Since President Donald Trump declared a series of tariffs on “Liberation Day” on April 2, 2025, world markets have been rocked with uncertainty and increased prices for consumers and producers alike. The economic results have been sluggish productivity, job losses, and slowing factory productivity each month since April 2. If there is a silver lining, the Federal Reserve has begun reducing interest rates to support the labor market.

Despite the upheaval, multinational companies are not going to simply pack up and go to their respective homes. The U.S. market is simply too large for multinational corporations to exclude the United States from their sales and corporate development plans. Ironically, as President Trump’s threats of tariffs and brash rhetoric unsettle foreign markets and even rattle governments abroad, the U.S. market may look relatively stable compared to some jurisdictions. Likewise, American companies won’t be content selling only to American consumers.

How then can multinational corporations survive the current global economic upheaval?

When it comes to trade policy, President Trump’s policies resemble mercantilism from centuries gone by. The mercantilist goal isn’t to end trade, but to “win” at trade. This is why President Trump regularly decries trade deficits claiming our trade partners are treating us very badly. Vice President expressed the administration’s policy as such: “If you want to be rewarded, build in America. If you want to be penalized, build outside of America. It’s as simple as that.”

Indeed, the administration seems to be keen on attracting foreign investment into the United States. President Trump recently lauded the announcement of a $21 billion steel plant in Louisiana by South Korean Hyundai Steel.

Playing the Game Under the New Rules

President Trump has focused his tariffs on the import of physically manufactured goods rather than professional services or digital services. (However, this may now be changing as he has promised a 100% tariff on movies made outside of the United States). With this in mind, services and software companies considering expansion into the United States may not face additional headwinds. Furthermore, multinational corporations that provide both goods and services might opt to enter the U.S. market initially with digital services, software and/or professional services with physical goods (that will be subject to the president’s tariffs) being introduced into the U.S. market at a later date.

Foreign manufacturers who are undeterred by the rhetoric and tariff threats, might consider alternative ways to get their product to market in the United States rather than as imported goods. The two obvious ways to accomplish this are for a foreign corporation to acquire an existing U.S. manufacturer or build new manufacturing facilities from the ground up.

Building new manufacturing facilities would allow a foreign corporation to design facilities specifically for the manufacture of their products. However, permitting, designing, and constructing new manufacturing facilities from the ground up would take longer than acquiring an existing American operating company or its assets and facilities.

Added benefits of acquiring a U.S. company might include access to new technologies, new products, and a ready-made workforce.

Going into 2025, commentators were bullish on the M&A market. It was widely accepted that 2025 would offer a surge in M&A activity as President Trump deregulates the economy, stifles inflation, and interest rates finally come down. This didn’t immediately transpire in the face of so much market uncertainty.

M&A activity in Europe is up 8.4% in Q1 compared to last year. But, M&A across all sectors in the U.S. was down about 7%. Q2 deal activity slowed even further. More critical than the trade uncertainty, inflation has persisted. As a result, high interest rates have continued to keep private equity groups on the sidelines. A contrarian foreign company might swoop in and acquire U.S. assets and companies while private equity competitors wait for interest rates to decline. In fact, crossborder M&A made up 36% of deal activity in Q1 2025, up from 26% in Q12024.

As an alternative to acquiring a manufacturing facility or building new facilities, a foreign manufacturer might consider outsourced manufacturing or operations through a joint venture with a domestic manufacturer. Given that other foreign and domestic companies may soon be looking for similar outsourced manufacturing arrangements, it may be prudent for companies to act quickly to secure contracts with OEM manufacturers.

Legal Considerations for International Transactions

A foreign acquirer thinking of acquiring critical U.S. assets need to be mindful of the potential need for a CFIUS review. The Committee on Foreign Investment in the United States (CFIUS) has jurisdiction to review foreign investments in U.S. businesses and real estate for national security risks.

The high-profile challenges to the Nippon-US Steel merger by both the Biden and Trump administration might have a chilling effect on foreign acquisitions of high-profile targets. But the reality is that the administration is unlikely to challenge a lower middle market or middle market acquisition by a foreign buyer in the absence of legitimate security concerns.

Contract drafting will be more challenging in the emerging mercantilist order. Identifying and allocating costs and risks in the supply chain will be critical and will require a bit of imagination for attorneys. Contracts that contemplate a peaceful, orderly market under Pax Americana and relative free trade may not be adequate for this unsettled era.

When drafting any contract regarding manufacturing and international sales or distribution, carefully consider provisions governing which parties are responsible for delivery, as well as duties and tariffs. It may be prudent to also consider including contractual obligations to cooperate in any administrative investigation (e.g., customs reviews) or to comply with future regulations.

Also, consider political risk when drafting the “force majeure”, and the possibility of persistent inflation particularly in contracts with time and materials pricing.

Current Thoughts

Global business may be entering a new era of fragmented markets with lower trust and higher restraints on trade. Yet, businesses will find a way to survive and thrive. Just as tariffs impose widespread costs that are borne by many, but benefit a few, it will also be true that a few contrarians and risk-takers will thrive during this time of upheaval.

 

Doug McCullough, Partner

Vanguard Legal, PLLC

Featured image: Seaport at Sunset, by Claude Lorrain, public domain