Donald Trump has threatened to double taxes on foreign companies and nationals as part of his “America First” trade policy.
A row has erupted over “discriminatory taxes” imposed on US businesses, which the president could root out using powers given to him as part of a specific clause in the US tax code.
Section 891 would allow Mr Trump to double taxes on foreign nationals and corporations if they’re found to be subjecting the US to “discriminatory or extraterritorial taxes”.
The Republican told the secretary of the treasury to discover whether “any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes pursuant to section 891 of title 26, United States Code”.
He has also withdrawn the US from the Global Tax Deal – an agreement on a global minimum corporation tax – as it forces countries to set up a minimum levy of 15% on company profits.
The agreement was championed by 140 nations, including the US under Joe Biden, and the EU officially adopted it last year in an effort to crack down on countries wooing businesses by lowering taxes.
Mr Trump argued that the agreement gave the Organisation for Economic Cooperation and Development (OECD) too much power over US tax policies after it helped forge the deal.
He issued an executive order to pull the US from the Global Tax Deal as it threatened US companies with “retaliatory international tax regimes” if they did not comply.
It read: “The OECD Global Tax Deal supported under the prior administration not only allows extraterritorial jurisdiction over American income but also limits our nation’s ability to enact tax policies that serve the interests of American businesses and workers.
“Because of the Global Tax Deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the United States does not comply with foreign tax policy objectives.”
The president added that it has “no force or effect” in his country and called for “a list of options for protective measures or other actions that the United States should adopt or take in response”.
The executive order, one of hundreds signed by Mr Trump since he took office on Monday, could fracture the US-EU relationship as they clash over tax policies.
It’s understood that the British Embassy in the UK is investigating how these new announcements from Mr Trump will affect the UK.
