The Republican Party's tax reform proposal, called the 'Big Tax Reform,' includes a Clause 899 that allows the U.S. Treasury to impose a maximum 20% 'retaliatory tax' on the income of foreign companies and investors in the U.S. This is intended to punish countries that discriminate against American companies and impose unfair tax systems. Although it is estimated to increase tax revenue by $116 billion over the next 10 years, it could be seen as a 'financial atomic bomb' that may scare away investment, intensifying turbulence in the stock, currency, and bond markets.

Allianz warns that if Clause 899 is legislated, the U.S. stock market could plummet by 10%, the dollar could depreciate by 5%, and U.S. bonds might also suffer heavily, with yields likely rising by 0.5 percentage points. Approximately 70 multinational companies, including Japan's Toyota, Netherlands' Shell, and France's LVMH, have jointly warned that this clause could undermine foreign investment confidence, potentially jeopardizing 8.4 million local jobs. They plan to send representatives to Washington this week to lobby against the passing of the bill, but Trump has called for the Senate to pass the bill before July 4 to celebrate America's birthday.

The Wall Street Journal notes that the gap between the highest and lowest yields of major U.S. asset classes has fallen to the lowest level in 40 years, meaning that no matter what type of U.S. asset one holds, the return rates are not very different. This reflects that returns on risk assets in the U.S. are below historical averages, and the protection that safe assets provide is also lower than in the past, shaking market confidence. Trump's policies regarding reciprocal tariffs and Clause 899 continue to test investors' faith in U.S. dollar assets.