US: From trade war to capital war – ABN AMRO

Source Fxstreet

The One Big Beautiful Bill contains many worrying aspects that further increase the debt level, without a strong economic impulse. Beyond the headline tax cuts, it also contains some proposals for various taxes, such as Section 899, that look an awful lot like capital controls. Various members of the Trump administration have spoken out in favor of such controls. Similar to tariffs, capital controls can reduce the trade deficit, and similar to tariffs, they are stagflationary. In contrast to tariffs, capital controls in theory reduce the value of the dollar, ABN AMRO's economist Rogier Quaedvlieg reports.

Foreign investors may lose further confidence in the U.S.

"Section 899 of the Big Beautiful Bill enables the U.S. government to levy taxes on individuals and businesses from countries with 'discriminatory' tax regimes. According to the Tax Foundation, nations with 'unfair taxes' contribute approximately 80% of inbound foreign investment into the U.S. To some extent, the U.S. already possessed this capability under Section 891 of the current tax code, which could double the taxes for citizens and firms from such countries. A crucial distinction lies in the exemption for portfolio interest earned, potentially shifting foreign demand from other inbound investments to Treasuries, further supporting the notion that the government is actively seeking to bolster Treasury demand."

"A decline in demand for other U.S. assets would lead to higher borrowing costs and inhibit investment, reducing productivity and trend growth. Elevated borrowing costs would also suppress import demand, narrowing the trade balance. However, it would also adversely impact demand for domestically produced goods. The Federal Reserve could potentially intervene by lowering rates. This would further suppress the dollar, making imports more expensive, further narrowing the trade balance. Even then, this scenario confronts the same limitations already faced by the Trump administration: the U.S. economy cannot immediately produce all the goods it currently imports. The only solution is for the US to consume less."

"The overall impact on the economy would not be favorable, and the repercussions for financial markets could be significantly worse. This reputational damage has arguably been a major factor driving the dollar's devaluation in recent months. Ifc – which implementation of capital controls would certainly do - there would be severe adverse effects on the dollar and yields. A depreciated dollar would raise inflation, and higher rates would further impede investment. In summary, although the channels differ from tariffs, the outcome remains a stagflationary shock."

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Analyst Mocks Calls For XRP Price At $1,000, Says Take Profits At This LevelCrypto analyst Jaydee has called out market participants who predict that the XRP price could rally to as high as $1,000. The analyst suggested that the altcoin can’t reach such heights and
Author  NewsBTC
19 hours ago
Crypto analyst Jaydee has called out market participants who predict that the XRP price could rally to as high as $1,000. The analyst suggested that the altcoin can’t reach such heights and
placeholder
Bitcoin Breakout Not Just Hype—$4.4B Inflows Back The MoveBitcoin has set a new all-time high (ATH) above $112,000, and if on-chain data is to go by, there is some real conviction behind the move. Bitcoin Realized Cap Shows ATH Breakout Not Just Speculative
Author  NewsBTC
19 hours ago
Bitcoin has set a new all-time high (ATH) above $112,000, and if on-chain data is to go by, there is some real conviction behind the move. Bitcoin Realized Cap Shows ATH Breakout Not Just Speculative
placeholder
Market Expert Says It’s Now ‘Illegal’ To Short Bitcoin, Here’s WhyBitcoin’s price action has shown intense strength in recent days to finally bounce fully from the weakness in late June. After briefly dipping into the low $108,000 range in the past 24 hours,
Author  NewsBTC
19 hours ago
Bitcoin’s price action has shown intense strength in recent days to finally bounce fully from the weakness in late June. After briefly dipping into the low $108,000 range in the past 24 hours,
placeholder
Bitcoin Uptrend Intact, But Binance Activity Warns Of Short-Term PullbackBitcoin (BTC) reached a new all-time high (ATH) yesterday, climbing to $111,999 on Binance exchange before dipping slightly to around $110,000 at the time of writing. While the broader trend remains
Author  NewsBTC
19 hours ago
Bitcoin (BTC) reached a new all-time high (ATH) yesterday, climbing to $111,999 on Binance exchange before dipping slightly to around $110,000 at the time of writing. While the broader trend remains
placeholder
Ethereum Price Forecast: ETH tests $3,000 following strong ETF and treasury inflowsEthereum (ETH) climbed above $2,900 on Thursday, mimicking the rally seen in Bitcoin. Amid the influence of the top cryptocurrency, strong buying pressure across ETH exchange-traded funds (ETFs) and crypto treasury companies have also pushed up ETH's price.
Author  FXStreet
19 hours ago
Ethereum (ETH) climbed above $2,900 on Thursday, mimicking the rally seen in Bitcoin. Amid the influence of the top cryptocurrency, strong buying pressure across ETH exchange-traded funds (ETFs) and crypto treasury companies have also pushed up ETH's price.
goTop
quote