CapitalMind founder Deepak Shenoy has questioned Donald Trump’s post of creating an “External Revenue Service” to reform US trade policy, highlighting the risk of such a move.
Trump, at X, announces his intention to create a system that collects tariffs, duties and revenues from foreign trading partners, claiming it will ensure they “pay their fair share”.
“For too long, we have relied on the Internal Revenue Service (IRS) to tax our great people,” Trump wrote. “January 20, 2025, will be the birth date of the Foreign Revenue Service. Make America Great Again!”
Shenoy pushed back, highlighting the risks of such a policy shift. “For the longest time, the world has sold the US and received dollars in return, effectively buying the debt of the US government so that its banks can lend to US consumers,” he explained.
He warned that changing this balance would have significant consequences: “Change that equation and the dollar will be less useful, America will pay more, and the debt will be a problem.”
Shenoy underscored the current global financial system where foreign nations trade goods for dollars, creating demand for US currency and government debt. This system allows US banks to lend heavily to consumers, effectively subsidizing domestic consumption.
Trump’s proposed tariffs, Shenoy warned, could upset this balance, reduce foreign willingness to hold U.S. debt and raise borrowing costs for the government.
The proposal comes as the US faces rising interest rates and rising borrowing costs, further straining its fiscal position. Higher tariffs could trigger retaliation from trading partners and potentially reduce their appetite for US debt, exacerbating financial vulnerabilities.
Trump’s rhetoric suggests a fundamental shift: shifting the tax burden from American citizens to foreign trading partners. “It’s time to change that,” he said, describing current trade agreements as “painfully weak.”
