U.S. President-elect Donald Trump has proposed the creation of a new agency known as the “External Revenue Service” to collect tariffs, duties, and other revenue from foreign sources. Trump announced the plan on Tuesday via his social media platform, Truth Social, drawing immediate comparisons to the Internal Revenue Service and raising questions about potential overlap with existing agencies—particularly those already under the purview of the U.S. Department of the Treasury.
Trump has described the External Revenue Service as a counterpart to the IRS, focused solely on “foreign sources” of revenue.
“We will begin charging those that make money off of us with trade, and they will start paying,” he declared on his platform. Although details remain scant, Trump’s post alludes to tariffs and duties placed on imported goods from countries such as Canada, Mexico, and China, with rates rumored to be as high as 25% or even 60% for Chinese products.
Critics argue the plan amounts to a rebranding of roles already undertaken by U.S. Customs and Border Protection and the Department of Commerce, which currently collect tariffs, duties, and trade-related fees. This duplication has fueled skepticism among economists and lawmakers, who question the necessity and efficiency of creating an entirely new bureaucracy to perform functions that already exist.
Streamlining or Further Bureaucracy?
Industry observers point out that the U.S. Department of the Treasury, which oversees customs revenue through its agencies, already manages trade-related inflows. The CBP arm of the Department of Homeland Security physically collects tariffs at the border, while the Treasury channels those funds and enforces related regulations. Skeptics note that any duplication of these roles could introduce administrative redundancy.
Meanwhile, Trump’s promise to “shrink the size of government” appears at odds with the introduction of a new federal entity. The President-elect has not offered clarity on whether his External Revenue Service would replace or merely supplement the roles of CBP, the Commerce Department, or the Treasury’s existing mechanisms.
Adding another layer of intrigue is the role of Trump’s so-called Department of Government Efficiency, or DOGE, which is led by billionaire entrepreneur Elon Musk and former biotech executive Vivek Ramaswamy. The two have been tapped to identify “trillions of dollars in budget savings” by streamlining government operations, which Musk even admitted could be a long shot.
Critics contend that creating an additional federal entity could contradict DOGE’s stated goal. Whether Trump’s plan for an External Revenue Service is consistent with his emphasis on reducing federal bureaucracy remains an open question.
Tariff Talk
Economists broadly agree that tariffs often increase consumer costs, as importers commonly pass these fees on to end users. Though tariffs can protect certain domestic industries from foreign competition, they also risk retaliatory measures from trading partners.
During his first term, Trump floated the idea of using tariff revenue to fund U.S. government operations. However, private forecasters have long maintained that the math simply does not add up. A 20% universal tariff, according to estimates from the conservative-leaning Tax Foundation, could generate up to $4.5 trillion over a decade before factoring in negative economic effects. By contrast, the Internal Revenue Service collected $4.69 trillion in gross tax revenue in fiscal year 2023 alone.
The plan has received immediate pushback from Democrats. Oregon Sen. Ron Wyden, the leading Democrat on the Senate Finance Committee, offered a pointed critique: “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.”
Wyden’s comments underscore a broader concern that new tariffs would function as an indirect tax on households, as importers raise prices in response to increased fees at the border. Republicans, for their part, have largely stayed silent, with many waiting for further details about how, exactly, this new agency would operate.
Trump’s insistence that an External Revenue Service is necessary—despite existing channels for collecting trade-related fees—has some observers rolling their eyes. The President-elect’s penchant for announcing grand plans on social media, often with more bravado than detail, is well-established. While Trump touts his new agency as an innovative solution, critics argue it simply duplicates existing processes.
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