• Foreign regulatory reviews of US-backed deals may emerge as easy targets for retaliation
• Among neighbors and longtime trade adversary, China represents most acute threat
• Pending deals such as Ansys/Synopsys represent potential bellwethers

The world knew that US President Donald Trump planned to use tariffs as an economic cudgel and businesspeople worldwide have been abuzz discussing the matter for months. Now, pen has hit paper and we are faced with at least the threat of a new trade alignment.

With little prior dealings with tariffs at this scale, those in the M&A world (and others generally) are reading tea leaves and attempting to forecast impacts. Scholars have attempted to make sense of tariffs’ influence on M&A trends, with limited success.

Might foreign firms involved in the supply chain rush to purchase US manufacturing, farming, and extraction assets to circumvent the tariffs? Might those who were poised to launch deals instead wait and see how the new system shakes out?

One key secondary impact that should be considered, however, is: how might these tariffs impact already announced deals that are pursuing required regulatory clearances in the nations Trump has targeted.

Mexico’s government quickly sent troops to its northern border to at least appear to be restraining the flow of fentanyl into the US. This conciliatory act has bought them a reprieve.

Canada has cut links with Trump supporter Elon Musk’s StarLink and appears to be preparing to hunker into a more adversarial posture with an announcement on retaliatory tariffs that target states and regions that supported Trump in his election victory. This stance as well appears to have bought them some time.

And China, which was hit with maybe softer tariffs than expected, was said to be taking a less combative approach, amidst rumblings of the possibility that it will let TikTok go to a US firm of some sort and seek to harmonize the trade imbalance. However, China is planning to push ahead with retaliatory measures, and has laid out a plan for tariffs on a number of American goods and has targeted a specific US national champion in opening an antitrust investigation into Google.

Tit-for-tat retaliation with tariffs of their own on US goods will clearly be in play as the battle rages, as this is a tactic taken from the standard playbook for this sort of conflict.

But pending deals, especially those involving US-based companies and most specifically those involving US domestic champions, represent rare moments where the fate of a US effort is so exposed to the internal regulatory power of a foreign country.

Historically, Mexico’s domestic regulators have not shown a lot of teeth, and rarely to the detriment of its gargantuan neighbor to the north.

Canada has been ramping up its regulatory abilities, first through the Investment Canada Act and then through bolstering the rules that govern the Canadian Competition Bureau.

And China, well, China has a long and rich history of using its regulatory powers to disrupt US dealmaking, with the NXP Semiconductors/Qualcomm saga, Tower Semiconductor/Intel failure and the prohibition of Micron chip sales in that country standing as recent examples.

The deployment of domestic regulatory apparatus should be viewed as a tip-of-the-spear weapon in international disagreements, as these moves largely fly under the public’s radar, do not provoke a military response, but are nonetheless painful and send fairly clear signals to the intended recipients.

The deal watching community is keenly aware of China’s tendency to politicize reviews of foreign-sponsored investment. And the US under former President Joseph Biden has, as one DC-based trade attorney put it recently, “opened Pandora’s Box” to the same dynamic here, through his rather noncommittal block of Japan-based Nippon Steel’s proposed acquisition of US Steel.

China initially appeared to be invoking a relatively measured response to Trump’s tariffs, and instead, it seemed that our closest neighbors may represent the greatest threat to the soft underbelly of pending deals, depending on how the current situation is navigated. With the announcement of its retaliatory measures today, however, it looks as if the US’s foil in the East will maintain its status as an acute threat to deals.

A survey of Dealreporter data suggests that six out of the 54 North American deals we track need approval from one of these ex-US jurisdictions to close. Those deals are: Juniper Networks/HPE, Kellanova/Mars, SoftChoice/World Wide Technologies, Interpublic/Omnicom, SilverCrest/Coeur Mining, and Ansys/Synopsys.

However, a subjective look at these deals does not present a clear candidate that carries with it the aspirations of the US government, besides potentially the Ansys/Synopsys deal.

Synopsys is a US-based provider of sensitive IP core design programs, it is acquiring Ansys, another US-based innovator of simulation software and technologies designed to optimize product development processes. The technologies the companies possess are critical to the development of a number of cutting-edge products the US and China compete on.

This news service has reported extensively on the deal, suggesting that, even prior to the US presidential election in November 2024 and the imposition of Trump’s tariffs Chinese regulators viewed the matter in the context of a “retaliatory environment”.

A heightening of tensions may not help its path through China’s antitrust regulator, and Canada must also bless the transaction to boot.

Hell or High Water is a weekly column that offers commentary from our editorial team on the main deals undergoing regulatory reviews as well as the broader enforcement environment. The opinions expressed here are those of the writer only.