Deutsche Bank Warns of US ‘Revenge Tax’ Impact

• Lyla Velez
• June 1, 2025
• Uncategorized
• 0 Comments

George Saravelos of Deutsche Bank warns that the US’s “revenge tax” may ignite a capital war, impacting global markets.

George Saravelos’s warning highlights the potential for a shift from a trade to a capital war, affecting global capital flows.

US “Revenge Tax”

The US “revenge tax”, part of Section 899, raises taxes on foreign investors, notably impacting foreign yields and Treasury securities. George
Saravelos stated that this could transform trade tensions into broader capital conflicts, influencing investor confidence.

We see this legislation as creating the scope for the US administration to transform a trade war into a capital war if it so wishes, a development that is
highly relevant in the context of today’s court decision constraining President Trump on trade policy.

Foreign Individuals and Corporations

Foreign individuals and corporations are directly affected by this tax policy, which targets passive income and raises significant concerns
over US investment attractiveness. It may lead to reduced foreign investment inflows and increased volatility in capital markets.

Immediate effects include potentially reduced attractiveness of US bonds, impacting global
markets and financial liquidity. Treasury yields and other US dollar assets may see diminished appeal, affecting
capital inflows
from foreign governments.

Financial Implications

The financial implications may extend to cryptocurrencies as alternatives if US assets’ attractiveness wanes further. Past incidents have
shown digital assets like Bitcoin and Ethereum gain popularity during fiat uncertainty, albeit no direct market data reveals this shift yet.

While cryptocurrencies may benefit as
alternative asset classes, no significant
on-chain or staking changes are evident yet. The situation remains dynamic, with potential
regulatory or economic adjustments expected amid heightened market complexity.