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Commercial Awareness Discussion
The impact of tariffs on business and law firms
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<blockquote data-quote="Jaysen" data-source="post: 274" data-attributes="member: 1"><p style="text-align: center"><strong><u>The impact of tariffs and/or a trade war on business and law firms - Part 2</u></strong></p> <p style="text-align: center"></p><p>Imagine you're in an industry that relies on steel and aluminium for imports. That could be the car industry or aerospace or construction. You fear your costs are going to rise and so you need to think ahead of time. Lawyers tend to get involved in these times of uncertainty. There are a few things you could do.</p><ul> <li data-xf-list-type="ul">First, you may want to lock the price in now so that you are less vulnerable to tariffs. Lockheed Martin, a US aerospace and defense company did exactly this. They recently negotiated a long-term purchase agreement for aluminium so they can agree on a price today and mitigate the risk of rising input costs. Lawyers will be involved in negotiating and drafting the agreement. Perhaps on the other side of the agreement, a supplier fears the costs will rise even more. Their lawyers will try to include terms that account for political uncertainty. There are other agreements you can also enter into. For example, you can use derivatives lawyers to draft up contracts that allow you to predetermine the price of your supplies.</li> <li data-xf-list-type="ul">Second, you may want to think about moving your supply chains. If your company is likely to be hit hard by the tariffs due to rising import costs you may want to relocate. That means you'll need the help of a variety of departments at law firms. Think real estate lawyers, finance lawyers and employment lawyers.</li> <li data-xf-list-type="ul">Third, you may not want to make the move yet, but you want to develop contingency plans. That's what lawyers are there for - to mitigate against risk. Perhaps you want your lawyers to research the legalities of your move or undertake due diligence in a particular area.</li> <li data-xf-list-type="ul">Fourth, you may slow down your expansion. If you're a construction company in big-ticket projects your costs will rise. Perhaps your planned billions-of-dollars investment into a new pipeline expansion suddenly isn't viable anymore. Or maybe your legal budget has just fallen. Law firms may have to reduce their price to win projects work and teams may see deals fall through.</li> </ul><p>Then on a bigger scale, trade lawyers may be instructed to assess the legality of what Trump is doing. He's justifying tariffs on the basis of national security. The EU is also retaliating. Both of these could contravene rules at the World Trade Organisation (WTO).</p><p></p><p>On the other hand, if the WTO doesn't do anything, it might be seen as weak. Perhaps other countries want to try protectionist measures because they don't think there will be any penalties. If the WTO unravels it could have many implications for the certainty of international trade. Companies will rely on lawyers for advice and countries will need help invoking the WTO's dispute resolution mechanism.</p><p></p><p>If there's a trade war, international trade slows down and law firms will see less revenue. Perhaps they need to scale down in certain regions - that's something they do a lot, for example, many of the magic circle have cut back in Germany after a tough few years.</p><p></p><p>If Trump continues to target China, that could impact law firms in a number of ways. There will be more demand for M&A lawyers in the East so they can advise Chinese companies on outbound acquisitions. If US and European regulators continue to crackdown on foreign takeovers, they'll need to work out how to structure the acquisition in a way that gets approval. If Trump spreads his policies to intellectual property, Chinese companies may need help proving that they haven't stolen trade secrets. If a more rigorous IP system evolves in the US, that could be good for the country - one estimate by the New York Times puts <a href="https://www.nytimes.com/2017/08/15/opinion/china-us-intellectual-property-trump.html" target="_blank">IP theft at $600 billion a year</a>, and a more global dispute resolution system could see a lot of work for IP litigators.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 274, member: 1"] [CENTER][B][U]The impact of tariffs and/or a trade war on business and law firms - Part 2[/U][/B] [/CENTER] Imagine you're in an industry that relies on steel and aluminium for imports. That could be the car industry or aerospace or construction. You fear your costs are going to rise and so you need to think ahead of time. Lawyers tend to get involved in these times of uncertainty. There are a few things you could do. [LIST] [*]First, you may want to lock the price in now so that you are less vulnerable to tariffs. Lockheed Martin, a US aerospace and defense company did exactly this. They recently negotiated a long-term purchase agreement for aluminium so they can agree on a price today and mitigate the risk of rising input costs. Lawyers will be involved in negotiating and drafting the agreement. Perhaps on the other side of the agreement, a supplier fears the costs will rise even more. Their lawyers will try to include terms that account for political uncertainty. There are other agreements you can also enter into. For example, you can use derivatives lawyers to draft up contracts that allow you to predetermine the price of your supplies. [*]Second, you may want to think about moving your supply chains. If your company is likely to be hit hard by the tariffs due to rising import costs you may want to relocate. That means you'll need the help of a variety of departments at law firms. Think real estate lawyers, finance lawyers and employment lawyers. [*]Third, you may not want to make the move yet, but you want to develop contingency plans. That's what lawyers are there for - to mitigate against risk. Perhaps you want your lawyers to research the legalities of your move or undertake due diligence in a particular area. [*]Fourth, you may slow down your expansion. If you're a construction company in big-ticket projects your costs will rise. Perhaps your planned billions-of-dollars investment into a new pipeline expansion suddenly isn't viable anymore. Or maybe your legal budget has just fallen. Law firms may have to reduce their price to win projects work and teams may see deals fall through. [/LIST] Then on a bigger scale, trade lawyers may be instructed to assess the legality of what Trump is doing. He's justifying tariffs on the basis of national security. The EU is also retaliating. Both of these could contravene rules at the World Trade Organisation (WTO). On the other hand, if the WTO doesn't do anything, it might be seen as weak. Perhaps other countries want to try protectionist measures because they don't think there will be any penalties. If the WTO unravels it could have many implications for the certainty of international trade. Companies will rely on lawyers for advice and countries will need help invoking the WTO's dispute resolution mechanism. If there's a trade war, international trade slows down and law firms will see less revenue. Perhaps they need to scale down in certain regions - that's something they do a lot, for example, many of the magic circle have cut back in Germany after a tough few years. If Trump continues to target China, that could impact law firms in a number of ways. There will be more demand for M&A lawyers in the East so they can advise Chinese companies on outbound acquisitions. If US and European regulators continue to crackdown on foreign takeovers, they'll need to work out how to structure the acquisition in a way that gets approval. If Trump spreads his policies to intellectual property, Chinese companies may need help proving that they haven't stolen trade secrets. If a more rigorous IP system evolves in the US, that could be good for the country - one estimate by the New York Times puts [URL='https://www.nytimes.com/2017/08/15/opinion/china-us-intellectual-property-trump.html']IP theft at $600 billion a year[/URL], and a more global dispute resolution system could see a lot of work for IP litigators. [/QUOTE]
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