Section 899, often described as a “revenge tax”, was a controversial provision in President Donald Trump’s One Big Beautiful Bill Act — the federal tax and spending bill — that sought to hit back at countries taxing US firms abroad.
Senate Republicans agreed to drop the retaliatory tax proposal after the US reached an agreement with the Group of Seven (G7) industrial nations on Thursday, which earned a tax reprieve for American firms doing business abroad.
The section would have empowered the US Treasury to hike taxes by up to 20 percent on individuals, corporations, and sovereign wealth funds from countries deemed to have imposed “unfair” or ‘‘discriminatory’’ taxes on US firms.
The measure, seen as part of Trump’s policy to force nations to fall in line with his vision of global trade, was crafted as a direct response to what Republicans described as unfair treatment of American multinationals.
Both House and Senate versions proposed aggressive enforcement tools, including a broadened “Super BEAT” tax rules and limiting the protections usually provided by tax treaties. For example, a foreign company operating in the US that previously relied on a treaty to avoid double taxation could have suddenly faced much higher tax rates under the new rules.
These enforcement tools showed a bigger change in the Trump administration’s approach, choosing to act alone rather than work through global tax agreements.
The changes triggered concern among US allies and global investors, who warned they could discourage foreign investment and lead to legal disputes.
The taxes that prompted the inclusion of Section 899 in the federal tax bill were widely used by member countries of the Organisation for Economic Cooperation and Development (OECD), such as France, the UK, Canada and Australia.
One of these tax rules requires large international companies to pay at least 15 percent in taxes in every country where they do business. Another is aimed at stopping foreign companies from moving their profits to tax havens, countries with very low tax rates, to avoid paying higher taxes elsewhere.
These instruments were designed to ensure large tech firms and multinationals paid their fair share in local markets, but US officials viewed them as economically discriminatory.
The 15 percent global minimum tax, negotiated under the Biden administration and endorsed by more than 140 countries, was widely seen as a landmark in international tax cooperation. However, Trump-era officials viewed the agreement as an overreach that compromised US tax sovereignty.
Section 899 was not merely a retaliatory measure. It marked a broader policy reversal, signalling Washington’s intent to reject foreign-imposed tax rules, even those shaped through multilateral consensus, such as the 15 per cent global minimum tax.
Analysts from the Financial Times explain that though Section 899 was ultimately dropped after the G7 deal, the episode revealed a growing willingness by Washington to weaponise tax policy in global trade disputes.
Why did 899 spark global concern?
Section 899 is primarily designed as a retaliatory tool against what US lawmakers described as “unfair foreign taxes”.
Critics warned that the measure, while intended to shield American companies from foreign tax regimes, could undermine multilateral cooperation by penalising countries implementing globally negotiated standards.
Beyond policy concerns, the proposal also raised broader diplomatic and economic alarms.
Investment groups and foreign stakeholders cautioned that the provision could deter capital from entering the US, potentially weakening America’s global investment climate.
Industry groups, including big financial and trade associations, warned that Section 899 would create uncertainty, hurt investor confidence, and make it harder for businesses to operate across borders.
In a joint letter to the American Senate leadership, groups such as the Global Business Alliance argued that the provision would disproportionately impact US subsidiaries of international companies and impede efforts to position the US as the most attractive destination for global investment.
Legal scholars and multinational stakeholders also cautioned that the provision’s punitive design, especially the proposed reductions in treaty protections and steep tax increases of up to 20 percent, risked undermining long-standing bilateral tax treaties.
These moves could have triggered complaints at the World Trade Organization (WTO) or led to arbitration.
As the Conference Board, a global think tank, warned, “Section 899 arguably violates bilateral tax treaties with the US and could have significant implications for foreign investment into the US because of the higher costs imposed on foreign individuals and companies as well as demand for US Treasuries if the tax is applied to interest on US government debt held by foreign persons and governments.”
From retaliation to retreat
Although initially supported by Republican lawmakers as a tool to counter what they saw as discriminatory foreign tax regimes, Section 899 was ultimately agreed to be withdrawn following internal divisions and mounting international pressure, according to Reuters.
Treasury Secretary Scott Bessent led the effort to scrap the measure after securing the key agreement at the G7 summit on June 26-27.
Under the “joint understanding,” G7 countries agreed to exempt US companies from the OECD’s global minimum tax rules, and in exchange, the US would remove Section 899.
Republican tax committee chairs confirmed the provision’s removal shortly after, clearing the way for final votes on the broader Trump tax plan ahead of the July 4 deadline.
The decision marked a turning point in the Trump administration’s push to shield American firms from international tax burdens through unilateral measures.
Politically, the move is also being seen as a strategic recalibration by the Trump administration, which has sought to balance nationalist economic policies with the need to maintain investor confidence and international financial ties.
The G7 compromise allowed US officials to claim a diplomatic victory while avoiding the risk of retaliatory tariffs, trade disputes, or further strain on US–Europe relations.
According to the National Association of Manufacturers, the G7 agreement and the removal of Section 899 represent a “massive triumph for manufacturing in America,” protecting both domestic and foreign-headquartered manufacturers from what industry leaders described as job-killing and discriminatory foreign taxes.
While the withdrawal of Section 899 helped avoid immediate disruption to foreign investment and treaty relations, similar proposals could resurface, particularly if global tax coordination falters or new digital tax disputes emerge.
For now, the international deal has provided temporary relief, but the underlying concerns in global tax policy remain far from resolved.
