Although tariffs by U.S. President Donald Trump are levied in U.S. courts, another law that can make the U.S. tax system weapons.

Investment banks and law firms warn that this step may be as important as the impact of tariffs on investors.

The U.S. House passed the U.S. House of Representatives’ “A Big Beautiful Act” last week, which included the biggest changes in the U.S. tax treatment for foreign capital in decades under Section 899. The legislation still has to be approved by the Senate.

"We believe that if we want, the legislation establishes the scope for the U.S. government to turn a trade war into a major war," George Saravelos, head of global research at Deutsche Bank Global FX Research, said Thursday.

“Section 899 challenges the open nature of the U.S. capital market by taxing foreign assets of U.S. assets as a further U.S. economic goal.”

Bill 899 says it will attack entities that are “discriminatory foreign” — those who are taxed, such as digital services tax disproportionately for U.S. companies.

For example, France imposes a 3% tax on revenue from online platforms, which targets large tech companies, for example Google,,,,, Amazon,,,,, Facebookand apple. Germany is reportedly considering a similar 10% tax.

Under the new tax bill, the U.S. will escalate the tax rate on U.S. income by raising the tax rate by 5 percentage points per year, which could put interest rates up to 20%.

Emmanuel Cau, head of Barclays' European equity strategy, suggested that tax legislation alone can reduce the value of dollar assets.

"We believe this is a risk for companies that generate U.S. revenue and are resided in countries that issue Digital Service Tax (DST) or are implementing the OECD's Tax Payment Rules (UTPR)" Cau said in a note to clients on Friday.

He highlights companies like London listed Compass Groupprovide catering services to American schools, and InterContinental HotelThose who have at least 25 luxury hotels in the United States may be affected by the proposed law.

He added: “Given that our international net investment position is huge, if capital outflows are indeed passed through the Senate in its current form as S899, there is indeed capital outflows.”

The impact of the bill is not limited to European companies or individuals in these states.

The bill "can greatly increase the tax rates applicable to certain non-U.S. individuals and businesses, governments and other entities," said Max Levine, head of U.S. tax at law firm Linklaters.

This means it may also attract governments and central banks, which are Our treasury. For example, France and Germany had a total of $475 billion in U.S. government bonds as of March.

The proposed tax will lower returns on U.S. Treasury bonds because “in fact, yields on U.S. Treasury will drop by nearly 100bps,” added Deutsche Bank’s Saravelos. “Demand for UST and funding for the U.S. twin deficit when it is most needed”.

“It’s very bad,” said Wittmann, chairman of Porta Advisors, Switzerland-based. “It’s huge – it’s just part of the whole plan, which is exactly in line with the whole of this administration.”

"The ultimate judge is not our opinion, but the bond market," Wittman added. "The U.S. bond market is discounting these developments, and we have seen in the past few weeks that investors obviously prefer if there is a safe haven relocation." Germany column. ”

The bill also reportedly focuses on a large number of Australian pension funds invested by Australia as Australia adopts a drug subsidy program opposed by large U.S. pharmaceutical companies.

Legal experts at Mayer Brown law firms suggest that the bill could make "significant changes" to the bill, as it passed the U.S. Senate before Trump incorporated it into the law.

"So, there may be a question of whether the proposal's provisions could include tax treaties in the U.S. Senate version of the tax bill," said Mayer Brown's expert.