Trump Wants Trade Partners To 'Start Paying,' Plans External Revenue Service To Oversee Tariffs

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Zinger Key Points
  • Donald Trump intends to create the External Revenue Service to oversee tariffs. U.S. Customs and Border Protection already does that.
  • Trump has threatened tariffs on China, Canada and Mexico ahead of his inauguration as president.
  • Get Wall Street's Hottest Chart Every Morning

President-elect Donald Trump has made tariffs one of the most talked about items ahead of his inauguration on Jan. 20. So far, he has not backed down from plans to place or increase tariffs on various trade partners, including Canada, Mexico and China.

What Happened: On Tuesday, Trump took things a step further by naming a new agency tasked with overseeing tariffs.

"For far too long, we have relied on taxing our Great People using the Internal Revenue Service (IRS). Though soft and pathetically weak Trade agreements, the American Economy has delivered growth and prosperity to the World, while taxing ourselves," Trump said in a post 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."

Trump intends for Jan. 20 inauguration day to be the birthdate for the so-called “External Revenue Service.” Normally, a new law would need to be passed first to create a new bureau or statutory body.

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

It’s worth noting that the U.S. Customs and Border Protection (CBP), under the Department of Homeland Security, already oversees tariffs and revenue from foreign countries. Its key functions include collecting customs duties and tariffs. The CBP also enforces trade laws and ensures revenue accountability as one of the federal government's largest revenue collectors.

Meanwhile, Democratic lawmakers are already scrutinizing Trump’s External Revenue Service plan. "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," Oregon Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, said in a statement.

Did You Know?

Why It's Important: Trump's plans to place tariffs on three of the country's largest trade partners have led to many question marks on how the other countries will respond and if items will get more expensive for American consumers as a trade off.

Retail executives Costco Wholesale COST and Dollar Tree DLTR have already warned about tariffs on earnings calls. Tariffs could mean higher prices for consumers, less product assortment or a change to product sizes, they say.

Trump joked that Canada could become the 51st state of America to avoid tariffs. While the country isn't ready to do that, a new report signals the country could be working on avoiding the tariffs.

Canadian ambassador Kirsten Hillman said Canada is prepared to buy more items from the U.S., as reported by the Associated Press. The move would ensure that there is not a deficit for America in its trade with Canada.

Hillman warned that a plan to put tariffs on all Canadian products will lead to prices going up for Americans.

"And at a time when the cost of living is challenging, when food prices are high, it seems like the wrong direction to go in," Hillman said.

Top items exported from Canada to the U.S. include oil, gas and automotive parts. These industries could see higher-priced goods under Trump's tariff plan.

Large Canadian oil companies Suncor Energy SU, Enbridge ENB, Canadian Natural Resources CNQ and TC Energy TRP could face significant impacts from the tariffs and a potential blow to the sector.

Railway company Canadian Pacific Kansas City Limited CP and trucking companies Old Dominion Freight Line ODFL and Knight-Swift Transportation Holdings KNX could also be impacted by the tariffs and the negative impact on trade between the United States and Canada.

Mexican President Claudia Sheinbaum has recently shown a serious focus on migration and security, two of Trump's vocal demands to keep the U.S. from placing tariffs on the country, as reported by Reuters.

Sheinbaum has publicly sparred with Trump, but it remains to be seen if she will be able to avoid tariffs for Mexico.

Ford Motor Company F, General Motors Company GM and Honda Motor Company HMC are among the automotive companies that have sub-$30,000 vehicles that are partially or fully built in Mexico and Canada.

Higher tariffs on China could rattle the American economy as the country remains a major source of many exported goods. To get ahead of potential tariff increases, China saw its exports up 10.7% in the month of December, NPR reported.

The growth was higher than estimates of 7% and could show that companies and China are taking proactive approaches to get ahead of higher-costing goods.

ETF Price Action: The iShares MSCI Canada ETF EWC is up 0.3% to $39.94 on Tuesday. The ETF is up 11% over the last year and down 4.5% over the last month.

The iShares MSCI Mexico ETF EWW is up 1.5% to $48.15 on Tuesday. The ETF is down 25.3% over the last year and down 6.4% over the last month.

The iShares MSCI China ETF MCHI is up 2.3% to $44.89 on Tuesday. The ETF is up 19.2% over the last year and down 5.5% over the last month.

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