Trump ‘revenge tax’ may open new front in global trade war, with consequences for your wallet
By Chris Matthews
A little-noticed provision in President Donald Trump’s sweeping tax and spending bill could spark the next battle in an escalating global trade war – and potentially unnerve an already rattled market for U.S. Treasurys that is critical to the global economy….Karen Petrou, managing partner at Federal Financial Analytics, warns that Section 899 may signal something far more consequential than a targeted trade response. In her view, it reflects a broader Trump-era shift toward economic nationalism, one that could fundamentally alter how the U.S. engages with global capital flows. In a Monday note to clients, she cited recent commentary by onetime Trump Fed board nominee Judy Shelton, who has criticized payments the Fed makes to foreign banks on the reserves they have deposited at the U.S. central bank. Petrou predicted that the Trump administration could soon cast these payments as giveaways to foreigners, even though they are a key pillar in the global dollar system, ensuring “dollar-clearing stability in a crisis.” The White House has proved willing to risk disrupting facets of the globalized economy, and Petrou argued that more such moves should be expected in the future. “An Administration determined to kick foreign students out of the United States will not hesitate to bar [interest payments on reserves] to foreign banks and maybe even central banks if the issue arises to its notice,” she wrote.