The second Trump administration has made numerous announcements on trade and tariffs, but US tax policy is increasingly woven into the discussion on international trade. This includes the possibility of retaliatory US action against “discriminatory or extraterritorial taxes” imposed by other countries.

The US House Budget Reconciliation Bill, officially titled the “One Big Beautiful Bill Act", was recently passed by the House of Representatives and includes retaliatory US tax measures in response to “unfair foreign taxes” - with digital services taxes (DSTs) and the undertaxed profits rule (UTPR) of the Pillar 2 global minimum tax regime expressly identified as falling in this category.

In our latest podcast US tax expert Claude Stansbury, UK tax expert Emily Szasz and international trade expert Lorand Bartels join Josh Critchlow to discuss the latest on this intersection of US tax and trade policy, including:

details of the measures in new proposed section 899 of the US tax code (including increased withholding tax rates), the impact the measures could have on multinational groups with US operations, the interaction of section 899 with double tax treaties, and when these measures could take effect;
a deeper dive into the taxes considered to be "unfair foreign taxes" and which countries may be in-scope of proposed section 899;
previous use of US trade measures in response to tax rules imposed by other countries and how the proposed retaliatory tax measures fit into the rapidly evolving international trade landscape; and
possible next steps, including:
- what actions may be taken at an OECD/EU level to address US concerns in respect of the identified "unfair" taxes; and
- whether proposed section 899 could itself be subject to challenge under trade laws.

Note: this podcast was recorded on 30 May 2025 and does not cover developments after this date.

Tax matters: Trump 2.0 - the intersection of US tax and trade policy

The Freshfields Podcast

Tax matters: Trump 2.0 - the intersection of US tax and trade policy