What the New Tax Bill Means for Cross-Border Portfolios

Michael Zezas, Global Head of Fixed Income Research and Public Policy Strategy, discusses Section 899, a provision in U.S. tax legislation that could significantly impact investors. This provision grants the U.S. Treasury the power to impose taxes on foreign companies if it deems other countries' taxation of U.S. businesses unfair, potentially overriding existing tax treaties. The immediate concern is the potential taxation of foreign holdings of U.S. bonds, which could increase costs and yields. While there's a possibility the Senate will amend or clarify Section 899, its enactment could negatively affect the U.S. dollar and European stocks, particularly in sectors with significant U.S. business. The podcast concludes by noting the possibility of the provision being removed entirely due to procedural reasons.