A major tax bill currently making its way through the U.S. Congress could give former President Donald Trump sweeping powers to retaliate against foreign nations that tax American tech giants like Amazon, Google, and Meta. Tucked into Section 899 of the 1,100-page proposal, this “sledgehammer” provision could reshape the global digital tax landscape — and not everyone is on board.
What’s in the Tax Bill?
Under the proposed legislation, Trump — if reelected — would be authorized to target countries that impose digital service taxes (DSTs) on American tech firms. Think of Germany’s recent proposal to tax platforms like Google 10%, or France’s existing digital tax on social media platforms. In response, Trump could direct the U.S. Treasury to hit back with higher taxes on individuals and companies from those countries that operate in the U.S.
Congress, which traditionally holds the power to levy taxes, would be handing Trump the ability to raise taxes on foreign businesses by up to 20 percentage points — year over year — if those nations are labeled “discriminatory foreign countries.”
Republican lawmakers behind the provision argue that if foreign countries can tax U.S. firms operating abroad, then their own firms should face the same treatment in America. “It’s about fairness,” said Representative Ron Estes of Kansas.
The $116 Billion Tax Hammer
The Joint Committee on Taxation estimates this provision could raise a whopping $116 billion over the next decade. But experts are divided. Some see it as a powerful bargaining chip to bring foreign nations to the negotiation table. Others fear it could drive away foreign investors and reduce confidence in the U.S. market.
“This new Section 899 brings a sledgehammer to the idea that the U.S. will allow itself to be labeled a tax haven,” said Peter Roskam, a former Republican congressman.
On the flip side, experts like Duncan Hardell from NYU’s Tax Law Center warn that aggressive tax retaliation may simply push investors to look elsewhere — like Europe or Asia — thereby hurting the U.S. economy long-term.
A Political Flashpoint
The bill is part of a larger Republican package aimed at extending Trump’s 2017 tax cuts, cutting back green energy incentives, and increasing immigration enforcement. Democrats largely oppose the bill but haven’t directly challenged the DST retaliation clause — likely because of broad bipartisan frustration with how foreign governments have been taxing U.S. digital services.
Section 899 also plays into Trump’s long-term economic agenda to reduce trade imbalances. By discouraging foreign capital, some analysts believe it could weaken the U.S. dollar, making American exports more competitive globally.
Uncertain Outcomes Ahead
While the bill passed narrowly in the House and is headed to the Senate, it remains unclear how the Treasury Department — or a potential Trump administration — would implement the powers if the bill becomes law. Would they immediately crack down, or simply use the threat to push countries to reconsider their tax policies?
As international tensions grow over how to tax the digital economy fairly, the U.S. seems poised to shift from a negotiator to an enforcer.
