Deutsche Bank says tax could erode the allure of US assets
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The so-called “revenge tax,” Section 899 in President Donald Trump’s fiscal package, has raised concerns among Wall Street investors and firms. Deutsche Bank even warned that tax could quickly erode the allure of US assets. The legislation item dictates an increase in tax rates for foreign individuals and companies that the government considers “discriminatory.” What worries investors more is that the policy extends to tax hikes on passive income, like interest and dividends. Wall Street analysts have warned that the provision could discourage foreign investors, especially since their confidence in the US market waned when Trump introduced tariffs earlier this year. Saravelos believes revenge tax depresses investor yield George Saravelos, head of FX research at Deutsche Bank, believes the “revenge tax” could reduce their appeal to investors, warning that it could even cultivate a capital war. He wrote: “We see this legislation as creating the scope for the US administration to transform a trade war into a capital war if it so wishes, a development that is highly relevant in the context of today’s court decision constraining President Trump on trade policy.” George Saravelos The United States Court of International Trade ruled against Trump’s tariffs, stating that the President is not authorized to set unlimited tariffs on nearly every country worldwide. However, Section 899 could serve as a workaround to impose new taxes. Saravelos argued that the legislation item uses taxation on foreign investors to push the US government’s economic goals and can be implemented with little justification. He added that the provision would only complicate deficit financing, slashing the effective yield foreign governments earn on Treasury securities by close to 100 basis points. He suggested that while his yield cut estimation may be off and may be less severe, any added uncertainty and complexity surrounding US investments further weaken the…
Filed under: News - @ June 1, 2025 7:23 am