Donald Trump’s ‘revenge' tax 'threatening foreign investment into US', analysts warn

16 June 2025, 07:46 | Updated: 16 June 2025, 07:56

Part of Donald Trump’s One Big Beautiful Bill Act could threaten foreign investment into the US, analysts have warned.

The so-called 'revenge' tax included in the bill will let the US impose higher taxes on foreigners, businesses and investors connected to jurisdictions that apply 'unfair foreign taxes' on US individuals and firms.

Max Yoeli, a senior research fellow in the US and the Americas programme at Chatham House, said this 'threatens to further alienate foreign investors'.

He added that it could hamstring investment into the US by questioning its 'fundamental openness'.

The Investment Company Institute, which represent financial business, said it 'could limit foreign investment to the U.S. — a key driver of growth in American capital markets that ultimately benefits American families saving for their futures.'

Section 899 of Trump's act says digital service taxes and 'diverted profits taxes' are unfair, as are any taxes that target US entities.

The measure would allow US authorities to slap an additional tax starting at 5% and increase this by five percentage points a year, up to 20%.

An analysis by EY Quantitative Economics and Statistics found there is uncertainty around how taxes under Section 899 could be imposed and how other countries may respond.

Businesses listed on the London Stock Exchange may decide to swerve the measure by changing their legal registration to New York.

Taxes could be charged against firms based in countries that tax digital services, such as in the case in parts of Europe.

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Meanwhile, an analysis by the Global Business Alliance trade group estimates that the move would cost the U.S. 360,000 jobs and $55bn annually over 10 years in lost gross domestic product.

Jonathan Samford, president and CEO of the Global Business Alliance, warned: 'While proponents say this punitive tax hike is intended as a retaliatory measure against foreign governments, this report confirms that the real victims are American workers in states like North Carolina, South Carolina, Indiana, Tennessee and Texas.'

Chye-Ching Huang, executive director of New York University’s Tax Law Center, told Associated Press: 'Section 899 creates a game of political chicken with trade partners that risks harming businesses, consumers, and workers in the hopes of securing US multinationals the ability to shift more of their profits out of the US to tax havens.

'It’s a high-risk strategy that could expand the damage of the failed tariff war.'

Republican Rep. Jason Smith of Missouri has defended the measure, arguing it will protect American business interests by giving Trump a tool to use against countries with tax codes that put US firms at a disadvantage.

He said in a statement: 'If these countries withdraw these taxes and decide to behave, we will have achieved our goal.

'It’s just common sense. I urge my colleagues in the Senate to move quickly to pass this bill and protect Americans from economic bad actors around the world.'

At the start of June, the White House said total new investments in the US were at roughly $5.3tn.

Trump has claimed more than $12 trillion (£8.8tn) had been 'practically committed' under his leadership.

But many of the 62 investments a White House list has included plans that were partially in the works before Trump became president.

'Nobody's ever seen numbers like we have,' he said, which he put down to his sweeping tariff agenda, tax cuts and deregulation.

He added: 'We have $14 trillion now invested, committed to investing.

'You know we have the hottest country anywhere in the world. I went to Saudi Arabia, the king told me, he said, you got the hottest -- we have the hottest country in the world right now.'

In April, Swiss pharmaceutical firm Roche announced plans to invest $50bn in the US over five years.

US manufacturer Corning is listed for a $1.5bn investment in a new manufacturing factory.

Stellantis is set to invest $5bn into reopening a plant in Illinois.

An analysis in May by Goldman Sach found that new investment following Trump's announcements totalled around $134bn.

However, this plummeted $30bn, not including investments backed by foreign governments, after experts factored in the risk that some projects may never materialise, or would have occurred anyway.

In April, Trump slapped most countries across the globe with huge tariffs ranging from 10% to more than 100% on goods brought into the US.

However, most of these tariffs were paused just weeks later after stock markets across the world plummeted. This pause is due to end soon.