Navarro: Trump Will ‘structurally Shift’ American Economy With Tariff Revenue

Trump trade adviser Peter Navarro defended the president’s plans to create a new agency to collect tariff income, doubling down on a controversial plan that has spurred unease even among some of President Donald Trump’s Republican allies.

“If President Trump succeeds like he wants to succeed, we are going to structurally shift the American economy from one over-reliant on income taxes and the Internal Revenue Service, to one which is also reliant on tariff revenue and the External Revenue Service,” Navarro said in an interview at POLITICO Playbook's First 100 Days breakfast series on Tuesday.

Trump and his advisers have argued in recent months that the revenue drawn from tariffs could replace the income tax as the primary revenue source for the United States. And Trump promised shortly before being sworn in to his second term that he would create a new “External Revenue Service” on his first day in office to collect those tariff payments. Ultimately, Trump signed an executive order asking officials to study the feasibility of creating such an agency.

Navarro pointed to the timeline laid out in that executive order, which set a due date of April 1 to study its feasibility.

Currently, the U.S. Customs and Border Protection, an agency overseen by the Department of Homeland Security, collects tariff payments, which are not paid by foreign countries, as Trump and his aides have suggested, but by the companies importing the products subject to the tariffs. Economists, meanwhile, have warned that Trump’s tariff plans could also drive up prices for consumers, sparking inflation.

Many economists and lawmakers have also pointed out that it is extremely unlikely Trump can collect enough revenue from tariffs to replace the more than century-old federal income tax system.

Even some of Trump’s Republican allies have expressed unease about relying on tariffs as a source of revenue, including the top Republican on the influential Ways and Means trade subcommittee, Rep. Adrian Smith (R-Neb.). Speaking prior to Navarro, Smith said at Tuesday’s event that he didn’t want the U.S. “to become dependent on tariff revenue, because that speaks to the fact that it's just another tax.”