Wall Street Slams Trump’s Foreign Investor Tax Timing as ’Economically Tone-Deaf’

Finance giants warn the proposed levy could spook global capital at the worst possible moment—just as markets wobble on recession fears. Because nothing says ’pro-growth policy’ like squeezing your biggest liquidity providers, right?

Countries affected by Section 899 may include Australia, Canada, the UK, and EU countries

According to law firm Davis Polk, most European Union countries, the United Kingdom, Australia, Canada, and others would fall under the scope of Section 899. For these foreign investors, the new rule would raise taxes on dividends and interest from U.S. stocks and certain corporate bonds by five percentage points each year over a four-year span. Sovereign wealth funds, which now enjoy an exemption on their American portfolio holdings, would also lose that benefit.

Jonathan Samford, president of the Global Business Alliance, warned that the impact would extend far beyond boardrooms. “This provision is not going to impact bureaucrats in Paris or London. It’s going to impact American workers in Paris, Kentucky, and London, Ohio,” he said.

Tim Adams, chief executive of the Institute of International Finance, which represents 400 of the world’s largest banks and financial institutions, called the MOVE “counter-productive.”

It is unclear whether the extra tax would extend to U.S. Treasury debt

Currently, interest on Treasury securities is usually tax-exempt for foreign holders. Imposing taxes on those payouts would mark a dramatic shift in policy. “

Section 899 is legally ambiguous regarding a potential tax on Treasuries,” said Lewis Alexander, chief economic strategist at hedge fund Rokos Capital Management. “Taxing Treasuries could be counter-productive as any potential revenues likely would be outweighed by a resulting increase in borrowing costs as investors sell the debt.”

Even if Treasuries escape direct taxation, the provision adds another LAYER of concern for international holders of U.S. debt. Many of these investors are already uneasy about America’s growing deficit and shifting trade tariffs. According to The Financial Times, a managing director at a large U.S. bond fund reported receiving anxious calls from foreign clients. “It’s not totally clear whether Treasury holdings will be taxed, but our foreign investors are currently assuming they will be,” the director said.

With foreign investment already retreating—partly a reaction to earlier tariff measures—Section 899 could further erode overseas demand for American assets.

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