35 Asian Legal Business | December 2024 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 superpower 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 International trade - 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 undertaxed 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.
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