U.S. Treasury Secretary Scott Bessent is calling on the Senate and House of Representatives to act. He’s asking them to remove a controversial provision from President Donald Trump’s omnibus spending bill. Section 899, known as the “revenge tax,” aims to punish foreign investors from China and other enumerated countries. This measure affects new taxes by reducing their returns on U.S. equities and other assets. This request follows the announcement that U.S. officials had finally come to a “joint understanding” with other G7 countries about the contours of a global tax agreement.
Section 899 would have done a serious disservice to foreign investment by applying massive indirect tax burdens. Bessent said this change is critically important given what’s happened recently with international trade. Reminding the audience that OECD Pillar 2 taxes are only one piece of our global tax puzzle. He concedes that these taxes will not affect U.S. companies.
“Based on this progress and understanding, I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill,” – Scott Bessent
The call to repeal Section 899 fits into a larger trend aimed at stabilizing global markets during increasingly tense trade talks. In late May, President Trump threatened EU imports with tariffs of as much as 50%. This outside threat ignited fear within investors and market analysts. Right now, any vehicles and parts imported into the U.S. are subject to a hefty 25% tariff that was enacted last April.
As White House Press Secretary Karoline Leavitt said last week, the deadlines for restarting tariffs on EU countries, July 8 and 9, are “arbitrary.” She reiterated that there is room for flexibility in these timelines. She added that if any countries fail to negotiate a satisfactory trade agreement by these deadlines, “the president can simply provide these countries with a deal.”
“Perhaps it could be extended, but that’s a decision for the president to make,” – Karoline Leavitt
With talks still ongoing and as the end of quarter stock rebalancing progresses, European stocks are starting to bounce back. The pan-European Stoxx 600 index was seen recently trading 0.6% higher, with all but two sectors in positive territory. Most remarkably, the Stoxx Automobiles and Parts index jumped around 2%. Industries like automotive and extractive industries like mining followed closely behind, up 1.4% and 1.1%, respectively.
The talks in London have provided the indication on the possibility between the U.S. and China trade pact. Sit tight, it’s going to be a wild ride! All of this is set to be supplemented with a very broadly construed trade agreement to continue boosting market sentiment.
Bessent’s comments are emblematic of a larger effort to create a environment more welcoming to investment and growth at home and abroad. He stressed collaboration with G7 counterparts, particularly in pursuit of global economic stability.
“This understanding with our G7 partners provides greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond,” – Scott Bessent