New Bill Mandates Termination of U.S.-China Tax Treaty if Military Attacks Taiwan

This bill, dubbed the "No Tax Treaties for Foreign Aggressors Act of 2025," is short, sharp, and focused on one specific, high-stakes scenario. It essentially creates a trigger mechanism: if the President determines that the People’s Liberation Army (China’s military) has launched an armed attack against the Republic of China (Taiwan), the U.S. immediately starts the clock on ending the current U.S.-China Income Tax Convention of 1984.

The Automatic Economic Penalty

Under Section 2, once the President certifies this armed attack, the Secretary of the Treasury is required to send a formal notice to China within 30 days, announcing the U.S. intent to terminate the tax treaty. This isn't a suggestion; it's a mandate. This treaty is what currently prevents U.S. companies and citizens operating in China (and vice versa) from being double-taxed on the same income. Think of it as the financial plumbing that keeps cross-border business manageable.

What the Treaty Termination Really Means

For the average person, a tax treaty sounds like boring bureaucratic stuff, but for anyone running a business, investing abroad, or even just working overseas, it’s critical. If this treaty is terminated, the immediate real-world impact is financial chaos for U.S. companies and individuals operating in China. For example, a U.S. software company with an office in Shanghai currently relies on this treaty to ensure they aren't paying full corporate taxes to both the U.S. and Chinese governments on the same profits. Without the treaty, the cost of doing business there skyrockets due to increased tax liability and administrative complexity.

This isn't just about big corporations, either. Consider an American engineer working on a temporary assignment in Beijing. The treaty currently dictates how their income is taxed and which country gets to claim what. If the treaty vanishes, that engineer—and the company employing them—will face immediate, massive uncertainty and likely much higher tax bills, potentially resulting in double taxation. The bill essentially guarantees that a military conflict will be instantly followed by a severe economic one, hitting the bottom lines of U.S. entities with exposure to China.

The Congressional Check-In

The bill does include a notification requirement (Section 2). When the President triggers the termination process, they must also notify four specific committees in Congress: the Senate Foreign Relations and Finance Committees, and the House Foreign Affairs and Ways and Means Committees. This ensures that Congress is immediately informed when this massive economic and geopolitical step is taken, though it doesn't give them a veto over the termination itself, which remains mandatory once the President makes the initial certification.