President Donald Trump’s new tax proposal, known as the One Big Beautiful Bill Act, includes a controversial provision called Section 899. This clause allows the US government to impose extra taxes on foreign individuals, companies, and investors from countries that levy what the US considers “unfair foreign taxes” on American businesses.
The additional tax would start at 5% and could increase by 5 percentage points each year, reaching up to 20%.
Section 899 targets digital service taxes and “diverted profits taxes” that some countries use to tax US companies. Many European countries, including Italy, Germany, France, and the UK, have such taxes, putting their investors at risk of facing these higher US taxes. Analysts fear this could discourage foreign investment in the US and damage its reputation as an open market.
The Italian bank UniCredit highlighted that foreign investors have more than doubled their holdings of US assets in the past decade. They warned that Section 899 could backfire by reducing foreign demand for US dollar assets, potentially weakening the dollar’s status as a safe haven currency.
UK companies listed on the London Stock Exchange could be particularly affected. About 30% of revenues for FTSE 100 companies come from the US, making them vulnerable to the new tax.
However, companies with majority US ownership are exempt, so some UK firms might consider moving their listings to New York to avoid the tax.
Experts also warn that Section 899 could escalate trade tensions into a “capital war,” where taxation becomes a tool to pressure foreign countries economically. This could lead to retaliation and reduce the overall flow of foreign investment into the US, potentially costing jobs and slowing economic growth.
The bill has passed the House of Representatives but still awaits Senate approval. The White House has set a deadline of July 4 for the Senate to act.
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