Law firms interviewed: Blackstone & Gold, Johnson Stokes & Master (JSM), Rifdaan Novarazka & Prabowo, DLA Piper, Cyril Amarchand Mangaldas, K&L Gates

Renewed uncertainties brought by Donald Trump’s White House comeback have prompted law firms in Asia to prepare for a wave of geopolitical and economic challenges anticipated from a new era of America First. 

• Asia braces for renewed America-first policies as Trump poised to return to the Oval Office.
• Continued U.S.-China trade tensions and potential tax policy changes prompt Asian businesses to reassess strategies and investment opportunities.
• Law firms across Asia should position themselves as business and political advisors.

As Donald Trump’s return to the Oval Office goes from “what if” whispers to an imminent reality, countries in Asia are gearing up for a hardened round of America-first policies boldened by a firmer popular mandate.

The U.S. president-elect, already known for his claims on hefty tariffs on Chinese goods, has wasted no time in appointing a cadre of hardliners to key cabinet and administration positions. This swift action has left governments and businesses across Asia grappling with a new wave of uncertainties. 

Notably, tariffs champion and investor Scott Bessent and Wall Street executive Howard Lutnick have been tapped to spearhead the Trump administration’s treasury and trade agendas, while tough-on-China economist Peter Navarro has been invited back to the administration as Trump’s new trade czar, completing a trifecta of trade hawks ready to ruffle the feathers of major Asian economies.

However, not all hope is lost. Trump, famed for his unilateral and often conspicuous decision-making process, has shown a propensity for policy U-turns even in the face of his sternest threats. Case in point: At the height of trade hostilities, Trump had threatened to impose 20 percent tariffs on cars and car parts from Europe, but ultimately, the U.S. and the European Union reached an accord to avoid further escalation. 

These developments transpiring in the world’s largest economy have sparked intense speculation about its impact on global markets. This protectionist surge has especially ignited concerns amongst Asian markets about a potential overhaul of international commerce framework.

The prospect of continued Sino-U.S. decoupling and a reorganisation of global supply chains presents both formidable challenges and exciting opportunities for Asia’s burgeoning markets. In response, law firms across Asia, closely tethered to the commercial considerations of their client base, are attempting to carve out secure pathways in this new era of complex and dynamic geopolitical environment.

TARIFF MAN: ROUND TWO

One of the most significant areas of concern is Trump’s approach to international trade. Baldev Bhinder, managing director of Blackstone & Gold in Singapore, anticipates that Trump would impose higher trade tariffs on goods imported from China and other countries. This could lead to significant disruptions in global trade flows, affecting supply and demand mechanics across various industries.

“The commodities market, for example, had just come out from one of its most volatile periods arising from COVID disruptions,” he says, adding that the prolonged Ukraine war and sanctions targeting Russia have increased market instabilities should Trump ramp up tariffs on global trade.

The expected continuation of the trade war between the U.S. and China is particularly worrisome, especially given China’s current economic slowdown. As Bhinder notes, “China’s economy, in turn, has huge implications for Asia and the rest of the world.” Countries with significant Chinese investments, such as Vietnam, might find themselves caught in the crossfire of the U.S.-China tensions that show little sign of relenting.

Tom Fu, partner at Hong Kong law firm Johnson Stokes & Master (JSM), expects continued U.S.-China trade and economic rivalry to prompt Chinese businesses to explore opportunities in markets such as the Middle East, ASEAN, and countries along the Belt and Road Initiative.

This could present a window of opportunity for Indonesia, ASEAN’s largest economy. John Lumbantobing, partner at Indonesian law firm Rifdaan Novarazka & Prabowo, has seen an uptick in investor interest from mainland China to Indonesia in recent weeks.

“In fact, (Indonesian) President Prabowo recently floated the idea of joint development between Indonesia and China within the area of “overlapping claim” (presumably with regards to the EEZ) - this arguably is an about-face of existing Indonesian foreign policy,” says Lumbantobing.

