Deutsche Bank Warns US Revenge Tax May Initiate Capital War

George Saravelos’ caution highlights the potential for a major shift in international capital and market stability.

The US’s proposed “revenge tax” in President Trump’s fiscal plan could drastically impact foreign investment, especially in US Treasuries. George Saravelos, Head of FX Research at Deutsche Bank, has voiced concerns, noting that Section 899 may lower the yield on Treasury securities by nearly 100 basis points. This proposed legislation could discourage investment and complicate deficit financing for the US.

Foreign governments might see reduced attraction in US assets, leading to a weaker USD if capital flows diminish. The impact on cryptocurrencies remains indirect, though macroeconomic changes often influence broader financial markets. If foreign inflows decline, the USD could weaken, subsequently affecting crypto sentiments and possibly stablecoin markets.

Historically, US protectionist policies like tariffs have resulted in international market volatility. The introduction of this tax could replicate such past events, influencing both traditional markets and cryptocurrencies. In the absence of official statements from other crypto leaders or regulators, uncertainty remains high. Understanding historical precedents offers insight; previous US tax measures led to strategic global investor repositioning. Key cryptocurrencies like BTC and ETH could face indirect impacts if fear of a capital war grows. As George Saravelos highlighted, “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…”