President Trump’s latest economic maneuver could reshape global trade dynamics. Section 899, buried within the One Big Beautiful Bill, grants the U.S. the power to impose higher taxes on foreign investors from nations deemed to have discriminatory tax policies against American businesses. The provision has been dubbed the “revenge tax”, and its potential impact is sending shockwaves through financial markets.
Foreign investors could soon face a 5% point annual increase on passive income taxes, including dividends and interest, with rates potentially reaching 20%. Analysts warn that this could escalate the trade war into a capital war, discouraging foreign investment in U.S. assets. The measure is designed to retaliate against countries imposing digital services taxes that disproportionately target American tech giants.
The stakes are enormous. The bill, which has already passed the House, is awaiting Senate approval. If enacted, Trump could wield Section 899 as a powerful tool to pressure foreign governments into rolling back tax policies that harm U.S. businesses. The Treasury Department would be responsible for maintaining a list of targeted nations, ensuring that retaliatory measures are enforced.
Wall Street is watching closely. Deutsche Bank analysts have warned that the provision could reduce foreign demand for U.S. investments, potentially weakening the dollar and making Treasury bonds less attractive. Some experts argue that the tax could deter capital inflows at a time when the U.S. is already facing fiscal challenges.
Supporters see it differently. House Ways and Means Committee Chair Jason Smith has defended the measure, stating that it will keep foreign governments “in check” and prevent them from unfairly taxing American companies. He argues that the tax serves as a deterrent rather than a direct economic weapon.
Sources:
https://www.axios.com/2025/05/30/taxes-section-899-big-beautiful-bill