Donald Trump’s second term as US President has already introduced a raft of changes. In-House Perspective assesses the key regulatory implications for multinational businesses and their in-house counsel.

Donald Trump’s second term as US President began on 20 January. Since then, he has issued more than 100 executive orders. These have covered a raft of issues that are pertinent for US companies as well as multinational businesses and the global economy more generally. Companies are reacting to what’s been put forward so far and preparing themselves for more, across areas such as energy, taxation, trade and technology.

The executive orders to date have focused largely on commitments made by President Trump during his election campaign. ‘These orders need to be studied to understand their implications,’ explains Abhijit Mukhopadhyay, Regional Fora Liaison Officer for the IBA Corporate Counsel Forum. The orders making the headlines, he says, show that Trump is focusing on his promise to ‘Make America Great Again’.

‘The President intends to achieve this by encouraging foreign investment to manufacture in the US and imposing tariffs on imports, especially from a few countries like China, Mexico and Canada,’ says Mukhopadhyay, who’s President (Legal) and General Counsel at Hinduja Group. Since there will undoubtedly be radical policy changes, general counsel must understand them by studying the laws carefully, he adds.

Generally, the direction of travel will be towards deregulation – or at least a move away from new regulation – with one of President Trump’s executive orders requiring the federal government to repeal ten regulations for every new one issued.

Abrupt policy changes are an immediate issue facing in-house counsel. But a further consideration in the medium to longer-term will be regulatory uncertainty, which poses significant challenges for companies and particularly for those operating in highly regulated sectors such as data and communication technologies, artificial intelligence, pharmaceuticals and defence.

The changing face of trade

In his assessment of the President’s plans, Mukhopadhyay mentions the additional tariffs announced on imports into the US from Canada, China and Mexico. These tariffs went into effect against China on 4 February, while the implementation of those against Canada and Mexico was delayed for 30 days after concessions were made by the two countries on border and crime enforcement – a major priority for the Trump administration.

President Trump claims that the tariffs will grow the US economy, increase tax revenue and protect jobs, though the countries targeted have queried the justification of the measures and vowed retaliation.

‘My message to every business in the world is very simple: Come make your product in America, and we will give you among the lowest taxes of any nation on Earth,’ said President Trump during his speech before the World Economic Forum in January. ‘We’re bringing them down very substantially, even from the original Trump tax cuts. But if you don’t make your product in America, which is your prerogative, then, very simply, you will have to pay a tariff – differing amounts, but a tariff – which will direct hundreds of billions of dollars and even trillions of dollars into our Treasury to strengthen our economy and pay down debt.’

‘The Trump administration loves to swing tariffs around as leverage for negotiating a stronger hand in its business standing,’ says Sarah Max, North American Regional Forum Liaison Officer on the IBA Poverty and Social Development Committee. Their enactment means businesses should anticipate major disruptions to the release of goods and services into the economic stream of the US, she adds. ‘It will be more expensive to import goods and services into the US, thus we anticipate many companies will not be able to afford to do business with the US at the same level as before,’ explains Max, who’s also a senior consultant at Walker Clark in Seattle. ‘And any residual delays in manufacturing or service delivery as a result will create a domino effect of delays and inflated costs.’

Given that tariffs were heavily promoted during Trump’s election campaign, in-house counsel have had them on their radar for some time – and have begun readying their supply chains. ‘Some have already long completed the task of mapping their supply chain and have moved on to finding alternative sources of supply – oftentimes in the US – negotiating short- and long-term supply arrangements and dealing with the myriad of issues associated with insourcing, where possible,’ says David Washburn, co-chair of the Mergers & Acquisitions and Private Equity practice at Katten in Dallas.

‘Of course, none of this is easy or risk free,’ he adds, highlighting that, in some cases, companies have had to take or pay arrangements with their existing suppliers, or exclusivity provisions that have serious consequences if breached. ‘It is a significant investment for multinational companies to modify their supply chains in order to prepare for these kinds of tariffs,’ says Washburn.

Tariffs aren’t the end of the trade-related considerations for businesses, which encompass everything from duty payments on the importation of goods to compliance with US export controls and economic sanctions.

Claudia D Hartleben, Chair of the Agency and Distribution Subcommittee of the IBA International Commerce and Distribution Committee, says a renewed holistic assessment of a company’s sensitivities and where they’re exposed is a good place for in-house counsel to start when assessing their response to the coming changes.

‘Engage with policymakers to ensure your company is aware of potential changes and has a voice in the process,’ says Hartleben, who’s also of counsel at Greenberg Traurig in Washington, DC, and ‘maintain open communication with outside counsel that can help keep companies informed and in good stead. In-house counsel are wise not to underestimate the Trump administration’s readiness to impose tariffs overnight, even if tariffs are modified or exemptions are made available in the medium to longer term. In practice, companies should have strategies for how new duties will be absorbed. A diverse and agile supply chain may prove most resilient to abrupt changes at the US border.’

Max expects that multinational organisations will lean heavily on their in-house counsel to help them navigate a number of developments during the second Trump administration. These will probably include the increase in cost of source materials and end products from manufacturers and distributors, particularly those in or reliant on companies located in Canada, China and Mexico, as well as delays in the receipt of inventory and source materials from foreign companies due to heightened customs scrutiny.

She also highlights that counsel may need to turn their attention to the re-drafting of contracts and operating agreements to reflect cost changes and timeline disruptions due to an expanded understanding of ‘force majeure’ to include unprecedented acts of government, as well as to the education of staff, to ensure personnel are in tune with how to comply with the regulatory changes introduced.

