Trump's ERS Plan Sparks Debate: Unnecessary Tariff Bureaucracy?
Tariffs are paid by domestic importers, even though they are levied on foreign nations.


President Donald Trump announced plans to create a new government agency called the External Revenue Service (ERS) to collect tariffs and other duties from foreign nations, but his plans have faced immediate backlash.
The proposed government agency would support Trump’s bold tariff plans on all imports, which he failed to expand upon in his inaugural address. To date, the Trump administration has levied 10% duties on Chinese imports and temporarily paused 25% tariffs on Canada and Mexico.
The Trump administration is also holding off tariffs on Colombia.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
One glaring concern: Tariffs are already collected by an existing federal agency, the U.S. Customs and Border Protection (CBP). It should be noted that the so-called External Revenue Service is a ‘play on words’ to mask who pays for tariffs — which are domestic importers.
As U.S.-based importers take on steep tariffs to pay for goods imported from other nations, some of that expense is passed onto the consumer. That means shopping for everyday goods could become more expensive, warn economists.
“For far too long, we have relied on taxing our great people using the Internal Revenue Service (IRS),” President Trump said in a post on Truth Social days before his January 20 inauguration. “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 added.
Historically, creating a new government agency requires an act of Congress. It's worth noting that Trump hasn't specified whether this agency will be federal.
Trump’s announcement comes days after House GOP lawmakers introduced a bill proposing to abolish the IRS and rewrite the tax code as we know it. Here’s what we know about the ERS so far.
Related: Five Tax Traps to Avoid in Trump's Second Term as President
What is the External Revenue Service?
As President Trump suggests, the External Revenue Service would be implemented to collect “tariffs, duties, and all revenue” that come from foreign sources. As implied, the agency would focus on collecting the major tariffs the Trump administration aims to impose.
Problem number one: the U.S. already has federal agencies that collect these fees.
Trump hasn't specified whether the proposed agency would replace the U.S. Customs and Border Protection collections of tariffs, duties, fees, and fines or the collection of taxes on foreign income by the IRS.
Problem number two: Calling the new agency an ‘External Revenue Service’ won’t change who pays for tariffs, which are U.S.-based importers. Though tariffs are ‘imposed’ on foreign countries, the tax is ultimately paid domestically.
For most of his campaign, Trump has pitched a steep 20% blanket tariff on all imports and an extra-punitive 100% fee on Chinese goods entering the U.S. He believes that tariffs will import taxes, or crucial revenue into the economy — allowing the government to lower food prices, inflation, and reduce the national deficit.
At one point, Trump also floated replacing income taxes with tariff revenue, adding that tariffs would allow the government to subsidize childcare.
While the proposed tariffs would raise about $2.8 trillion over the next decade, government agencies and multiple non-partisan economists warn the revenue wouldn’t come close to replacing income tax or funding other tax cuts.
Trump ERS plans face immediate backlash
President Trump’s proposed External Revenue Service faced instant backlash from social media and top Democrats.
Sen. Ron Wyden of Oregon, a top Democrat on the Senate Finance Committee said the proposed External Revenue Service was a “silly rebranding” that would fail to hide “a multitrillion-dollar tax hike on American families and small businesses to pay for another round of tax handouts to the rich.”
In another post on social media platform X, a White House Correspondent for the Independent said Trump appeared “ignorant” to the fact there’s been an “external revenue service” since July 31, 1789. In other words, the U.S. Customs Service, now known as the U.S. Customs and Border Protection.
Of note, the proposed External Revenue Service seems somewhat at odds with the mission of Trump’s newly created Department of Government Efficiency (DOGE).
The non-governmental entity led by Tesla CEO Elon Musk aims to “dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies,” according to Trump.
The creation of a new government entity appears to add more bureaucratic hoops to its pile.
The new Trump administration may continue to develop plans for what lies ahead as they tackle the first 100 days in office. Some plans may cause an immediate impact on your finances or tax experience, so stay informed.
Related
- House GOP Bill Aims to Abolish the IRS and Rewrite the Tax Code
- Tariffs: What They Are and How They Impact Your Wallet
- Project 2025 Tax Overhaul Blueprint: What You Need to Know
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Gabriella Cruz-Martínez is a finance journalist with 8 years of experience covering consumer debt, economic policy, and tax.
Gabriella’s work has also appeared in Yahoo Finance, Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier.
As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances, no matter their stage in life.
-
What Health Insurance Tax Credits Have to Do With the Government Shutdown
Tax Credits Previous shutdowns have occurred for various reasons, including border wall funding. But this time, the standoff centers in part on health care and taxes.
-
Florida Residents Could Soon Get Property Tax Relief
Property Tax The push for a solution to end high property taxes could lead to significant tax cuts in the Sunshine State next year.
-
New Tax Rules: Income the IRS Won’t Touch in 2025
Income Taxes From financial gifts to Roth withdrawal rules, here’s what income stays tax-free under the new Trump 2025 tax bill, and some information on what’s changed.
-
Three Popular Tax Breaks Are Gone for Good in 2026
Tax Breaks Here's a list of federal tax deductions and credits that you can't claim in the 2026 tax year. Plus, high-income earners could get hit by a 'surprise' tax bill.
-
Tax Brackets 2025 Quiz: How Much Do You Know?
Quiz Test your knowledge of IRS rules that impact how much money you keep in your wallet.
-
Retirees Face a Growing Capital Gains Tax Trap: What's Next?
Home Sales A changing housing market and unchanged IRS exclusion amounts can add up to a headache for many homeowners. Will Congress offer a fix?
-
New York Inflation Refund Checks Are Coming Soon: What to Know Now
Tax Relief Inflation relief checks are on the way for over 8 million New York taxpayers. Here's a full breakdown of who gets a payment and when you may expect yours.
-
Mortgage Refinance in 2025? These Tax Breaks Can Boost Your Savings
Tax Breaks Refinancing your mortgage comes with tax implications, but also opportunities to deduct certain expenses on your return.