On February 1, 2025, President Donald Trump announced the creation of the External Revenue Service (ERS), a new agency designed to manage tariffs and duties from foreign nations. This initiative aims to shift the burden of tariffs from American consumers to foreign entities, a move that Trump believes will enrich American citizens and increase disposable income [8a6ced74]. The ERS is set to implement significant tariffs, including a proposed 100% tariff on goods from BRICS nations—Brazil, Russia, India, China, and South Africa—targeting their growing economic influence [b9ba1ccf].
Critics of the ERS, including economists and trade experts, argue that this may be more of a public relations strategy than a substantive policy shift. They point out that during Trump's first term, American importers bore the costs of tariffs, which were ultimately passed on to consumers [8a6ced74]. The U.S. International Trade Commission reported in 2023 that American companies and consumers absorbed the full cost of tariffs, raising concerns about the long-term viability of such a strategy [8a6ced74].
Trump's proposal to abolish federal income tax and replace it with tariffs on foreign imports has been met with skepticism. He cited the economic success of the U.S. from 1870 to 1913 as a model for this new approach, claiming it was the richest period in U.S. history [8a9dcb89]. However, mainstream economists warn that tariffs could lead to job losses in the U.S. and increased prices for consumers, as the cost of imported goods rises [b9ba1ccf].
The ERS will introduce compliance burdens for businesses, potentially leading to price hikes for consumers. Scott Lincicome has described the agency's name as misleading, suggesting that it may not effectively collect from foreign manufacturers [8a6ced74]. Furthermore, experts caution that tariffs may not provide a long-term financial solution, as they can provoke retaliatory measures from trading partners [e9074b6e].
Historically, tariffs were a major revenue source for the U.S. before the income tax was established. In the fiscal year ending September 30, 2024, the U.S. collected around $80 billion in tariffs [fde1512a][f071f39e]. The Tax Foundation estimates that a universal 20% tariff could generate approximately $4.5 trillion over the next decade, although realistic projections lower this figure to around $3.3 trillion due to potential economic impacts [4eca0ad6].
As the ERS prepares to launch its operations, the specifics of its implementation remain unclear, and ongoing debate is expected in the coming weeks. Voters and economists alike will be closely monitoring how these policies will affect households and the broader economic landscape in the coming months [0810ab65]. Studies have shown that Trump's tariffs did not restore jobs as intended and had negative impacts on farmers, highlighting the complexities of trade policy [e9074b6e]. Tariffs can provoke retaliation, and while Trump claims they create jobs and lower prices, the reality is often more nuanced [e9074b6e].