‘The new trade environment will also require businesses to focus on careful planning, strategic foresight and a willingness to adapt to new market conditions,’ says Brian Whisler, Legislation Officer for the IBA Anti-Corruption Committee. ‘Companies that can proactively assess risks, protect their assets and explore alternative markets will be better positioned to weather the storm of global trade volatility.’

People matters

Poorvi Chothani, Co-Chair of the IBA Immigration and Nationality Law Committee, explains that for businesses reliant on global talent, there will probably be increased uncertainty and disruption overall. Employers, she says, are bracing themselves for visa processing delays, increased compliance risks – including greater enforcement activity – and travel challenges, particularly concerning employees on temporary visas who may face difficulties re-entering the US due to stricter scrutiny at ports of entry.

Chothani, who’s also Founder and Managing Partner of global immigration firm LawQuest Global, which has offices in the US, additionally highlights that hiring foreign workers or maintaining and documenting compliance with Form I-9 requirements, which relate to employee eligibility verification, may become more complex. In the medium term, she predicts that restrictions on employment-based immigration may have an impact on workforce planning, especially in industries such as technology, agriculture, hospitality, healthcare and construction, which rely heavily on skilled immigrants.

As federal funds within the US Department of State are redirected to enforcement activities, there will be an impact on visa processing and on the work of the US Citizenship and Immigration Services, resulting in significant delays. ‘Under Trump 2.0, there will be a re-emphasis on Buy American, Hire American (BAHA), affecting visa decisions and petition adjudication, with an overall negative impact on employment and business-related immigration,’ says Chothani. In the long term, a more restrictive immigration landscape could affect the talent acquisition strategies and the overall competitiveness of US-based businesses.

Chothani believes the Trump administration will probably also revisit and potentially tighten policies affecting both legal and undocumented immigration. Here, the areas of focus may include changes to family-based immigration, employment-based visa programmes, asylum procedures and border security measures.

Given all of this, Chothani advises counsel to be prepared for increased due diligence, including the need for employers to regularly audit employment authorisation records and maintain stricter compliance protocols. Meanwhile, companies may need to engage in lobbying or policy discussions to protect access to foreign talent, in which counsel will become involved. Counsel will also probably take on an enhanced role in talent strategy, becoming critical in developing workforce solutions that align with immigration rules. 

Energy and ESG

Since taking office, President Trump has made a number of changes to US energy and climate policy. These include the removal of restrictions on oil and gas development, the suggestion that new energy infrastructure will receive rapid approval, the withdrawal of the US from the Paris Climate Agreement and the revocation of US commitments under the UN Framework Convention on Climate Change.

The country’s approach to environmental and energy issues is therefore heading in a new direction – what’s been set out so far points to an emphasis on energy independence, deregulation and the rollback of climate crisis-related regulations.

Washburn isn’t surprised that President Trump appears set to make good on his promises to enact significant regulatory change in the areas of energy policy and environmental protection. However, ‘the change from [former President Joe] Biden’s policy agenda is so significant that it may take years to turn the ship,’ he says. ‘And, indeed, the rest of the world doesn’t necessarily adhere to the timeline dictated by the US. Put differently, it’s one thing to make these sweeping policy changes, it’s another to actually have them implemented in a way that impacts core US businesses. Of course, President Trump’s energy policies will impact direct industry participants quickly. However, I anticipate that the impact on Main Street businesses may be slower and more nuanced.’

In regard to the wider environmental, social and governance (ESG) landscape, the regulatory environment will probably become more complex for businesses and in-house counsel. Whisler, who’s also a partner at Baker & McKenzie in Washington, DC, says the second Trump administration’s priorities may include the Department of Justice’s Antitrust Division targeting competitor collaborations on sustainability initiatives as anticompetitive collusion. In keeping with this approach, ‘we may also see reforms by the Securities and Exchange Commission [SEC] directed at shareholder activism, which has generally increased over recent years and has become more divisive with respect to ESG issues,’ he says.

President Trump’s pick to head the SEC, Paul Atkins, has consistently voiced concerns of a ‘tyranny of the minority’ within the shareholder litigation environment that’s often burdensome and costly to companies, says Whisler. Reforms may therefore involve the reduction of SEC enforcement investigations of proxy fights, or changes to make it easier for a company to exclude shareholder proposals.

Meanwhile, a number of Trump’s executive orders have targeted diversity, equity and inclusion (DEI) programmes, which the administration views as ‘divisive’. The orders include instructions to remove such programmes from the federal government. The administration’s direction here appears to go against the approach to ESG and DEI being taken in many other jurisdictions.

Dramatic change

Washburn believes that the utilisation of external counsel by companies will, overall, increase. ‘Dramatic change in US policy tends to drive a significant uptick in business for outside law firms,’ he says. Based on the policy agenda laid out by President Trump, as well as the executive orders already in motion, Washburn anticipates that law firms will see a meaningful uptick in questions related to energy and finance deregulation, cryptocurrencies, DEI, ESG and M&A activity, as well as work resulting from the lowering of corporate tax rates, among other things.

Hartleben adds that companies operating across jurisdictions should bear in mind that geopolitics could prove disruptive. ‘Cooperation on issues like economic sanctions, for instance, could become less cohesive and/or complimentary between the US, the European Union and the UK,’ she explains.

‘From tax policy to trade and tariffs, from dealmaking to enforcement, we anticipate significant impact for companies operating in the US and globally, so the need for preparation is key,’ says Whisler. ‘It’s important for businesses and in-house counsel to remain adaptable in the face of changing regulatory environments.’