Trump's "America First" Policy Takes a New Turn Will the External Revenue Service Ease Fiscal Pressure?

U.S. President-elect Donald Trump recently announced that he would establish a new government agency, the "External Revenue Service," after his inauguration on January 20. This agency would focus on increasing tariffs and taxes on foreign imports. This proposal once again underscores Trump's commitment to his "America First" policy, particularly in his aggressive stance on trade. Trump plans to impose tariffs of 10% to 20% on imported goods and require countries and businesses benefiting from trade with the U.S. to pay more. The core intention of this policy is to reduce fiscal pressure on the U.S. government through increased tariffs and renegotiated trade agreements while promoting domestic economic growth. However, given the complex global economic landscape and the multiple challenges within the U.S. economy, it remains uncertain whether this plan will achieve the desired effects.

The global economy is facing many uncertainties, especially with the delayed economic recovery post-pandemic, supply chain disruptions, and rising energy prices. Global economic growth has slowed, and this is an undeniable fact. Trump's tariff policy, especially his proposal to impose 10% to 20% tariffs on all imported goods, appears to be an attempt to stimulate U.S. domestic production through trade protectionism. However, such protectionist policies could lead not only to a slowdown in economic growth but also potentially trigger a global trade war. If major global economies retaliate with countermeasures, tariff barriers will exacerbate instability in international trade, restrict trade flows, and reduce the efficiency of global supply chains.

More importantly, the current global economic environment, with its disrupted supply chains, has made U.S. businesses increasingly dependent on imported goods. Imposing tariffs on imports will inevitably raise the cost of domestic products, leading to higher consumer prices and further exacerbating inflationary pressures in the U.S. This situation, particularly with the Federal Reserve's tightening monetary policies already in place, could push the U.S. economy into a state of stagflation, where inflation and sluggish economic growth coexist.

Inflation remains a major concern for the U.S. economy. In 2024, despite the Federal Reserve raising interest rates and implementing a series of tightening policies to combat high inflation, U.S. inflation remains stubbornly high. The inflation rate in December 2024 stood at approximately 6.5%, a decline from earlier in the year but still far from the Fed's target of 2%. If Trump raises tariffs further, especially on consumer goods and manufactured products, this could lead to further price increases, increasing the cost of living for ordinary Americans, reducing consumer spending, and potentially hampering economic growth.

Additionally, the U.S. federal debt has exceeded $30 trillion, and the budget deficit remains persistently high. In this context, Trump's proposal may aim to reduce fiscal pressure through higher tariff revenues, but its effectiveness remains doubtful. Increased tariff revenues are unlikely to fully offset the rising government spending, and a slowdown in economic growth may reduce tax revenue. Raising tariffs will also further increase corporate cost pressures, suppress investment and innovation, and have a long-term negative impact on U.S. economic growth.

Moreover, U.S. social welfare and healthcare spending are significant fiscal burdens. Trump has previously spoken about reducing government spending through reform, but such efforts face considerable implementation challenges. His proposal to reduce fiscal pressure through the "External Revenue Service" and increased tariffs does not address the root problem of the U.S. economy—namely, the sustainability of its fiscal system and the need for strong domestic demand growth.

Against the backdrop of globalization, Trump's protectionist trade policies face even more complex challenges. As the global economy becomes increasingly interconnected, protectionist measures by a single country often lead to retaliatory measures, creating a vicious cycle. The tariffs imposed during Trump's first term not only failed to significantly reduce the U.S. trade deficit but also intensified economic tensions between the U.S. and China, while disrupting global supply chains.

If Trump pursues more aggressive tariffs during his second term, it could not only exacerbate tensions with key trading partners but also destabilize global trade rules. Economies such as the European Union, Canada, and Japan may retaliate, and the global trade system could face a potential reshuffling, leading to a more fragmented international trading environment.

Although the "External Revenue Service" is designed to increase tariff revenues, the reality is that these tariff revenues will ultimately be borne by American consumers. This is because higher tariffs will directly raise the prices of imported goods, and due to the long-term outsourcing of U.S. manufacturing, the country remains heavily reliant on imported goods and services. Consequently, the increased tariffs will directly affect consumers' purchasing power, and in the end, American citizens may end up paying for this policy.