U.S. Treasury Deal Kills ‘Revenge Tax’ Plan, Calming Wall Street and G7 Concerns

Key Points

• It seems likely that a recent U.S. Treasury deal with G-7 allies has eliminated the 'revenge tax,' a proposed measure causing concern on Wall Street.

• The deal appears to protect U.S. companies from certain foreign taxes, addressing fears of reduced foreign investment.

• Research suggests this could stabilize financial markets, though market reactions show mixed responses.

Background

The 'revenge tax,' or Section 899, was part of President Donald Trump's tax bill, aimed at countering taxes on U.S. firms by countries like European nations, Canada, and Australia, seen as discriminatory.

The Deal

The Treasury Department announced an agreement with G-7 allies, excluding U.S. companies from some foreign taxes, like digital services and global minimum corporate taxes, in exchange for dropping the 'revenge tax.'

Market Impact

Initial market reactions include a declining Bloomberg Dollar Index and rallying Treasuries, with the S&P 500 nearing all-time highs, though the deal's full impact is uncertain.

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Survey Note: Detailed Analysis of the Treasury Deal and 'Revenge Tax'

The recent announcement by the U.S. Treasury Department regarding a deal with G-7 allies has significant implications for U.S. financial markets, particularly in relation to the proposed 'revenge tax' that had been causing unease on Wall Street. This note provides a comprehensive overview, drawing from multiple sources to ensure a thorough understanding of the situation as of June 27, 2025.

Understanding the 'Revenge Tax'

The 'revenge tax,' officially designated as Section 899, was a provision within President Donald Trump's "One, Big, Beautiful Bill," a comprehensive tax legislation. This measure was drafted by House Republicans and supported by the White House, with the intent to retaliate against what were perceived as discriminatory tax policies imposed by several foreign nations, including European countries, Canada, and Australia. Specifically, it targeted countries implementing digital services taxes on U.S. tech companies and those adhering to the OECD's 15% global minimum corporate tax, negotiated under former Treasury Secretary Janet Yellen during President Joe Biden's administration and agreed upon by over 140 countries

The 'revenge tax' would have increased tax rates for countries with tax policies deemed "discriminatory" by the U.S., aiming to protect U.S. firms from additional financial burdens abroad. However, this proposal sparked significant concerns on Wall Street, with fears that it could deter foreign direct investment in the U.S., potentially impacting economic growth and international business relations

The Treasury Deal with G-7 Allies

On June 26, 2025, the Treasury Department, led by Secretary Scott Bessent, announced a deal with G-7 allies that addresses these concerns. The agreement excludes U.S. companies from certain taxes imposed by other countries, particularly those related to OECD Pillar 2 taxes, which are part of the global minimum tax framework. In exchange, the U.S. has committed to removing Section 899, the 'revenge tax,' from the aforementioned tax bill

Treasury Secretary Bessent stated on social media, “OECD Pillar 2 taxes will not apply to US companies, and we will work cooperatively to implement this agreement across the OECD-G20 Inclusive Framework in coming weeks and months.” He further requested that the Senate and House remove Section 899 from consideration, a request promptly supported by congressional tax committee chairs, Representative Jason Smith and Senator Mike Crapo, who agreed to preserve U.S. tax sovereignty

This deal is seen as a move to enhance certainty and stability for the global economy, potentially boosting growth and investment in the U.S. and beyond, as noted in statements from the Treasury Department

Market Reactions and Implications

The financial markets have shown mixed initial reactions to this development. The Bloomberg Dollar Index has declined for the fourth consecutive day, while Treasuries have rallied, and the S&P 500 approached an all-time high, though largely before the deal's announcement late on June 26, 2025

Additionally, Scott Semer from Torys LLP in New York highlighted that this development is positive for non-U.S. investors, providing greater certainty for their investments

Broader Context and Political Dynamics

The 'revenge tax' was part of a broader push by the Trump administration to assert U.S. tax sovereignty, particularly in response to the global minimum tax, which Republicans and the Trump administration criticized for ceding control to international bodies

The deal with G-7 allies reflects a diplomatic approach to resolve these tensions, balancing domestic policy goals with international cooperation.

X posts from financial news accounts, such as @business and @tax, have echoed the deal's details, reinforcing the narrative of relief for Wall Street

Detailed Breakdown of Key Elements

To organize the information, the following table summarizes the key aspects of the 'revenge tax' and the Treasury deal:

Aspect	Details
Revenge Tax (Section 899)	Drafted by House Republicans, supported by White House; aimed at countering discriminatory foreign taxes on U.S. firms, particularly digital services and global minimum taxes.
Concerns on Wall Street	Feared deterrence of foreign investment, potential impact on U.S. economic growth and international business relations.
Treasury Deal with G-7	Excludes U.S. companies from OECD Pillar 2 taxes; removes Section 899 from Trump's tax bill; to be implemented across OECD-G20 framework.
Statements	Treasury Secretary Scott Bessent announced deal, requested removal of Section 899; congressional chairs agreed to preserve U.S. tax sovereignty.
Market Reaction	Bloomberg Dollar Index declined, Treasuries rallied, S&P 500 neared high; mixed expectations on market impact.

This table encapsulates the core elements, providing a clear reference for understanding the situation.

Conclusion

The Treasury deal with G-7 allies appears to have effectively addressed the concerns surrounding the 'revenge tax,' offering relief to Wall Street by ensuring U.S. companies are protected from certain foreign taxes while removing a contentious domestic tax measure. As of June 27, 2025, the agreement is poised for implementation across the OECD-G20 framework, with ongoing monitoring needed to assess its full economic impact.

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Key Citations

• Treasury Deal Kills Revenge Tax Spooked Wall Street Bloomberg

• US Treasury Deal G7 Kills Revenge Tax Business Standard

• Trump Administration Tells Congress Kill Revenge Tax New York Times

• Business posts on X about Treasury Deal

• Tax posts on X about Treasury Deal

• BigBreakingWire posts on X about Treasury Deal

• AccountingToday posts on X about Treasury Deal

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