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Commercial Awareness Update - June 2019
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<blockquote data-quote="Alice G" data-source="post: 11428" data-attributes="member: 1160"><p><strong><u>Trump’s Tariffs on Mexico [USER=1160]@Alice G[/USER]</u></strong></p><p><strong><u></u></strong></p><p><strong>The Story:</strong></p><p></p><p>On 30th May, President Trump announced his intentions to impose a 5% tariff on Mexican imports into the USA effective from 10th June. He has also declared that he will increase the tariffs by 5% each month until 31st October, when the tariffs would reach 25%, unless Mexico halts the movement of migrants across the Southern border of the USA.</p><p><strong></strong></p><p><strong>Impact on Businesses and Law Firms:</strong></p><p></p><p>In a recent article, ‘The Economist’ reported that two-thirds of Mexican imports into the USA ‘are between related parties, where one partner owns at least 10% of the other’. This means that tariffs will be especially damaging to closely integrated supply chains. The exact impact of this for law firms is still too early to tell. Unlike the US-China Trade War which has been raging for many months now, it is unclear how long tariffs might be imposed for. If this begins to look like a long-term issue between the two nations, then businesses may look to reorganise their supply chains which corporate lawyers would oversee to ensure that contracts reflect the changes made and that businesses are making tax efficient decisions.</p><p></p><p>Analysts have also expressed concern about the impact this might have on the ratification of the United States-Mexico-Canada Agreement (USMCA), a trade deal between the three nations. Trump was actually supposed to stop threatening Mexico with tariffs upon agreeing to the USMCA. This not only shows another example of untrustworthiness but marks a potentially huge step backwards for free trade between the nations. The agreement had hoped to increase growth in the automotive sector and made provisions for the trade of intellectual property too. All this now hangs in the balance which will have negative impacts across many industries. Lawyers would be drafted in to navigate new and more effective deals between companies in order to guarantee growth and development, should the trade deal falter.</p><p></p><p><strong><u>Italy’s Debt [USER=525]@Sara Moon[/USER]</u></strong></p><p><strong></strong></p><p><strong>The Story:</strong></p><p></p><p>Last Wednesday, Brussels wrote a letter to Rome expressing concerns over Italy’s failure to reduce debt since 2018. The European Commission is obliged to write warnings to eurozone governments if the level of debt rises above 60% of GDP. Italy’s debt has continuously risen since 2017: it rose from 131.4% of GDP in 2017 to 132.2% of GDP in 2018, and this level is expected to rise to 133.7% this year and to 135.2% in 2020 according to the European Commission. Italy is currently recording the lowest growth rate within the eurozone and is second to Greece for national debt.</p><p></p><p>However, the right-wing League party’s victory in the recent European parliamentary elections seems to have triggered anti-Brussels rhetoric. Matteo Salvini, the country’s deputy prime minister and leader of the party, has promised to cut taxes to boost the economy instead of cutting expenditure and raising taxes to reduce debt. Such measures are expected to cause Brussels to initiate a disciplinary procedure, or to impose economic sanctions if necessary, to require Italy to raise taxes and cut expenditure.</p><p><strong></strong></p><p><strong>Impact on Businesses and Law Firms:</strong></p><p></p><p>Italy’s policy of increasing government borrowing and spending has not led to greater economic growth, as the government expected, and has only produced huge public debt. Italy’s economic stagnation has meant that business conditions in the country have deteriorated. For example, the Italian manufacturing industry has been shrinking for eight months in a row. Moreover, if the EU proceeds with disciplinary procedures to force Italy to increase taxes, this will increase the financial burden on companies by increasing the cost of borrowing. This may cause greater business restructurings and insolvencies, although it will help the government reduce public debts. This potential increase in business restructurings and insolvencies within the country will increase the volume of work for the corporate departments within law firms</p></blockquote><p></p>
[QUOTE="Alice G, post: 11428, member: 1160"] [B][U]Trump’s Tariffs on Mexico [USER=1160]@Alice G[/USER] [/U] The Story:[/B] On 30th May, President Trump announced his intentions to impose a 5% tariff on Mexican imports into the USA effective from 10th June. He has also declared that he will increase the tariffs by 5% each month until 31st October, when the tariffs would reach 25%, unless Mexico halts the movement of migrants across the Southern border of the USA. [B] Impact on Businesses and Law Firms:[/B] In a recent article, ‘The Economist’ reported that two-thirds of Mexican imports into the USA ‘are between related parties, where one partner owns at least 10% of the other’. This means that tariffs will be especially damaging to closely integrated supply chains. The exact impact of this for law firms is still too early to tell. Unlike the US-China Trade War which has been raging for many months now, it is unclear how long tariffs might be imposed for. If this begins to look like a long-term issue between the two nations, then businesses may look to reorganise their supply chains which corporate lawyers would oversee to ensure that contracts reflect the changes made and that businesses are making tax efficient decisions. Analysts have also expressed concern about the impact this might have on the ratification of the United States-Mexico-Canada Agreement (USMCA), a trade deal between the three nations. Trump was actually supposed to stop threatening Mexico with tariffs upon agreeing to the USMCA. This not only shows another example of untrustworthiness but marks a potentially huge step backwards for free trade between the nations. The agreement had hoped to increase growth in the automotive sector and made provisions for the trade of intellectual property too. All this now hangs in the balance which will have negative impacts across many industries. Lawyers would be drafted in to navigate new and more effective deals between companies in order to guarantee growth and development, should the trade deal falter. [B][U]Italy’s Debt [USER=525]@Sara Moon[/USER][/U] The Story:[/B] Last Wednesday, Brussels wrote a letter to Rome expressing concerns over Italy’s failure to reduce debt since 2018. The European Commission is obliged to write warnings to eurozone governments if the level of debt rises above 60% of GDP. Italy’s debt has continuously risen since 2017: it rose from 131.4% of GDP in 2017 to 132.2% of GDP in 2018, and this level is expected to rise to 133.7% this year and to 135.2% in 2020 according to the European Commission. Italy is currently recording the lowest growth rate within the eurozone and is second to Greece for national debt. However, the right-wing League party’s victory in the recent European parliamentary elections seems to have triggered anti-Brussels rhetoric. Matteo Salvini, the country’s deputy prime minister and leader of the party, has promised to cut taxes to boost the economy instead of cutting expenditure and raising taxes to reduce debt. Such measures are expected to cause Brussels to initiate a disciplinary procedure, or to impose economic sanctions if necessary, to require Italy to raise taxes and cut expenditure. [B] Impact on Businesses and Law Firms:[/B] Italy’s policy of increasing government borrowing and spending has not led to greater economic growth, as the government expected, and has only produced huge public debt. Italy’s economic stagnation has meant that business conditions in the country have deteriorated. For example, the Italian manufacturing industry has been shrinking for eight months in a row. Moreover, if the EU proceeds with disciplinary procedures to force Italy to increase taxes, this will increase the financial burden on companies by increasing the cost of borrowing. This may cause greater business restructurings and insolvencies, although it will help the government reduce public debts. This potential increase in business restructurings and insolvencies within the country will increase the volume of work for the corporate departments within law firms [/QUOTE]
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