Donald Trump warns of doubling tax rates on foreign nationals and firms operating in the US: Report

United States President Donald Trump has alleged “discrimination” against American companies by other countries and threatened to double tax rates for foreign nationals and companies in the US, as per a report by the Financial Times.

Trump claimed the levies on American MNCs are “discriminatory” while seeking to justify a tax move that could trigger a global domino effect, the report added.

How Will US Check For ‘Discriminatory Taxes’? What Does This Mean?

The report said that this comes as part of an order signed by Donald Trump on January 20, where he directed the US Treasury Secretary to “investigate” if foreign countries are subjecting US citizens or companies to “discriminatory or extraterritorial taxes” under Section 891 of the US Tax Code.

Trump is serving his non-consecutive second term as US President after winning the elections against Democratic candidate Kamala Harris in November 2024. On his first day in office he signed a slew of executive orders including pulling the US from the World Health Organization (WHO); removing birthright citizenship for children of illegal immigrants; and repealing diversity, equality and inclusion (DEI) roles in federal institutions, and more.

What is Section 891? How Can Donald Trump Use it to Double Taxes?

On January 20, Donald Trump signed an order which referenced the yet obscure 90-year-old provision — Section 891 — in the US Tax Code, which allows him to “retaliate against foreign countries” through punitive taxes on their citizens and businesses in America, the FT report said.

Furthermore, Section 891 allows the US president to double tax rates for “citizen and corporation of such foreign country” without approval from the US Congress, it added. This aligns with Trump's much touted “America First” campaign slogan, but will likely trigger counter measures from other countries, if imposed.

Who Will Likely Be Affected?

While there is no clear answer for this yet, as the order scope is broad, the report noted that in the past, EU leaders butted heads with Donald Trump over proposed digital taxes that would apply to US big tech players such as Apple and Alphabet. During his first term as president, Trump had threatened France with tariffs, as a result. Also, in 2024, Canada introduced a “digital services tax” that the US called “discriminatory” against American companies and opposed.

What Is Expected to Happen?

Grant Wardell-Johnson, global head of tax policy at accountants KPMG, told the FT that the US could impose additional taxes on foreign-owned businesses in the US or withhold 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.

OECD secretary-general Mathias Cormann told the paper that 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”.

On the Europe front, EU economy commissioner Valdis Dombrovskis told the FT that the Commission “regrets” the tax announcement but is interested in “taking the time to discuss this matter with the new US tax administration.”