Factory workers at an electronics company in the production of automotive circuit system equipment in Jiangxi province in China. (Photo: humphery/Shutterstock.com)
President-elect Donald Trump forged a path to the White House partly on a platform of upending U.S. trade agreements and taxing imports to keep jobs from leaving the country.
As a candidate he said he’d impose a 45 percent tariff on Chinese goods and declare China a currency manipulator, and he threatened to withdraw the U.S. from the World Trade Organization. Economists have warned that these actions would set off trade wars, hurting U.S. exports and sending prices for goods in the U.S. soaring.
For U.S.-based law firms with significant Asia practices and offices, the question is whether Trump will follow through. But even if his administration adopts a protectionist stance that constrains global trade, law firm leaders said policy changes would result in more work for firms with trade practices—and would have little effect on transactional work.
“I would expect there to be more opportunity for international law firms in Asia, at least in the short term,” said Roger Parker, managing partner of Reed Smith’s Asia-Pacific branch. Uncertainty about U.S. motives and the administration’s potential actions will drive clients to seek out their lawyers, he suggested.
Parker added that while he hopes the U.S. will stay fully engaged in Asia, a protectionist Trump administration would only increase the determination of the United Kingdom and Europe “to keep the force of globalization moving.”
Duane Layton, head of Mayer Brown’s government and global trade group in Washington, D.C., said Thursday that two clients had already called to ask what the president can unilaterally do to change trade agreements and raise tariffs.
“They are going to look for statutory authority for the president to unilaterally, or any way he can, raise tariffs on imports,” Layton said of the Trump administration lawyers. “That of course is going to lead to, presumably, lawsuits. There are going to be Chinese exporters and their U.S. importers challenging those tariffs.”
Layton predicted that lawyers on the ground in the firm’s Asia offices, as well as those that represent clients before the WTO in Geneva and before the U.S. Department of Commerce and the U.S. International Trade Commission in Washington, D.C., will be busy as a result.
“Change causes the need for legal advice,” he said.
Bruce Heiman, K&L Gates’ Washington, D.C.-based partner who co-leads the policy and regulatory practice, agreed that Chinese companies seeking to export to or invest in the U.S. will need extra legal guidance.
“The next four years will be a time of more difficult U.S.-China relations; the movement of goods, capital and people between China and the U.S. will be more restricted and the potential for conflict will increase,” Heiman said.
Waiting for the Dust to Settle
Most capital markets lawyers, meanwhile, don’t see a Trump presidency bringing any direct short-term effect. Stock markets across Asia recovered quickly on Thursday following the fall a day earlier as the ballots were counted.
“The market doesn’t like uncertainty,” said a Hong Kong-based international firm partner. “But as soon as the dust settled, it went back to normal.”
Another Hong Kong partner with a U.S. firm cautioned that listings by companies in certain industries could be affected by specific policies, but that’s difficult to predict before the new administration starts.
Chinese outbound M&A will continue. Weiheng Chen, Wilson Sonsini Goodrich & Rosati’s head of China practice, said that clients’ pursuit of overseas assets is often commercially driven and tends not to be influenced by politics.
One possible challenge, Chen noted, could be that the Committee on Foreign Investment in the United States is going to be more conservative, and that could result in a more challenging review process for Chinese investors.
But Chen said that the U.S. will likely continue to be an attractive investment destination for companies in the technology, health care and consumer sectors.
Baker & McKenzie chairman Paul Rawlinson, who took over the position from Eduardo Leite last month, expressed hope that the U.S. would not disengage with Asia. He added that volatility as a result of changing geopolitical realities is nothing new.
“President-elect Trump’s views on trade is one area that our clients will want us to watch closely, but it is too soon to say what the impact will be on NAFTA or other agreements,” Rawlinson said in a statement. “However we hope we don’t see a retreat into an overtly protectionist America—as we would say for any major market internationally.”
Mostly, firms have no choice but to watch and wait.
“They don’t know what his real program is and what the relationship with the Republican House is going to be,” said Tony Williams, a principal at the London-based legal consultancy Jomati Consultants. Traditionally, free trade has been a cornerstone of the Republican Party platform, and it’s unclear whether a Republican-controlled Congress will pull back from that stance now that Trump is their standard-bearer.
“The risk factor there is a bit like Brexit,” said Williams, noting that the United Kingdom’s vote to withdraw from the European Union has been followed by a period of uncertainty. “It just causes people to pause and think a bit.”
Most U.S. law firms advise on transactional work in Asia, where they represent clients looking to do work in the emerging economies there, as well as foreign clients who wish to invest in or trade with the U.S., the U.K. and European countries. Squire Patton Boggs, Ropes & Gray and Kirkland & Ellis have tripled their Asia-based lawyer head counts in the last five years, while Morgan, Lewis & Bockius grew from 10 to 90 lawyers during that time largely through its mass hire of lawyers from now-defunct Bingham McCutchen.
Baker & McKenzie is one of the firms with the largest practices in Asia, with over 700 lawyers in Tokyo, Singapore, Hong Kong, Jakarta and other cities. Most firms at the top of the Am Law 100 opened Asia offices during or prior to the Obama administration, though some have pulled out of the continent within the past year.
Fried, Frank, Harris, Shriver & Jacobson closed its offices in Hong Kong and Shanghai last January, the same week that Dentons announced its decision to merge with China’s Dacheng to create the world’s largest law firm. In July 2015, Chadbourne & Parke closed its one-lawyer Beijing office, ending its presence in Asia. And earlier this year, Cadwalader, Wickersham & Taft announced it would pull out of the continent by closing its Beijing and Hong Kong offices.