{"id":682,"date":"2025-01-25T22:27:05","date_gmt":"2025-01-25T22:27:05","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/trump-pitches-external-revenue-service-to-collect-tariffs-what-to-know\/"},"modified":"2025-01-25T22:27:05","modified_gmt":"2025-01-25T22:27:05","slug":"trump-pitches-external-revenue-service-to-collect-tariffs-what-to-know","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/trump-pitches-external-revenue-service-to-collect-tariffs-what-to-know\/","title":{"rendered":"Trump Pitches External Revenue Service to Collect Tariffs: What to Know"},"content":{"rendered":"<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">President Trump has promised to generate a \u201cmassive\u201d amount of revenue with tariffs on foreign products, an amount so big that the president said he would create a new agency \u2014 the External Revenue Service \u2014 to handle collecting the money.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cInstead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,\u201d Mr. Trump said on Monday in his inaugural address, where he reiterated a promise to create the agency. \u201cIt will be massive amounts of money pouring into our Treasury coming from foreign sources.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Much about the new agency remains unclear, including how it would differ from the government\u2019s current operations. Trade experts said that, despite the name \u201cexternal,\u201d the bulk of tariff revenue would continue to be collected from U.S. businesses that import products.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Here\u2019s what you need to know about what Mr. Trump has proposed.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-17a31257\">The U.S. has an established system for collecting tariffs.<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Tariff revenue is currently collected by U.S. Customs and Border Protection, which monitors the goods and the people that come into the United States through hundreds of airports and land crossings.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">This has been the case nearly since the country\u2019s inception. Congress established the Customs Service in 1789 as part of the Treasury Department, and for roughly a century tariffs were the primary source of government revenue, counted in stately customs houses that still stand in most major cities throughout the United States, said John Foote, a customs lawyer at Kelley, Drye and Warren.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">With the creation of the income tax in 1913, tariffs became a minor source of government revenue, and after the Sept. 11 attacks, the customs bureau was moved from the Treasury Department to the Department of Homeland Security.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Customs officials today collect tariff revenue, but also monitor food safety, enforce intellectual property rights, inspect crops for pests and screen imports for goods made with forced labor, Mr. Foote said.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Creating a new agency is <a class=\"css-yywogo\" href=\"https:\/\/constitution.congress.gov\/browse\/essay\/artII-S2-C2-3-6\/ALDE_00000012\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">the provenance of Congress, not of the president<\/a>, so it is not clear how the administration might go about establishing the new unit.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">In an executive order issued on Monday evening, the president directed the leaders of Treasury, Commerce and Homeland Security to \u201cinvestigate the feasibility of establishing and recommend the best methods for designing, building, and implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues.\u201d<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-6047c9b8\">Tariff revenue rose in Trump\u2019s first term and could grow<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">The money that the United States collected from tariffs grew significantly as Mr. Trump imposed levies on foreign metals, solar panels and thousands of goods from China in 2018 and 2019. The government collected $111.8 billion in trade duties, taxes and fees in 2022, up from $41.6 billion in 2018, <a class=\"css-yywogo\" href=\"https:\/\/www.cbp.gov\/newsroom\/stats\/trade\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">according to Customs data<\/a>.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">That number could increase by multiples if Mr. Trump follows through on his promises to tax all American imports, and impose even higher levies on products from China. On Monday evening, Mr. Trump said that he planned to move forward with a 25 percent tariff on Canada and Mexico on Feb. 1, and was considering a universal tariff on all foreign products.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Mr. Trump and other Republicans are eagerly looking to tariff revenue to help to finance tax cuts. Still, tariffs are likely to earn just a tiny slice of what the United States takes in through income taxes. Economists say revenue from even very substantial tariffs <a class=\"css-yywogo\" href=\"https:\/\/www.piie.com\/blogs\/realtime-economics\/2024\/can-trump-replace-income-taxes-tariffs\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">would likely max out<\/a> in the hundreds of billions of dollars, while the United States took in $4.2 trillion in income and payroll taxes last fiscal year. Tariffs would also decrease U.S. deficits, lower growth and raise consumer prices, <a class=\"css-yywogo\" href=\"https:\/\/www.cbo.gov\/system\/files\/2024-12\/61112-Tariffs.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">the Congressional Budget Office calculated<\/a> last month.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-100a985b\">Tariffs are paid by importers<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Mr. Trump insists that foreign countries pay the tariffs but it\u2019s actually so-called importers of record \u2014 the companies responsible for bringing products into the United States \u2014 who pay tariffs to the government. Most importers sign up for a government electronic payment system, and the tariff fees are automatically deducted from their bank accounts as they bring products into the country.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Importers of record can be of any nationality: U.S. companies, U.S.-based divisions or branches of foreign companies, or foreign companies directly importing, without a business presence within the United States, Mr. Foote said.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">But Richard Mojica, a customs lawyer at Miller &amp; Chevalier, said U.S. importers \u201care usually U.S. companies.\u201d He said that Mr. Trump had created confusion by saying that the External Revenue Service \u201cwould collect duties and tariffs \u2018that come from foreign sources\u2019 \u2014 a term that nobody understands.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cI don\u2019t see how the E.R.S. could collect tariff payments from a foreign manufacturer who is not also the U.S. importer of record,\u201d Mr. Mojica added.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The question of who pays the tariff to the government is somewhat distinct from the issue of who ultimately bears the tariff\u2019s costs. The importer can pass the cost of the tariff on to American consumers in the form of higher prices, or it could try to force its foreign factories to sell its goods more cheaply.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Every case is different, but <a class=\"css-yywogo\" href=\"https:\/\/www.aeaweb.org\/articles?id=10.1257\/aeri.20190536\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">several<\/a> <a class=\"css-yywogo\" href=\"https:\/\/www.aeaweb.org\/articles?id=10.1257\/pandp.20201018\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">economic<\/a> <a class=\"css-yywogo\" href=\"https:\/\/www.nber.org\/system\/files\/working_papers\/w29315\/w29315.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">studies<\/a> have found that American consumers mostly bore the brunt of Mr. Trump\u2019s previous tariffs on China.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Some trade analysts say that the name \u201cExternal Revenue Service\u201d is an effort to disguise who really pays for tariffs.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-4\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Scott Lincicome, the vice president of economics and trade at the Cato Institute, which supports free trade, called the agency\u2019s name \u201cmore branding than substance \u2014 and misleading branding at that.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cTrump could call it the \u2018Foreigners Pay the Tariffs Agency,\u2019 and it still wouldn\u2019t change the fact that Americans really are,\u201d he said.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>President Trump has promised to generate a \u201cmassive\u201d amount of revenue with tariffs on foreign products, an amount so big that the president said he would create a new agency \u2014 the External Revenue Service \u2014 to handle collecting the money. \u201cInstead of taxing our citizens to enrich other countries, we will tariff and tax [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":683,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[358,355,354,356,357,199,158],"class_list":["post-682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-collect","tag-external","tag-pitches","tag-revenue","tag-service","tag-tariffs","tag-trump"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=682"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/682\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/683"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}