Donald Trump has threatened to double tax rates for foreign nationals and companies in the US to hit back at “discriminatory” levies on American multinationals, in a move that threatens to trigger a global confrontation over tax regimes.
In a memo outlining his “America First” trade policy on Monday, the US president referred to an obscure 90-year-old provision of the US tax code — Section 891 — that empowers him to retaliate against foreign countries by imposing punitive taxes on their citizens and businesses in America.
The threat came as Trump primed his administration for a wide-ranging international tax fight, with digital services taxes against big tech groups and an OECD-brokered minimum corporate tax regime in its sights.
His order, signed on Monday, specifically asks the Treasury secretary to “investigate whether any foreign country subjects US citizens or corporations to discriminatory or extraterritorial taxes” so it conforms with Section 891.
This section says that when a president formally declares there is such discrimination, the tax rates should “be doubled in the case of each citizen and corporation of such foreign country” — without needing Congressional approval.
“This [invoking Section 891] is the most extreme option and it’s interesting that they’re threatening to use it straight out of the gate,” said Alex Parker, tax legislative affairs director at Eide Bailly. “Based on the way the legislation is worded, it does seem to be double or nothing.”
Trump also issued a separate policy memo withdrawing US support for last year’s OECD global tax pact, which allows other countries to levy top-up taxes on US multinationals.
He added that the “list of options for protective measures” should be drawn up “within 60 days”, putting signatories to the OECD pact — including EU member states, the UK, South Korea, Japan and Canada — on notice that Washington intends far-reaching challenges to global tax rules.
European leaders clashed with Trump during his first term as president over proposed digital taxes that would affect big US technology groups such as Apple and Google’s owner Alphabet, threatening France at one point with tariffs.
Canada also introduced a “digital services tax” last year that the US has opposed as “discriminatory” against American companies.
Trump’s memo on the OECD on Monday also includes investigating “whether any foreign countries are not in compliance with any tax treaty with the US or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies”.
Everett Eissenstat, a partner at Squire Patton Boggs and former Trump administration official, said the trade and OECD memos represented the “merging of tax and trade policy, which has really taken root in this term of Trump’s presidency”.
He added: “This is likely aimed at jurisdictions where corporations have housed a lot of their intellectual property like Ireland, and it also likely gets at what the EU is doing on trying to extract more revenues from US tech companies.”
Former UK trade department official Allie Renison, now at consultancy SEC Newgate, said the move showed Trump was widening the “economic warfare” net far beyond tariffs in response to what the US sees as discriminatory practices from other countries.
The global deal agreed at the Paris-based OECD in 2021 and partly introduced by several countries last year was expected to raise the tax take from the world’s biggest multinationals by up to $192bn a year.
Under “pillar two” of the OECD deal, if corporate profits were taxed below 15 per cent in the country where the multinational was headquartered, signatories could potentially charge top-up levies. One part of the interlocking measures, known as the undertaxed profits rule, has long drawn Republican anger, with the party labelling it “discriminatory”.
Grant Wardell-Johnson, global head of tax policy at accountants KPMG, said US responses could include imposing additional taxes on foreign-owned businesses operating in the US, or withholding taxes on payments to those jurisdictions.
“Ultimately we are seeing international taxation moving from a multilateral domain to a bilateral one based on strong unilateral assertions. It is a new taxation world,” he added.
One senior EU official said Trump’s billionaire technology entrepreneurs were pushing him to act on tax rather than trade. “The conversation on tariffs will be transactional but the real fight will move to where fortunes are at stake and big tech has an interest,” they added.
OECD secretary-general Mathias Cormann said: “There have been concerns raised with us by US representatives about various aspects of our international tax agreement.”
He added the organisation would “keep working with the US and all countries at the table to support international co-operation that promotes certainty, avoids double taxation, and protects tax bases”.
Valdis Dombrovskis, the EU’s economy commissioner, said that while the European Commission “regrets” the tax announcement it was interested in “taking the time to discuss this matter with the new US tax administration”.
Additional reporting by Paola Tamma in Brussels and Ilya Gridneff in Toronto
