Currently, Trump’s capital tax measures are being rolled out through Congress, and the impact on the global market is frankly surprising. The new policy, buried deeply in section 899 of the Republican “Big Beautiful Bill,” allows the White House to impose taxes on foreign companies in countries that it considers discriminatory. At the time of writing, the US dollar collapse scenario and the possibility of a massive capital outflow from American assets is becoming a real concern among financial experts.
How Trump’s capital tax could cause crypto turmoil and dollar decline
Wall Street experts issue capital tax warnings
George Saravelos, global head of FX Research at Deutsche Bank, is extremely vocal about the issue. He warns that this approach challenges the open nature of US capital markets by explicitly using taxation on foreign holdings of US assets as a exploitative use to promote US economic targets.
Saravelos also warned of the weaponization of the US capital market, saying:
“This weaponization of US capital markets poses the risk of creating scope for turning trade wars into capital wars if the US administration wishes.”
And Deutsche Bank isn’t the only one who’s worried about it. Elias Haddad, a Harriman strategist with the Brown brothers, points out that the measure would block foreign investment in US assets when America becomes increasingly dependent on foreign capital to fund its growing debt pile. His ratings are dull – it’s simply not good for the dollar.
New policies accelerate global derailment
Trump’s capital taxes are extremely perplexed, as the weaponization of the dollar is already a concern. Russian currency reserves were recently frozen when Putin invaded Ukraine. Foreign Relations Council economist Zongyuan Zoe Liu has followed this development closely, and she is very clear about this issue.
Liu was clear about the following facts:
“The more the US uses it, the more diverse other countries will be for geopolitical reasons.”
In 2022, Congress gave the Biden administration the authority to take Russian dollar assets to support Ukraine. As a result of the provisions in this report, people have started talking again about how using dollars will ultimately increase US costs, and similar questions are now being raised about these new capital tax measures.
The impact of crypto markets due to rising capital outflows
The impact on the crypto market from these new policies is becoming more significant as investors seek alternatives to traditional dollar-controlled assets. Capital outflow from the US market could be accelerated as foreign entities consider reducing exposure to these new tax risks. Digital assets often act as hedges against currency instability and against government overreach.
Market volatility has already been seen as Trump’s broader economic agenda unfolds. His tariff threat surprised the Treasury market earlier this year, boosting a 10-year yield, exceeding 4.8% in April. The chaos did not remain trapped – it spread worldwide and hit Japanese government bonds particularly violently.
These policies have accelerated the global deco-op trend, and crypto assets are now positioned as potential beneficiaries. When traditional assets become more risky due to potential taxation, investors often rely on digital currencies as an alternative.
Congressional support despite the risks of dollars
Congress’ Republican allies are moving forward with controversial capital tax laws despite potential consequences of dollar hegemony. The 1,000-page document represents a major shift in the way America approaches foreign investment and how it uses the financial system as a weapon.
This timing coincides with Trump’s broader attack on the independence of the Federal Reserve. He threatens to fire Chairman Jerome Powell, limiting the Fed’s ability to independently make monetary policy decisions. These combined pressures create an environment where global repetition trends can be significantly accelerated.
At the time of writing, other countries are following news about Trump’s capital taxes. It turns out that several countries are already diversifying their currency sources, so they don’t rely on the dollar. Weaponization policies, uncertain regulations and geopolitical issues can lead to a collapse of the US dollar.
Those involved in financial markets worldwide are deeply concerned about what the future means for American financial control. As foreign investors are considering reducing their holdings of US investments, capital outflows will increase and the growing popularity of cryptocurrencies will have a major impact on the market.
