Today’s trade war is about to expand to include a new tax war. Proposed congressional legislation (Section 899 of the current fiscal budget bill) would add a punishing income tax on foreign firms operating in the U.S. This would be in retaliation of the OECD proposed minimum tax and digital tax on U.S. firms. U.S. business groups are opposing this new tax. We’ll see ………….

“Business lobbyists are working to kill a tax measure embraced by Republican lawmakers that would punish companies based in countries that try to collect new taxes from American firms …. These taxes would punish companies based in countries that either adhere to the terms of a 2021 global minimum tax agreement or impose digital services taxes on American technology companies …. The legislation is poised to reignite international tax and trade wars that have been on hiatus as policymakers around the world grapple with how to overhaul the global tax system …. The Global Business Alliance estimates that the tax measure, known as Section 899, could cost the United States 700,000 jobs …. The Trump administration is including concerns about digital services taxes and other international tax issues in its trade negotiations with dozens of countries.” “Proposed ‘Punish Tax’ on Foreign Firms in US for OECD Min Tax & Digital Tax.” New York Times (June 17, 2025).

“Much of the financial press has taken to labeling Section 899 of the reconciliation bill a “revenge tax”—generally leaving out what exactly it’s revenge for. The section would allow the Treasury secretary to tax certain income of residents and firms of a country that imposes unfair extraterritorial and double taxation of U.S. companies …. Section 899 would let the U.S. respond to this extraterritorial and double taxation. It could be used to withhold taxes on the income earned by individuals and firms or by the government that collects these taxes.” “Revenge Tax.” Wall Street Journal (June 19, 2025).