President Trump’s “America First” economic agenda is increasingly targeting global financial flows, challenging long-standing practices of international financial arbitrage. This shift is exemplified by the introduction of Section 899 in the “One Big Beautiful Bill Act,” which proposes a “revenge tax” of up to 20% on passive income earned by foreign investors in U.S. assets, such as dividends and interest. The measure aims to retaliate against countries imposing taxes on U.S. digital services, notably within the EU and UK.
While the White House asserts that passive, non-controlling investments remain welcome, the broad scope of Section 899 has raised concerns among global investors. Analysts warn that such policies could deter foreign investment in U.S. assets, potentially leading to higher borrowing costs and destabilizing markets.
The financial sector is already responding to these uncertainties. Goldman Sachs, for instance, has moderated its risk-taking strategies in response to market volatility stirred by President Trump’s sudden tariff increases. John Waldron, the bank’s COO, stated that reducing risk, particularly in capital markets and trading, is a prudent approach amid global uncertainty and fluctuating investor confidence in U.S. dollar assets.
Furthermore, the U.S. dollar has experienced a significant decline, falling nearly 10% since Inauguration Day, as investors reassess the stability of U.S. fiscal policy. This depreciation, accompanied by a rise in long-term Treasury yields, indicates investor skepticism driven by inconsistent policy communication and fears of economic repercussions.
In summary, the “America First” policies, particularly the proposed Section 899 tax, are challenging the foundations of international financial arbitrage. These measures could have far-reaching implications for global capital flows, investor strategies, and the overall stability of the international financial system.
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