Economists Uncut

ClearValue Tax (Uncut) 01-17-2025

Trump’s External Revenue Service for Tariffs on January 20th!

President Trump is saying that he’s going to create the External Revenue Service, the ERS. Okay, so you know how we have the Internal Revenue Service, the IRS, and the IRS collects income taxes, payroll taxes, etc. Well, Trump is saying that he’s going to create the external one and the ERS will collect taxes from the tariffs.

 

So I want to show you what he said. Okay, so on January 14th, here’s what President Trump posted on Truth Social. I am today announcing that I will create the External Revenue Service to collect our tariffs, duties, and all revenue that come from foreign sources.

 

We will begin charging those that make money off us with trade and they will start paying, finally, their fair share. January 20th, 2025 will be the birthday of the External Revenue Service. Okay, so the first thing I want to say is that, I mean, you just saw it for yourself.

 

There’s absolutely no way for you to misconstrue or misinterpret what President Trump is trying to achieve with the ERS. It’s very direct, very straightforward. Yeah, of course, he didn’t give all the details of the plan, but I’m sure that he’s going to disclose them very soon.

 

But let’s cover other aspects of the ERS that are meaningful to this conversation. Okay, so first, let’s talk about the current system. So how are taxes on tariffs collected right now? So currently, tariffs are collected by Customs and Border Protection, so CBP, which is an agency within the Department of Homeland Security.

 

So President Trump wants importers to pay the tax directly to the ERS. So details, of course, have yet to be disclosed on how this is going to work. Now, I want to say this, all of this revolves around tariffs, right? So I want to give you an update on the tariff situation with Trump.

 

Okay, so President Trump says that on day one, he wants to give 100 executive orders. One or some of those may be related to tariffs. All right, so this is very important for you to know.

 

Does the President need Congressional approval to impose tariffs? So Congress is given the power to enact tariffs. However, the President is given limited powers to enact tariffs without Congressional approval. But to expand his powers and to speed up the process, President Trump is saying that he may declare a national emergency.

 

By doing so, the Trump administration is saying that it’s going to give the President legal justification for implementing a new tariff program. Okay, so let’s talk about the potential national economic emergency declaration that Trump is expected to do. Trump may use the International Economic Emergency Powers Act, the IEEPA, and this allows the President to manage imports during a national emergency.

 

Now, I want you to be aware that in 2019, President Trump threatened to use this, to use the IEEPA to impose tariffs on Mexico because of immigration issues. But honestly, at the end of the day, it turned out to be a negotiating tactic as Mexico agreed to tighten border security. So President Trump, in his prior term, he never went through with it.

 

As of now, no President has ever used the IEEPA for imposing tariffs. And currently, I think that this is the best way to explain the situation. There are three categories of tariffs that are up in the air.

 

So the first one is the universal tariff. So Trump is saying that there could be a 10% to 20% tariff on all imports. So the second category is tariffs against our neighbors.

 

So Trump is threatening a tariff of up to 25% on Mexico and Canada. But both Mexico and Canada are saying that they’re ready to fight back. Both countries are saying that they’re ready to retaliate with their own tariffs against the U.S. and that nothing is off the table in terms of trade wars as retaliation.

 

And the third category would be tariffs on China. So these would be additional tariffs on China. So in Trump’s last term, he placed tariffs on over 300 billion dollars of Chinese products and services, most of which Biden kept in place.

 

And it would basically just be even more tariffs, additional tariffs on top of those. And President Trump is saying that gets sworn into office on January 20th, he’s going to hit the ground running with the executive orders, with the tariffs, with the E.R.S. But I will see what happens in the first few days, the first few weeks. Now, I want to give you my expectation.

 

This is based off just practically and historically speaking. So when it comes to universal tariffs, 10% to 20% tariffs on all imports, I mean, that is a lot. And I don’t believe he’s going to do that.

 

I gave my reasoning, the detail in my first video. It’s just not going to happen when it comes to our neighbors, Canada and Mexico. So he’s threatening up to 25% for each of the Canadian imports, Mexican imports.

 

I don’t believe he’s going to do that, in my opinion. And you see for yourself, he’s just doing this as a negotiating tactic. But you know what? It’s working when it comes to Chinese imports.

 

I do believe, yes, he will impose new tariffs. So, again, these would be additional tariffs on what he’s already imposed and what Biden kept. Now, I want to cover the legality of President Trump declaring a national emergency to manage tariffs.

 

So if President Trump uses the International Emergency Economic Powers Act, the IEEPA, he can be challenged in court. And that’s actually what’s expected to happen. Again, no president has used the IEEPA for tariffs.

 

So this would be legally untested. But here’s the thing. If President Trump uses the IEEPA and imposes tariffs, the courts may not issue a ruling for months or even longer.

 

And in the meantime, while they’re waiting for an answer, the tariffs would be in effect. So of course, a judge could freeze the implementation of the tariffs while the case is being worked on. But of course, that’s not guaranteed to happen.

 

So there’s a lot of uncertainty. And just to give you a sense of the timeline of the situation, if Trump declares a national emergency, then in that situation, he can impose tariffs as quickly as 12 hours. So if he wanted to move quickly on tariffs, he absolutely can.

 

Now, I want to point out to you that Trump’s policies, they’re really going to affect the strength of the U.S. dollar, interest rates, and inflation. And those three things, they’re so important to the Federal Reserve. So I don’t know if you’ve been watching, but the Federal Reserve, they’re acting like, oh, regardless of what Trump does, like his policies, they’re not going to affect our decisions.

 

The Federal Reserve is saying they’re going to cut interest rates, their forecast, cut interest rates two times this year, regardless of Trump’s policies. I mean, I call BS on that. Of course, they’re going to be paying attention to those three things.

 

And those three things are going to be affected by Trump’s policies. So we’ll see what happens. All I can tell you is that policy standpoint, monetary policy, fiscal policy, there’s going to be a lot of uncertainty for 2025.

 

But I’m going to keep you updated. Please subscribe. I thank you for the support and wish you a very nice day.

 

Take care.

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