United States President Donald Trump announced that federal income taxes would be “substantially reduced” once the new tariff regime is implemented. Trump shared this update through an April 27 post on Truth Social, emphasizing that the tax reductions would mainly benefit individuals earning less than $200,000 annually.

Trump also referenced the idea of creating an “External Revenue Service” funded through tariffs. This system would replace the Internal Revenue Service (IRS) in funding the U.S. government. The announcement comes after a period of changing trade policies that have influenced both financial markets and investor sentiment.

Trump’s Plan for Federal Tax Cuts After Tariffs

In his Truth Social statement, Trump explained that the government could reduce or even eliminate federal income taxes. He added that new tariffs on imported goods would fund government operations instead. The focus is on helping American workers and families, especially those earning below $200,000 annually.

Trump introduced this plan during an earlier October 2024 appearance on the Joe Rogan Experience. However, details about the proposed tax structure were limited at that time. Trump’s latest comments provided further clarity, connecting the tax cuts directly to the new tariffs.

The External Revenue Service Concept and Tariff Strategy

Trump described a shift toward an “External Revenue Service,” suggesting the government would rely exclusively on import tariffs for funding. He linked the idea to the 19th-century Gilded Age when the U.S. did not have a permanent federal income tax.

On April 2, Trump signed an executive order imposing tariffs on all U.S. trading partners. The policy included a 10% baseline tariff and “reciprocal” rates based on each country’s duties on American goods. Since then, the administration has adjusted the tariff rates several times. These changes have affected market confidence and caused swings in stock and bond markets.

Market Reactions to Trump’s Federal Tax Cuts and Tariffs

Research by accounting automation firm Dancing Numbers suggested that Trump’s proposal could save the average American about $134,809 over a lifetime. If other wage-based taxes are also removed, the savings could reach $325,561 per individual.

Analysts, however, raised concerns about the stability of the proposed system. Many noted that relying only on tariffs could strain consumer prices and global trade relationships. Since April, financial markets have seen increased volatility, with stock prices fluctuating and bond yields rising.

Potential Effects on Cryptocurrencies and Asset Markets

Federal income tax reductions would have effects on crypto asset markets and cryptocurrencies specifically. More funds in consumer pockets would generate additional investments in cryptocurrency assets, Bitcoin (BTC), and Ethereum (ETH).

Financial markets can anticipate shaping from Trump’s continuously changing tariff policies, together with his shifting tax proposals during the upcoming months. Investor safeguards become essential during transformations because the U.S. Securities and Exchange Commission, along with other regulatory institutions uphold their mission to protect investors.