The Impacts of the Global Trade War on Law Firms: A Look Ahead
May 7, 2025, 9:05 am CDT
The global trade conflict has significantly elevated legal demand in early 2025, but challenges lie ahead. (Image from Shutterstock)
According to a recent report by the Thomson Reuters Institute, the ongoing global trade war has resulted in increased client demand across many legal sectors for law firms in the first quarter of 2025. However, experts advise that the near future could present significant challenges.
Surge in Legal Demand
The Law Firm Financial Index highlighted a notable uptick in client requests for legal services in March 2025, attributed to the complexities arising from the trade dispute. Law firms successfully increased their billing rates by an average of 7.3% compared to the same period in 2024.
According to a press release dated May 5, 2025, “Law firms, from midsize firms up to and including the Am Law 100, implemented their most aggressive rate increases since 2005.”
Concerns for the Future
Despite the immediate benefits, a faltering U.S. economy could pose risks to long-term deal-making activities, which are essential for the performance of larger law firms. The report echoes experiences from the 2007 financial downturn, during which a similar spike in legal demand preceded significant declines in both demand and pricing.
Historical data indicated that it took firms years to recover their transactional work levels post-crisis, stressing that counter-cyclical legal practices—such as litigation and bankruptcy—typically grow in a slowing economy.
Current Financial Trends
The Law Firm Financial Index employs a composite score derived from quarterly assessments of rates, demand, productivity, and firms’ expenses. For the first quarter, the index recorded a drop of 13 points, bringing the score down to 51, suggesting an impending slump in growth prospects.
Moreover, the report notes underwhelming performance in mergers and acquisitions. Despite a modest increase of 2.6% in the first quarter year-over-year, this growth falls short of market expectations.
Rising Operational Costs
Another issue law firms face is the rising operational costs driven by intense competition for talent and bonuses. The report highlights that “direct expenses grew 7.6% on a rolling 12-month average, outweighing the record rate of law firm growth.”
In summary, while the global trade war has temporarily bolstered legal service demand, the potential for economic deterioration poses threats to profitability and growth for law firms. Observers will be watching closely to see how these dynamics unfold in the coming months.
