Trump is planning a tax war: Are EU investors now threatened with high taxes?

Trump is planning a tax war: Are EU investors now threatened with high taxes?

US President Donald Trump has announced intentions with his new draft law “One Big Beautiful Bill” that could have a serious impact on foreign investors. This move comes at a critical time, as the US House of Representatives passed the proposal on May 22 and the US Congress is now working to finalize the reform. The bill aims to introduce sweeping tax cuts for US citizens, reform of the Medicaid system and cuts to immigration funding. A central aspect of the law is the controversial Section 899, which imposes higher taxes on foreign companies and investors.

Section 899 aims to impose additional tax pressure on foreign investors from countries whose tax policies are considered “discriminatory.” The focus is particularly on the “Digital Services Taxes” and the “Undertaxed Profit Rule” (UTPR) of the European Union, which primarily affect multinational companies with an annual turnover of over 750 million euros. The proposed increase in tax rates on interest and dividends would increase by a total of 20 percent over four years, which could bring an estimated $116 billion to the U.S. treasury if the proposal is approved in the U.S. Senate. German investors are called upon to take the effects of this regulation into account in their financial planning, as there is a risk of high taxes on US dividends.

An impending capital war

With Section 899, Trump not only announced tax increases, but also a possible “capital war,” as experts warn. This new tax regime could put pressure on other countries to rethink and adapt their tax policies. Stock markets are already showing signs of nervousness, while investors are being asked to quickly rethink their strategies. Smaller investors are likely to be less affected, but larger institutional investors may decide to steer clear of US investments.

Trump sees the reform as a strategic means of influencing tax policy worldwide. Analysts note that the measures not only affect the US economy, but could also potentially cause long-term damage to the global economy and the economy. It is also reported that the US dollar has depreciated by over 9 percent against the Swiss franc since Trump's return to power, which could further exacerbate the impact.

The decision on the reform is still pending, but investors have until the end of the year to react and should prepare for corresponding changes. During this time, it will be crucial to address the complex tax environment that could arise from political developments in the United States.

For many investors, the question remains: How will U.S. tax policy affect international markets? In an increasingly globalized economy, Trump's legislative approach could have far-reaching consequences.