefits of tax cuts elsewhere, they should not be relied upon as a major source of tax revenue," York explained.

TRUMP'S PROPOSED TARIFFS: WHAT CONSUMER PRODUCTS COULD BE IMPACTED?

Scott Lincicome, vice president of general economics at the Cato Institute, expressed a similar sentiment and told FOX Business: "The agency name is more branding than substance – and misleading branding at that. In the vast majority of cases, parties in the United States – not foreign ('external') sources – pay U.S. tariffs and, as confirmed by several recent studies, bear their economic incidence, too."

"Declaring tariff revenue 'external' would therefore be just as misleading as, say, declaring domestic sales tax revenue 'external' because it happened to apply to a foreign-made good sold at your local Walmart. At the end of the day, Trump could call it the 'Foreigners Pay the Tariffs Agency,' and it still wouldn't change the fact that Americans really are," Lincicome said.

During his successful campaign to return to the White House, Trump touted plans to impose an across-the-board tariff of 10% or 20% – as well as a larger tariff of 60% on goods imported from China.

He also threatened to impose a 25% tariff on goods from Canada and Mexico, which are both parties to the U.S.-Mexico-Canada Agreement (USMCA) – a free trade agreement Trump negotiated during his first term as a successor to the North American Free Trade Agreement (NAFTA).

His campaign platform included income from tariffs as a source of tax revenue to offset proposed tax cuts and spending plans.

Trump is set to be inaugurated for his second term as president on Monday, January 20. His transition team has signaled that he plans to sign a slate of executive orders upon taking office, as the new presidential administration often does.

Trump's social media post suggests the External Revenue Service will be created on Inauguration Day, though details on whether that will be done via executive order and how the new agency plans to operate are unclear at this time.

[bert]

The External Revenue Service is a new agency developed to manage the Trump tax increase that will be hidden from the public.

The proposed tariffs are in fact a tax increase that will be borne by ordinary tax payers when prices of imported and tariffed goods finally get purchased by the consumers.

[HYPOCRACY]

Don’t buy Chinese junk. Unless you like that style of boat.

[Farcesensitive]

Same old and tired anti-tariff lies.

[tired&retired]

Need a 400% tariff on drugs imported from China.

[RoosterRedux]

Of course tariffs are collected from importers.

Tariffs are collected from importers when goods enter a country. While foreign governments are the targets, it’s the importers who pay them at customs.

[ClearCase_guy]

Costs that importers have to pay are likely to be passed on the foreign suppliers. This stuff rolls downhill. China will be kicking in additional funds, one way or another. But, hopefully, this all provides incentives to re-shore manufacturing here in the US. That’s the best outcome.

[teevolt]

It gets old doesn’t it? Of course the tariff is paid by the importer, so what? It still creates an incentive to buy from here instead of from there. It also provides the Gov’t with a revenue stream that can offset tax cuts elsewhere.

[Bratch]

President Trump Introduces the “External Revenue Service”

January 14, 2025 | Sundance

Aligning with the concept of using tariffs to fund government operations, President Trump has announced his intention to create the External Revenue Service.  It appears to be a collection and enforcement mechanism to gather income from tariffs, duties and other sources that will pay for access to the U.S. consumer market.

[SOURCE]

One of the issues the External Revenue Service will likely address is the de minimis loophole.

The de minimis loophole comes from back in the 1930s. The idea back then was, say you went on a vacation to Paris, you shouldn’t have to file customs paperwork or pay taxes if you decided to ship some little Eiffel Tower statues to your friends back home.

Congress in 2015 then raised the de minimis threshold from $200 to $800.  However, the e-commerce world exploded, and Chinese companies began using the de minimis loophole to ship cheap goods (ex. Temu and Shein) into the USA direct to consumers without paying any customs duty.

It was reported last year that the U.S. was on track to receive a billion packages through the de minimis loophole that aren’t taxed and don’t have customs slips saying what they are.  Making matters worse, illegal items are slipping through the cracks, including, knockoffs, unsafe items and even chemicals used to make fentanyl.  The worst abuser that exploits this de minimis loophole is, by far, China.

President Trump can require a customs and duty declaration stating what is in every package and subsequently collect tariffs and duties.

Something tells me shutting down the de minimis issue is part of the background for this “ERS” announcement.

[Farcesensitive]

And the foreign exporter will often lower the price to compensate, or the foreign country will devalue its currency.

And tariffs are taxes you can avoid paying by not buying imports, then all of the money circulates in our economy and stimulates more production and consumption, building the economy for everyone.

[1_Rain_Drop]

Well then, have stuff be made in America! no importing needed.

[bert]

Your understanding of commerce is totally lacking

The costs of tariffs paid by the importers is passed down to consumers who ultimately purchase the imported products.

In the instance of say a BYD electric car purchased by a Californian, the importer would pay the tariff collected by the ERS but the Californian buying the car would pay the increased price to the importer.

China and BYD would not be affected by the tariff. China and BYD will be affected if the Californian chooses instead to buy a Tesla rather than an expensive and heavily tariffed BYD. When a Tesla is available at a much better price, the Californian won’t buy the Chinese car

[alloysteel]

Importers do not pay any taxes or tariffs, the consumer of those imported goods do.

If the price of the imported goods then exceeds the price of similar goods made domestically, then it is a simple economic decision. Part of the objective is to reduce dependence on imported goods, and simultaneously increase domestic employment.

[Farcesensitive]

Your understanding is lacking.
The consumer can buy American instead, and the foreigners will lower their prices to compensate in many cases because they want to keep market share.
Often the importer will eat the cost or some other link in the supply chain will as well.

The consumer also will not have to pay other kinds of taxes and the compliance costs for other taxes will go away.

If the consumer chooses to avoid the tariffs then the money spent on American goods circulates in our economy and builds it instead of a foreign economy.

[Farcesensitive]

See #13.

[DouglasKC]

The proposed tariffs are in fact a tax increase that will be borne by ordinary tax payers when prices of imported and tariffed goods finally get purchased by the consumers.

Your statement presupposes that people will vastly overpay for goods rather than find cheaper alternatives.

[bert]

It is common for domestic producers to raise prices to slightly below the tariffed goods price. That is, one result of tariffs is higher prices of non tariffed products.

[ConservativeMind]

That’s good information I did not have.

That does seem a problem.

[SauronOfMordor]

“ China and BYD would not be affected by the tariff. China and BYD will be affected if the Californian chooses instead to buy a Tesla rather than an expensive and heavily tariffed BYD. When a Tesla is available at a much better price, the Californian won’t buy the Chinese car”

Right. The tariff makes imported goods more expensive, giving an advantage to locally made goods.

If a Chinese widget is priced at $100, and a domestic made is $110, people will buy Chinese. If the tariff raises the price of the Chinese to $120, then people will buy domestic.

[central_va]

but messaging does not change that higher tariffs will be paid by the people and businesses in the United States who import goods

What is your point? Who pays the corporate income taxes? The consumer does. Why are "deficit chicken hawks" opposed to this most Constitutional of all revenue streams? Who is against the fact that tariffs promote domestic industry?

Why do gloBULList love the personal income tax so much? BECAUSE THE ARE CLOSET COMMUNISTS AND TRAITORS, THAT IS WHY.

[central_va]

And tariffs are taxes you can avoid paying by not buying imports, then all of the money circulates in our economy and stimulates more production and consumption, building the economy for everyone Americans!

Fixed it.