To extract from a USB drive the best syntax is
gunzip -c /media/usb_drive1/file.tar.gz | tar -xvf -
The -c option extract to standard output which is the console.
-c --stdout --to-stdout Write output on standard output; keep original files unchanged
This is piped to tar. So if you keep the current directory where you want the extracted files to be, you can directly unzip from the USB drive