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Retaliatory taxes on foreign companies operating in the U.S. could open the door for a broader economic conflict.
Reporting from the G7 finance ministers meetings in Banff, Alberta.
May 21, 2025Updated 3:05 p.m. ET
The sweeping policy legislation that Republicans are pushing through Congress is poised to reignite international tax and trade wars that have been on hiatus as policymakers around the world grappled with how to overhaul the global tax system.
Since taking office, President Trump has made clear that he wanted nothing to do with a 2021 deal brokered by the Biden administration that aimed to rewrite the rules of how the world’s largest companies would be taxed around the globe. That deal, which was agreed to by the Group of 7 countries, created a new global minimum tax rate of at least 15 percent that companies would have to pay, regardless of where they locate their headquarters.
House Republicans are now pressing ahead with a bill that would essentially punish companies from those countries that move ahead with the global minimum tax. The legislation would substantially increase the tax bills for foreign companies that operate in the United States if they are based in countries that try to enforce the 2021 agreement and collect higher taxes from American multinational firms.
A measure tucked in the One Big Beautiful Bill Act would increase tax rates on such companies by as much as 20 percentage points over time if their headquarters are in “discriminatory foreign countries.” The bill defines “unfair foreign taxes” broadly, giving the United States discretion over how and when it could impose new taxes on foreign firms.
The looming tax fight is expected to be a topic of discussion as finance ministers from the Group of 7 nations gather in Canada for three days of meetings this week. The issue had been simmering in the background as officials grappled with the fallout from Mr. Trump’s trade war. If Congress passes the legislation it is likely to become a more prominent source of tension between the United States and other nations.
“Every country is sovereign in how they determine what’s in their best interest and their tax policy,” François-Philippe Champagne, the Canadian finance minister, said on Tuesday when asked about U.S. concerns over Canada’s digital services taxes and the potential for retaliation.
