President Trump has promised to generate a “massive” amount of revenue with tariffs on foreign products, an amount so big that the president said he would create a new agency — the External Revenue Service — to handle collecting the money.
“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Mr. Trump said on Monday in his inaugural address, where he reiterated a promise to create the agency. “It will be massive amounts of money pouring into our Treasury coming from foreign sources.”
Much about the new agency remains unclear, including how it would differ from the government’s current operations. Trade experts said that, despite the name “external,” the bulk of tariff revenue would continue to be collected from U.S. businesses that import products.
Here’s what you need to know about what Mr. Trump has proposed.
The U.S. has an established system for collecting tariffs.
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.
This has been the case nearly since the country’s 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.
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.