'US no longer a safe nation for investment': Why Carmignac chief economist thinks Trump's 'revenge tax' will backfire

Raphael Gallardo, chief economist at French asset manager Carmignac. warned that the United States is no longer a secure destination for foreign investors because of risks stemming from President Donald Trump's tax and spending bill, as reported by Bloomberg.
Gallardo is the latest market commentator to speak about the deep concerns over Section 899 of the bill, a provision that would increase tax rates for individuals and companies from countries whose tax policies the US considers 'discriminatory'. Some have dubbed the measure a 'revenge tax'.
During a briefing on the outlook for the second half of the year, Gallardo said, 'The United States is no longer a safe nation for investment.' Carmignac, which had about $39 billion under management at the end of 2024, titled its presentation ''From America First' to Global Financial Anarchy'.
Gallardo believes that Trump's unpredictable decisions on trade, along with the concerns around his foreign policy and the rule of law are all prompting traditional allies of the US to reduce their dependence and ties to the world's biggest economy. 'Why de-risk? Because the United States has become a totally unreliable military ally and so, one has to secure supply chains, find new markets,' as reported by Bloomberg.
According to Bloomberg data, the Wall Street consensus is that the tax provision would further decrease investors' confidence in US assets, which are already shaken by Trump's trade policies and America's deteriorating fiscal accounts.
The tax provision could trigger a 5 per cent fall in the dollar and a 10 per cent selloff across equities, according to Allianz SE chief investment officer Ludovic Subran.
Carmignac is diversifying asset allocations from the US to Europe, where Germany's historic fiscal reforms have given a boost to economic growth, reported Bloomberg.
German Chancellor Friedrich Merz has taken a series of measures to add weight to the country's military capacity, accelerate infrastructure spending and revive the economy through comprehensive corporate tax breaks. 'Trump managed to achieve what no one had managed before, and that's to make the Germans start to spend,' Gallardo said.
Bloomberg reported that European equities have emerged as clear winners worldwide this year as concerns over the Trump administration's trade policies encourage investors to reduce holdings of US assets. At the end of May, eight of the world's 10 best-performing stock indexes were European.
Carmignac handles a range of funds across equity, fixed income, diversified and alternative asset classes with different geographical focuses and target outcomes.
It was among asset managers who predicted the rally in global shares last year, dismissing talk of a bubble in equity markets, as per Bloomberg

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