The Republican Party's proposed major tax reform bill includes a provision, known as Clause 899, that allows the U.S. Treasury to impose a maximum 20% "retaliatory tax" on foreign companies and investments' income in the U.S. This measure aims to penalize countries that discriminate against U.S. companies or implement unfair tax systems. While it is estimated that this could generate an additional $116 billion in tax revenue over ten years, experts warn that this clause could act as a "financial bomb," potentially driving investment capital out of the U.S. and exacerbating volatility in stock, currency, and bond markets.

Allianz warns that merely passing this clause could result in a 10% drop in the U.S. stock market, a 5% depreciation of the dollar, and a sharp rise in U.S. bond yields by 0.5 percentage points. Around 70 multinational corporations, including Japan's Toyota, Netherlands' Shell, and France's LVMH, have jointly warned that Clause 899 could undermine foreign investment confidence, threatening to jeopardize approximately 8.4 million local jobs. They are reportedly planning to send representatives to Washington this week to lobby against the passage of the bill.

Moreover, the Wall Street Journal reports that the gap between the highest and lowest yields of major U.S. asset classes such as U.S. stocks, Treasury bonds, and corporate bonds has fallen to the lowest level in 40 years, indicating that current returns on any U.S. assets are not significantly different. This reflects that not only are the returns on riskier assets below average, but the security assets also provide lower protection compared to the past, shaking market confidence. Trump's policies, including tariffs and Clause 899, continue to test investors' faith in dollar assets.