Deepak Shenoy Raises Concerns About Trump's "External Revenue Service" Proposal

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Deepak Shenoy Raises Concerns About Trump's "External Revenue Service" Proposal

A Risky Move?

Capitalmind founder Deepak Shenoy has raised concerns about Donald Trump's proposed "External Revenue Service" (ERS), which aims to overhaul US trade policy by collecting tariffs, duties, and revenue from foreign trade partners.

Trump claims this move will ensure foreign entities "pay their fair share." However, Shenoy warns that altering the existing global financial arrangement could have significant consequences.

Currently, foreign nations trade goods for dollars, creating demand for US currency and government debt. This allows US banks to lend heavily to consumers, effectively subsidizing domestic consumption.

Trump's proposed tariffs could disrupt this balance, reducing foreign willingness to hold US debt and increasing borrowing costs for the government. This comes at a time when the US faces rising interest rates and escalating borrowing costs, further straining its fiscal position.

Higher tariffs could also trigger retaliation from trade partners and potentially shrink their appetite for US debt, amplifying financial vulnerabilities.

moving the tax burden from American citizens to foreign trade partners. He describes current trade agreements as "pathetically weak" and believes it's time for a change.

However, Shenoy highlights the risks of such a policy shift, emphasizing the potential for negative consequences on the US economy and its global financial standing.