Retaliatory tariffs revoked, "Buy America" slogan back! Australia relaxes as over 2 trillion US dollars flow in.

The Australian retirement industry, with assets totaling up to AUD 4.1 trillion (approximately USD 2.7 trillion), expressed relief and satisfaction at the U.S. government's decision to cancel the proposed "retaliatory tax" plan, which would have increased the tax burden on foreign investors' income. The change in the retaliatory tax plan has reignited immense interest from Australian pension funds and large institutional investors around the globe in the U.S. market, particularly in U.S. stocks, driving a renewed wave of "Buy America" enthusiasm. This ultimately led to a rise in the three major U.S. stock indices on Thursday, with the S&P 500 and Nasdaq nearing historic highs. According to financial industry statistics, the originally proposed plan to increase the U.S. income tax rates for non-U.S. companies could have profound implications - Australian pension funds have invested around USD 450 billion in the world's largest economy, covering assets such as infrastructure, stocks, U.S. Treasury bonds, and corporate bonds. "Seeing that the measure did not pass or was significantly weakened indeed makes it easier for us to invest in long-term U.S. assets." said Daniel Famer, Chief Investment Officer of MLC Asset Management. Famer pointed out that the impact of the tax could be "quite significant" in certain asset categories, including non-listed real estate and non-listed infrastructure. "This to some extent opens these markets to us in a less obstructed way." Section 899 of the "big and beautiful bill" led by President Donald Trump, known as the "retaliatory tax," raised tax rates only for countries that the U.S. deemed had unfair tax systems, including Canada, the U.K., France, and Australia, which levied a "digital services tax" on large tech companies (such as Facebook and Instagram Meta Platforms Inc.). For investors from these countries, the latest good news is that the U.S. Treasury Department announced an agreement with G7 allies, under which U.S. companies will be exempted from certain taxes in other countries. In exchange, the U.S. government will remove the "retaliatory tax" clause from Section 899. "Investors will remain cautious, and we will continue to assess, but from what we see now, this is a fairly good outcome." said Andrew Fisher, Portfolio Manager of Australian Retirement Trust (ART), managing assets of around AUD 330 billion. Australian Treasurer Jim Chalmers expressed direct concerns to U.S. Treasury Secretary Scott Bennett in a statement on Friday. "During that meeting, he said he was doing his best to advance the issue, and we are pleased to see most positive progress in today's statement." Chalmers added that Australia will "continue to constructively engage" in international tax rule discussions. In February of this year, a delegation from Australian pension funds visited Washington and New York in search of deeper and long-term investment opportunities in the U.S., but increasing tariff uncertainty forced some funds to reassess their positions. Before Benett made the above statement, Cbus Super Chief Investment Officer Lee Gavin, who manages assets of AUD 100 billion, stated that the potential taxation in the original plan made them cautious about certain transactions. "We have not made any infrastructure deals in the U.S. this year," he emphasized. "Predicting coverage for years under potential tax changes has become difficult, which makes us more cautious." The tax also prompted large Australian pension funds like AMP Ltd. to temporarily halt their long-term U.S. investment. The Australian Superannuation Funds Association (ASFA) welcomed the latest developments but noted that "there is still a long way to go" as the related amendments still need to be passed by legislators in the U.S. Congress. In a statement, James Cowal, ASFA's Chief Officer for Policy and Advocacy, said, "The potential legislative terms could change the risk-return structure of our investments in the U.S., which is unfavorable for all parties involved."