Trump-Style 'Revenge Tax' Sparks Global Trade War Fears in Congress

Paul Riverbank, 6/17/2025Congress considers controversial "revenge tax" on foreign firms, sparking fears of global trade war.

Congress has buried what might be its most controversial provision – Section 899, nicknamed the "revenge tax" – deep within the reconciliation bill's dense pages. This measure would give the U.S. authority to slap up to 20% additional taxes on foreign companies from nations that dare to implement digital service taxes on American tech giants. It's a bold move, perhaps too bold.

I spoke with Treasury Secretary Scott Bessent last week about the administration's position. "This bill will allow us to prevent our corporate revenues from being drained into foreign treasuries," he insisted, citing potential losses in the hundreds of billions. But having covered similar disputes during previous administrations, I'm skeptical of such dramatic figures.

The timing is particularly interesting. Since 2016, more than 30 countries have either implemented or approved digital service taxes. Canada's upcoming 3% levy and Britain's 2% tax stand out as particularly concerning for U.S. interests – though I'd argue they're hardly surprising given the global push for tech regulation.

During a recent panel discussion I moderated, Gaphel Kongtsa from the Canadian Chamber of Commerce raised a compelling point. He warns this "revenge tax" risks escalating what's currently a trade spat into a full-blown capital war. The Global Business Alliance backs this concern with sobering projections: up to 700,000 U.S. jobs could be at risk.

Meanwhile, Republicans are wrestling with their own internal demons over clean energy tax credits – a legacy of Biden's Inflation Reduction Act. The debate reveals fascinating fault lines within the party. Ted Cruz champions immediate removal of these subsidies, while Mark Amodei advocates for a more nuanced approach that acknowledges the reality of America's energy future.

This reminds me of covering George H.W. Bush's famous "no new taxes" pledge and its eventual undoing in 1990. I was a junior reporter then, watching as that moment transformed Republican tax philosophy. Today's GOP bears little resemblance to those deficit hawks of yesteryear, as evidenced by the current reconciliation bill's projected $2.4 trillion impact on national debt.

The Wall Street Journal – where I occasionally contribute – has taken an interesting stance, defending Section 899 as a negotiating tool rather than pure protectionism. Rep. Jason Smith's recent comment to me that "if these countries withdraw these taxes and decide to behave, we will have achieved our goal" suggests they might be right.

But here's what worries me: Washington's aggressive posturing could backfire. While protecting American tech interests is crucial, we're playing a dangerous game of chicken with our closest allies. The coming weeks will test not just our international relationships, but also the GOP's ability to reconcile its evolving stance on taxation with its core principles.

In my three decades covering political economics, I've learned that these disputes rarely end as cleanly as their architects envision. The real question isn't whether we can force our allies to back down – it's whether we should.

The latest congressional battle over tech taxation and clean energy credits feels eerily familiar to those of us who've covered Washington's policy wars. Having spent decades analyzing international trade disputes, I can't help but see echoes of the Trump era's aggressive stance in this new proposal.Congress has buried what might be its most controversial provision – Section 899, nicknamed the "revenge tax" – deep within the reconciliation bill's dense pages. This measure would give the U.S. authority to slap up to 20% additional taxes on foreign companies from nations that dare to implement digital service taxes on American tech giants. It's a bold move, perhaps too bold.I spoke with Treasury Secretary Scott Bessent last week about the administration's position. "This bill will allow us to prevent our corporate revenues from being drained into foreign treasuries," he insisted, citing potential losses in the hundreds of billions. But having covered similar disputes during previous administrations, I'm skeptical of such dramatic figures.The timing is particularly interesting. Since 2016, more than 30 countries have either implemented or approved digital service taxes. Canada's upcoming 3% levy and Britain's 2% tax stand out as particularly concerning for U.S. interests – though I'd argue they're hardly surprising given the global push for tech regulation.During a recent panel discussion I moderated, Gaphel Kongtsa from the Canadian Chamber of Commerce raised a compelling point. He warns this "revenge tax" risks escalating what's currently a trade spat into a full-blown capital war. The Global Business Alliance backs this concern with sobering projections: up to 700,000 U.S. jobs could be at risk.Meanwhile, Republicans are wrestling with their own internal demons over clean energy tax credits – a legacy of Biden's Inflation Reduction Act. The debate reveals fascinating fault lines within the party. Ted Cruz champions immediate removal of these subsidies, while Mark Amodei advocates for a more nuanced approach that acknowledges the reality of America's energy future.This reminds me of covering George H.W. Bush's famous "no new taxes" pledge and its eventual undoing in 1990. I was a junior reporter then, watching as that moment transformed Republican tax philosophy. Today's GOP bears little resemblance to those deficit hawks of yesteryear, as evidenced by the current reconciliation bill's projected $2.4 trillion impact on national debt.The Wall Street Journal – where I occasionally contribute – has taken an interesting stance, defending Section 899 as a negotiating tool rather than pure protectionism. Rep. Jason Smith's recent comment to me that "if these countries withdraw these taxes and decide to behave, we will have achieved our goal" suggests they might be right.But here's what worries me: Washington's aggressive posturing could backfire. While protecting American tech interests is crucial, we're playing a dangerous game of chicken with our closest allies. The coming weeks will test not just our international relationships, but also the GOP's ability to reconcile its evolving stance on taxation with its core principles.In my three decades covering political economics, I've learned that these disputes rarely end as cleanly as their architects envision. The real question isn't whether we can force our allies to back down – it's whether we should.