January 27, 2021 - On January 20, 2021, Joseph R. Biden, Jr. became the 46th President of the United States.  Biden faces a number of immediate crises—a surge in coronavirus cases, the distribution of vaccines, and economic relief for struggling Americans—that are likely to delay broader policy initiatives.  But those broader policy initiatives will be coming, and the Biden administration is expected to bring changes to current U.S. policy and enforcement priorities that may significantly affect Japanese companies and their U.S. subsidiaries.

International Trade

In comparison to the Trump administration, the Biden administration is expected to pursue a trade policy that will be more favorable for Japan.  We do not, however, expect this to occur immediately.  Among other things, Biden has indicated that he intends to move cautiously on trade in light of the continuing protectionist climate in the United States.  


The Biden administration may keep existing tariffs in place for now, but Biden is, in general, unlikely to raise tariffs unilaterally or impose additional tariffs.  Of particular importance, he is expected to eliminate tariffs that were imposed on U.S. allies for national security reasons under Section 232 of the Trade Expansion Act of 1962.  President Trump used Section 232 aggressively, imposing tariffs on, among other products, Japanese steel and aluminum, and threatening tariffs on automobiles and certain auto parts.  Under Biden, we should see a return to the more common practice of using Section 232 sparingly, if at all.     


When he was vice president under Barack Obama, Biden promoted the Trans-Pacific Partnership.  This has led some to believe that, in due course, the Biden Administration may pursue U.S. entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which replaced the Trans-Pacific Partnership when Trump withdrew.  However, the United States is likely to want to resurrect terms that were deleted when it withdrew from the original agreement, such as environmental protections important to Democrats and intellectual property protections important to Republicans.
Buy American

Not everything about the Biden trade policy will be good for Japan. Biden supports the Buy American Act, which requires federal agencies to prioritize the purchase of U.S.-made goods.  Indeed, Biden has already issued an executive order requiring federal agencies to consider bolstering their Buy American procedures to reduce exceptions and waivers.


Biden has said that addressing climate change and other environmental issues is one of his top priorities.  He has already signed an executive order requiring the U.S. to rejoin the Paris Climate Agreement.  He is expected to require public companies to disclose climate risks, such as greenhouse gas emissions in their operations and supply chains, and to take action against companies that conceal information regarding potential health and environmental risks.  He is also expected to push for a “carbon tax,” which would include tariffs on goods from countries that do not reduce carbon emissions.

Certain Japanese industries are expected to benefit from Biden’s environmental policies.  For example, Japanese automakers excel at manufacturing fuel-efficient vehicles, and Japanese steel companies are known for producing lighter and more environmentally-friendly materials.  However, Biden’s policies may have a negative impact on Japanese equipment suppliers, contractors, and investors involved in the U.S. fossil fuel industry.  Biden is expected to curtail activities such as fracking, oil drilling, and the construction of pipelines, and he has already canceled the Keystone XL pipeline.

Health Care

In the United States, the pandemic has led to renewed concerns about prescription drug pricing, medical supply shortages, and undue market concentration in the pharmaceutical and health industries.  During the campaign, Biden pledged to “tackle market concentration across our health care system.”      

Under Biden, the Food and Drug Administration is expected to increase regulatory scrutiny of new and existing medicines, which would include those marketed by Japanese pharmaceutical companies.  There may also be federal legislation to restrict direct-to-consumer advertising, end tax deductions for expenditures on pharmaceutical marketing, and ban certain payments by pharmaceutical companies to physicians.

Antitrust & Competition

Antitrust enforcement actions are expected to increase under Biden, as they generally do under Democratic presidents.  During the four years of Trump’s term, there were half the number of antitrust cases as there were during the four years of Obama’s second term.  Japanese companies selling goods in the U.S. are subject to U.S. antitrust laws and should expect to face greater scrutiny.  Big Tech, the health care industry, and the pharmaceutical industry are expected to be particular areas of focus.

M&A Approval

Under Biden, the Department of Justice (“DOJ”) and the Federal Trade Commission are expected to scrutinize proposed mergers and acquisitions for possible anticompetitive effect more rigorously than they did under Trump.  While M&A activity is expected to be strong, there may be instances where companies walk away from deals that fail to obtain initial approval.  There may also be more litigation involving whether a proposed transaction may proceed.  


Generally, the DOJ’s enforcement of the U.S. Foreign Corrupt Practices Act (the “FCPA”) remains consistent from administration to administration.  In 2019 and 2020, FCPA settlement amounts broke records, and the DOJ continued to pursue and charge individuals.  Notably, some recent actions have been against Japanese entities and individuals.  In 2018, a subsidiary of Panasonic settled an FCPA matter for $137.4 million, and in 2020, an indictment against a Japanese executive was unsealed, alleging bribery of government officials in Indonesia.  Under Biden, enforcement is expected to continue apace, and the DOJ is likely to continue its pursuit of foreign companies and individuals.


The Biden administration is expected to push for a broad stand-alone federal privacy law, perhaps similar to Europe’s General Data Protection Regulation.  If such a law is enacted, it will likely affect Japanese companies doing business in the United States, especially those that sell or use newer technologies, such as biometric data, facial recognition systems, connected cars, or IOT devices.

Corporate Tax

Biden plans to ask Congress to scale back the corporate tax reductions that Trump signed into law in 2017.  This will increase taxes payable by U.S. corporate subsidiaries of Japanese companies.  Specifically, Biden’s tax plan contemplates raising the corporate income tax rate from 21% to 28% and imposing an alternative minimum tax of 15% on book income of certain large companies to prevent those companies from paying no taxes.  Foreign income earned by a U.S. parent company’s overseas operations would be taxed at 21%.  The plan also contemplates incentives for keeping jobs in the U.S. and investing in infrastructure, green energy and manufacturing.


For further information or for help with any of the issues discussed above, please contact any of the Hughes Hubbard lawyers listed below.

Seth D. Rothman | Partner 
Hughes Hubbard & Reed LLP
One Battery Park Plaza | New York, NY 10004-1482
Office +1 (212) 837-6872 | Cell +1 (917) 697-8093
seth.rothman@hugheshubbard.com | bio

Paul Marston | Counsel
Hughes Hubbard & Reed LLP
Kojimachi Place, 9th Floor, 2-3 Kojimachi | Chiyoda-ku, Tokyo 102-0083, Japan 
Office +81-3-6272-5831 | Cell +81-80-8432-3497
paul.marston@hugheshubbard.com | bio