The Dollar(DXY) Posts Worst Start in History—Section 899 Asset Tax Deepens Dollar Woes

TradingKey - Although the easing of U.S.-China tariff tensions briefly slowed the selloff in dollar assets, the Trump administration’s proposed tax on foreign capital has delivered another heavy blow to the greenback. With the U.S. Dollar Index (DXY) down more than 8% year-to-date, the dollar is experiencing its worst start to a year since the index was launched.

Data shows that the DXY fell by 8.4% in the first five months of 2025, marking the largest decline over the same period since records began for the index, which tracks the value of the U.S. dollar against a basket of six major global currencies.

As of June 3, the DXY stood at 98.81, the lowest level in nearly three years, and down 8.87% year-to-date.

DXY Chart Over Last Three Years, Source: MarketWatch

Analysts argue that a controversial provision in the Republican-backed “Beautiful Big Bill”—known as Section 899—has further reinforced the narrative of a weakening U.S. dollar.

This provision allows the U.S. government to impose higher taxes on individuals and companies from countries deemed to have “discriminatory tax practices”, including increasing levies on passive income earned by foreign investors holding trillions of dollars in U.S. assets such as stocks, bonds, and real estate.

Deutsche Bank analysts described this as Trump’s attempt to shift from a trade war to a capital war, effectively weaponizing the U.S. financial system to achieve broader economic goals.

Wall Street warns that this move could accelerate capital outflows, further weakening the dollar.

Dollar Under Pressure

Morgan Stanley forecasts that the DXY could fall to 91 by mid-2026, matching pandemic-era lows. Goldman Sachs estimates that the U.S. dollar remains overvalued by around 15%.

Barclays analysts added that additional downward pressure on the dollar will come from weakening U.S. bond markets, escalating trade tensions and disappointing U.S. economic data.

Goldman Sachs’ economic model suggests that the current trajectory of global asset repositioning and repricing still leaves room for further depreciation in the U.S. dollar.