Donald Trump’s new “revenge” taxes under the One Big Beautiful Bill Act have raised concerns among analysts about the potential threat to foreign investment in the US. Section 899 of the bill allows for higher taxes on foreign individuals, businesses, and investors from jurisdictions with perceived “unfair foreign taxes” on US entities. This provision could lead to a significant impact on foreign investors’ sentiment towards US assets, potentially chilling investment due to concerns about the country’s openness.

UniCredit, an Italian bank, warns that section 899 could harm foreign investor sentiment towards US dollar-denominated assets, especially considering the substantial holdings of US assets by foreigners. The tax, starting at 5% and increasing annually up to 20%, could be used as a bargaining chip in trade negotiations and to fund corporate tax reductions.

UK companies, particularly those listed on the London Stock Exchange, may face challenges under section 899 due to existing digital services and diverted profits taxes. Goldman Sachs identifies potential exposure for UK corporates, with companies like Pearson, Experian, Rentokil, and Hikma highlighted as particularly at risk. However, companies majority-owned by US shareholders are exempt, prompting considerations for relocation to the US market to mitigate tax risks.

The implications of section 899 extend beyond the UK, with French companies also vulnerable due to France’s digital services tax. Overall, the potential impact of these new taxes on foreign investment in the US raises concerns about the future of international investment dynamics and trade relationships.