Game of Chicken

Hi ZipLawyer! Today’s Memo:

• Game of Tariff Chicken
• EU pushes ahead with AI Act
• EU under pressure on ESG
• Linklaters, Akin lead on Thames Water rescue
• What are preference shares?

Game of (Tariff) Chicken

You’ll never guess…we’ve got more tariff news today (yay)!

Ok there’s a lot to dig in here, so here’s a recap of what happened:

• Trump kicked everything off by announcing 25% tariffs on Canada and Mexico plus 10% tariffs on China.
• Canada responded with its own 25% tariffs while Mexico mulled a plan.
• At the last minute, Trump suspended the tariffs on Mexico and Canada, narrowly averting a trade war that could have disrupted hundreds of billions in commerce. In exchange for a 30-day reprieve, Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau agreed to deploy 10,000 troops to their borders with the US and ramp up efforts to combat drug trafficking. Trudeau also pledged C$200 million ($138 million) for initiatives targeting organized crime and fentanyl. 
• China instead responded with 15% tariffs on US energy imports (coal, LNG) and 10% tariffs on US oil and agricultural equipment—a relatively measured response.
• China also started a probe into Google and blacklisted PVH Corp. (Calvin Klein, Tommy Hilfiger) and Illumina, and restricted exports of tungsten, a critical metal used in defense and electronics.

Wow that’s a lot in a few days and it won’t end here. EU will likely be next while the UK may be spared IF Starmer sides with Trump.

Regs Away

The EU is pushing forward with enforcement of its AI Act, releasing new guidance on banned AI applications despite Donald Trump’s threats of retaliation against European regulations targeting US tech giants. The Act, hailed as the world’s most comprehensive AI law, bans certain uses like scraping online data for facial recognition, with broader rules on high-risk AI set to roll out by 2027. The move comes as Big Tech lobbies against the law, arguing it stifles innovation with excessive transparency requirements and access provisions for third parties. Trump, who has already deregulated AI development in the US, warned that Brussels’ actions against American firms amount to taxation and signaled he may push back. While some EU officials acknowledge the pressure, they insist the law will not be watered down, though efforts are underway to make it more innovation-friendly. Meanwhile, talks on the Code of Practice for powerful AI models like Google’s Gemini and OpenAI’s GPT-4 continue, with concerns that regulatory somethings could undermine the Act’s intent.

Don’t Back Down

A €6.6 trillion investor coalition is urging EU officials not to dilute ESG regulations, warning that weakening reporting rules would undermine the Green Deal and create regulatory chaos. Groups like IIGCC, Eurosif, and PRIargue that strong ESG disclosures are crucial for informed investment decisions, not just red tape. But Germany and France—facing stagnant GDP growth—are pushing for delays, claiming excessive rules hurt business competitiveness. EU financial chief Maria Luis Albuquerque is open to slowing reforms but insists sustainability goals remain. Investors, however, have been excluded from key discussions, fueling criticism ahead of an ESG law review this month.

Linklaters, Akin lead on Thames Water rescue