Donald Trump to create new department to collect revenue from foreign sources on inauguration day

Donald Trump said in a social media post he would create the department on January 20, the day he takes office as president for a second term

US President-elect Donald Trump said on Tuesday he will create a new government agency called the External Revenue Service "to collect tariffs, duties, and all revenue" from foreign sources as he readies new import tariffs ahead of his inauguration next week.

Trump did not specify whether the new agency would replace collections of tariffs, duties, fees and fines by US Customs and Border Protection.(AP)

Trump said in a social media post he would create the department on January 20, the day he takes office as president for a second term, adding that Americans have been taxed for too long by the Internal Revenue Service.

"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," the Republican said in a post on Truth Social.

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"We will begin charging those that make money off of us with Trade, and they will start paying, FINALLY, their fair share."

A spokesperson for Trump's transition team could not be immediately reached for comment to clarify Trump's statement or explain how the new agency would work.

Trump did not specify whether the new agency would replace collections of tariffs, duties, fees and fines by US Customs and Border Protection or collection of taxes on foreign corporate and individual income by the IRS.

It also was unclear whether the move would create additional government bureaucracy, which would appear to go against the plans of Trump's informal Department of Government Efficiency, an effort led by billionaire Elon Musk and former biotech executive Vivek Ramaswamy aimed at finding trillions of dollars in budget savings by streamlining government operations.

During his presidential campaign, Trump often mused about replacing US income taxes with tariff revenue, but the numbers do not add up, according to private economists and forecasters.

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The conservative-leaning Tax Foundation estimates that a 20% universal tariff on all imports into the US would generate $4.5 trillion over 10 years before negative economic effects that would cut net collection to $3.3 trillion over a decade. This compares to IRS tax collection of $16 trillion to $18 trillion every year.

Senator Ron Wyden, the top Democrat on the Senate Finance Committee, blasted Trump's proposal.

"No amount of silly rebranding will hide the fact that Trump is planning a multi-trillion-dollar tax hike on American families and small businesses to pay for another round of tax handouts to the rich," Wyden said.

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Trump has proposed a 10% tariff on global imports, a 25% punitive duty on imports from Canada and Mexico until they clamp down on drugs and migrants crossing borders into the US and a 60% tariff on Chinese goods.

Trade experts say the duties would upend trade flows, raise costs and draw retaliation against US exports.