Capitalmind founder Deepak Shenoy has questioned Donald Trump’s post of creating an “External Revenue Service” to overhaul US trade policy, highlighting the risk of such a move.
Trump, on X, declared his intention to create a system that collects tariffs, duties, and revenue from foreign trade partners, claiming it would ensure they “pay their fair share.”
“For far too long, we have relied on taxing our Great People using the Internal Revenue Service (IRS),” Trump wrote. “January 20, 2025, will be the birth date of the External 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 to the US and taken the dollar in exchange, effectively buying US government debt so that its banks could lend to US consumers,” he explained.
He cautioned that altering this balance would have significant consequences: “Change that equation and the dollar will be less useful, America will pay more, and debt will be a problem.”
Shenoy underscored the existing global financial arrangement 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 disrupt this balance, reducing foreign willingness to hold US debt and increasing borrowing costs for the government.
The proposal comes as the US faces rising interest rates and escalating borrowing costs, further straining its fiscal position. Higher tariffs could trigger retaliation from trade partners and potentially shrink their appetite for US debt, amplifying financial vulnerabilities.
Trump’s rhetoric suggests a fundamental shift: moving the tax burden from American citizens to foreign trade partners. “It’s time for that to change,” he said, describing current trade agreements as “pathetically weak.”