A “revenge tax” buried deeply in budget bills could turn trade wars into “capital wars,” analysts say
- Section 899 of “One Big Beautiful Bill” Moving the council has increased the rise in alarms on Wall Street after former viewing provisions were initially overshadowed by the estimated impact on the shortage. Deutsche Bank warned that what is known as the “revenge tax” could further harm the appeal of US assets.
Wall Street has caused sharp cases of heartburn, especially as it continued to digest countless line items in its recently passed 1,000-page budget bill.
Section 899 of “One Big Beautiful Bill” moving through Congress raised an alarm that grows after the provisions of former observations were first covered by estimated effects on the deficit.
It is called “revenge tax” because it increases tax rates for individuals and businesses in countries with tax policies branded as “discriminatory.” This means that foreign investors who own trillions of dollars in US assets could face higher collections on passive incomes, such as dividends and interest payments.
Investors have already shifted to Europe and China as President Donald Trump’s aggressive tariff agenda erodes the idea of ”American exceptionalism.” Meanwhile, foreign investors have shown signs of Buyer’s strikeavoid US assets.
For George Saravelos, head of FX Research at Deutsche Bank, the idea of revenge tax could make them even less attractive. It is also worth noting in the wake of a Tuesday’s U.S. Trade Court Judgment It overridden Trump’s mutual tariffs as Section 899 could represent an alternative tool.
“We believe this law will create scope to turn trade wars into capital wars if the US administration wants to do so.
He pointed out that Section 899 uses taxation on foreign investors as an exploitation to advance US economic priorities and must meet a low bar before it is implemented.
Also, by reducing the de facto yield from the Treasury from the US Treasury by nearly 100 basis points, Saravelos estimated that cover deficits would be even more difficult.
The ultimate impact may be less, but the mere introduction of more uncertainty and complexity regarding investments in US assets “damage the appeal of dollar inflows when this is already being questioned,” he warned.
“It is not unreasonable to the market to conclude that if the President is constrained by the use of trade policies, foreign capital could be taxed,” he added.
Even Jason Smith, chairman of the Houseways and Means Committee, who supports the revenge tax, said during a panel discussion on Friday. I hope it will never be used Instead, they act like a deterrent to prevent other countries from unfairly cracking down on American businesses.
Meanwhile, the Joint Tax Committee, the Congress’ non-partisan tax scorekeeper, reflected some of Wall Street’s horrors.
Thomas Barsoldo, the committee’s chief of staff; said in a Bloomberg Tax statement This section 899 leads to “reduced foreign demand for direct and portfolio investments in the US.”
This story was originally introduced Fortune.com