While Indonesia might benefit from investments relocating from China to avoid U.S. tariffs, its trade surplus with the U.S. could also make it a target for new tariffs. “Among others, Indonesian manufacturers exporting to the U.S. may need to reevaluate and find alternative markets,” he notes. 

For law firms in Indonesia, this fluid situation underscores the need for careful navigation of international relations and trade policies. Meanwhile, lawyers in Japan, the staunchest U.S. ally in Asia, are relatively more optimistic about the repercussions from a more protectionist Washington. 

Tony Andriotis, partner at DLA Piper in Tokyo, suggests that Japan’s relationship with the U.S. is likely to remain resilient despite sweeping shifts in U.S. trade and foreign policy, as Japan has effectively “trade war-proofed” itself since the 1980s by heavily investing in the American economy and creating interdependent economic ties. “Japan’s active presence in the U.S. economy gives it unique leverage and a stable base to navigate any shifts in trade policy effectively,” he adds.

However, “If broad tariffs are imposed, even Japanese firms with U.S.-based manufacturing could feel some strain, as crucial components like automotive supplies are frequently sourced from Japan,” says Andriotis. This complexity may prompt a more nuanced approach to tariff policies, one that considers U.S.-based production interests, potentially benefiting both American and Japanese manufacturers.

As such, Andriotis anticipates that legal services focusing on trade issues and regulatory compliance in Japan and Asia will likely be in greater demand, especially with possible sanctions tied to the conflict in Ukraine or China. 

Rishabh Shroff, partner at India law firm Cyril Amarchand Mangaldas, believes that this new phase of super-power showdown will require law firms, especially those in Asia advising U.S. clients, to become “savvy political advisors” to help company boardrooms and general counsel navigate complex geopolitical currents while keeping abreast of policy shifts and agendas in both America and their home jurisdiction. 

“Lawyers will need to understand how the U.S. is likely to scrutinise such investments and guide clients accordingly,” he adds.

TAXING TIMES

While much attention has been focused on Trump’s protectionist agenda on international trade, astute business leaders and economic analysts are particularly interested in Trump’s proposed tax reforms. These sweeping changes to the U.S. tax code could have far-reaching implications, not only for domestic businesses but also for economic relations across the Pacific.

Mary Burke Baker, government affairs counsellor at U.S. law firm K&L Gates in Washington, DC, expects lawmakers from Trump’s Republican Party – which is set to control both chambers of Congress - to extend or enact tax policies favourable to businesses operating in the U.S., benefiting both domestic companies and U.S. subsidiaries of foreign-headquartered firms.

“This U.S.-centric approach is intended to bolster the U.S. supply chain and reduce reliance on imports,” explains Burke Baker. These policies could include a version of the border adjustment tax (BAT), where revenues from exports would not be taxed, and costs of goods arising from imports would not be deductible.

On the campaign trail, Trump has also championed a 15 percent corporate rate for U.S. manufacturers, compared to the current 21 percent. Burke Baker cautions that while these policies aim to bolster the U.S. supply chain and reduce reliance on imports, they could adversely affect non-U.S. companies dependent on exports to the United States.

There could also be the possibility of retaliatory tax policies against countries adopting the OECD’s Pillar 2 under-taxed profits rule (UTPR), which allows a country to increase taxes on a business if that business is part of a larger company that pays less than the proposed global minimum tax of 15 percent in another jurisdiction. The introduction of the UTPR and potential retaliatory tax measures could significantly impact how non-U.S. multinational firms operate and structure their global tax strategies.

With potential changes in U.S. tax policies and their global implications, plus the intertwining of tax and trade policies that create a new and complex landscape for international businesses and their legal advisors to navigate, law firms’ tax practices will be in high demand to help companies optimise their tax strategies.

And as Asia businesses and governments brace for Trump 2.0, the legal landscape across the region is also poised for a substantial transformation. Ultimately, the key for law firms and legal professionals in Asia is to stay agile, continuously updating their knowledge and skills to meet the evolving needs of their clients, say lawyers.