Associated Press, by Josh Boak
WASHINGTON (AP) – President Donald Trump likes to say he brings trillions of dollars into foreign investment, but the provisions in his tax cut bill will help international companies avoid expanding to the US.
The version passed in the Legislative House allows the federal government to impose taxes on foreign companies and investors from countries determined to charge “unfair foreign taxes” against US companies.
The measure, known as Section 899, could allow businesses to avoid investing in the US out of concerns that could lead to sudden taxes. The fate of this measure rests on the Senate, which will spark debate about its prospects and implications.
A new analysis by the Global Business Alliance, a trade group representing international companies such as Toyota and Nestlé, estimates the provision will cost $55 billion per year in 10 years in gross domestic product losses. The analysis estimates that taxes can reduce one-third of the economic growth expected from the overall tax cuts by the Joint Taxation Commission.
“Advocates say the punitive tax hike is intended as a retaliation measure against foreign governments, but the report confirms that the true victims are American workers in states such as North Carolina, South Carolina, Indiana, Tennessee and Texas.”
Missouri Republican Rep. Jason Smith, chairman of the House Way and Means Committee, defended provisions that protect the interests of the United States by giving the president the tools he can use against a country that, in the opinion of the federal government, can use against American companies.
“If these countries decided to withdraw and act on these taxes, we would have achieved our goal,” Smith said in a statement last week. “That’s just common sense. I urge my Senate colleagues to pass this bill and move quickly to protect Americans from bad economic actors around the world.”
House Republicans have long been considering the issue, and the bill provides flexibility so that the president doesn’t have to collect taxes. During Joe Biden’s presidency, there were concerns among GOP lawmakers that a national agreement on a corporate tax code could lead to foreign governments charging more US businesses.
Taxes are in radical tension within Trump’s policy agenda. Trump’s broad strokes, as well as the contradiction of trying to tax imports and foreign profits at a higher rate, calls for investment from overseas-headquarters.
In late May, Trump defended his approach, saying that his tariffs were investing in the US in more countries and avoiding imports being taxed. Although some countries and businesses have made announcements, there is no evidence that investments are driving up spending on new factories, as measured in the government’s monthly report on construction spending.
The Republican president said the trend of imposing sudden tariffs and then retreating to low rates was successful.
“We’re investing in the $14 trillion we’re committed to investing,” Trump said. “I know we have the hottest countries in the world. I went to Saudi Arabia. The king told me, he said, you said the hottest. We have the hottest countries in the world now.”
The Global Business Alliance was one of the groups that signed a letter warning about the outcome of Section 899 to Republicans, both South Dakota Senate Majority Leader John Tune and Idaho Senate Finance Committee Chairman Mike Krapo.
The Institute of Investment Companies, which represents the financial company, said the provision “could limit foreign investment in the United States. This is a key driver of the growth of the American capital market, which will benefit the profits that American families will ultimately save for their future.”
The analysis carried out by EY’s quantitative economics and statistics states that there is some degree of uncertainty about how taxes under section 899 can be carried out and other countries can respond. However, as in some European cases, you could be charged against companies based in countries that tax digital services.
If the US deems taxes unfair, there is a 30% tax rate on the profits and income of foreign companies. People who work in the US for businesses that are not citizens can also be taxed, among other regulations. Still, exemptions are in place to ensure that foreign holders of US debt are not affected by the potential new taxes.
Chye-Ching Huang, executive director of the New York University Tax Law Center, said the tax potential and seemingly arbitrary nature are also challenges.
“In Section 899, we will create a political chicken game with trading partners at risk of hurting businesses, consumers and workers in the hopes of ensuring the ability to shift profits from the US and move to havens,” Huang said in an email. “This is a high-risk strategy that can increase the damages of a failed tariff war.”
It could also be a political impact if a key nation in Trump’s political coalition from 2024 is suffering from layoffs or simply feels that employment growth is slowing down. The Global Business Alliance has found that Florida has the potential to reach 44,200 unemployment, Pennsylvania, 27,700 in North Carolina, and 24,500 in Michigan.
Associated Press Writer Fatimahssein contributed to this report.
Original issue: June 10th, 2025, 12:32pm EDT
