Hint: AI can help
Global trade dynamics are shifting under the weight of newly imposed tariffs by the United States and other countries. For C-suite executives and legal / procurement teams in the US and Europe, these changes pose a pressing question: How can companies manage and adapt to the surge in trade tariffs while protecting their business interests?
Companies are already feeling the impact of tariff changes. Bloomberg Law reports that firms have been “scurrying to revise commercial contracts to mitigate the damage” from these tariffs. Across industries, from manufacturing to tech to pharmaceuticals, leaders are realizing that adept contract management is as important as strategic sourcing in weathering tariff storms.
We share our perspective on navigating tariff negotiations and contract negotiations in this new environment. It also highlights how ContractKen enables legal and commercial teams to review, negotiate, and amend contracts with unprecedented speed, minimizing tariff exposure and other negative implications.
Tariffs essentially act as sudden cost inflators and risk shifters.
They can turn a profitable contract into a loss-making one overnight by adding double-digit percentage costs to goods. A 10% or 25% tariff can wipe out profit margins, especially in industries with tight margins. As one analysis noted, in the tech hardware sector a 7% increase in cost of goods from new tariffs (on top of existing inflation) could erode most of the operating income for many companies. In fact, 69% of tech industry executives in a recent survey said new tariffs forced them to adjust their growth strategies. These figures underscore that tariffs are not just trade policy news - they are bottom-line issues that demand executive attention.
While virtually any cross-border commercial agreement can be affected by tariffs, certain industries face outsized impacts due to the nature of their supply chains and contracts. Below are examples of industries heavily hit by recent tariff changes, and how their contracts are under pressure:
Other sectors also face tariff exposure – industrial equipment, consumer goods (apparel, agriculture products), even technology services (if digital trade tensions spark non-tariff barriers).
In all cases, the common thread is that contracts define who bears the risk. As tariffs upend the cost calculus, companies with flexible, well-negotiated contracts are weathering the storm better than those without.
When tariffs hit, the fine print in contracts becomes crucial. Careful contract language can either provide relief from tariff impacts or, if poorly drafted, leave a company fully exposed. Tariffs are essentially a form of government-imposed cost and regulatory change. However, the effectiveness of those clauses depends entirely on how precise and forward-thinking the contract language is.
In addition, companies should remember that contractual rights and commercial strategy go hand in hand.
Even if an agreement technically allows relief (say, a force majeure for a tariff), invoking it might strain a valuable partnership. Thus, many parties use these clauses as leverage to find a mutually acceptable solution (like splitting costs) rather than immediately canceling contracts. The mere existence of well-crafted clauses puts you in a stronger negotiating position when tariff troubles arise.
To adapt to the new tariff reality, legal and procurement teams should proactively review certain key clauses in their existing contracts (and ensure new contracts have them).
Here's a ready reckoner for you to use:
Lets discuss these crucial contract provisions for tariff risk management, along with common pitfalls to avoid:
International Commercial Terms (Incoterms) in a contract determine which party is responsible for import duties and tariffs on goods. For example, DDP (Delivered Duty Paid) means the seller covers all duties, whereas FOB (Free on Board) or CIF (Cost, Insurance & Freight) might leave import duties to the buyer.
As discussed, force majeure can potentially cover tariffs but only if carefully drafted.
These clauses act as a contractual safety valve when external events upset the original deal balance. A change-in-law clause typically allows renegotiation or termination if a new law or regulation significantly increases costs or makes performance illegal. A related concept, hardship clauses, found especially in civil-law jurisdictions and long-term contracts, provides for renegotiation if circumstances change beyond what the parties reasonably anticipated.
These clauses allow the contract price to adjust if certain cost factors change (commonly used for commodity price changes, inflation, etc.). In the context of tariffs, a price escalation clause might say that if tariffs on the product or its components increase, the seller can pass through some or all of those costs to the buyer. Or vice versa, if tariffs are reduced or an exemption is obtained, prices will decrease accordingly.
In volatile times, having a clear exit or reset option in a contract can be invaluable. Termination for convenience (with notice) or special termination triggers (like if regulatory changes make continuation unviable) can allow a company to stop the bleeding if tariffs render a deal unsustainable. Similarly, clauses that explicitly allow renegotiation upon certain events (sometimes called hardship or material adverse change provisions) can facilitate a restructure of the deal.
Handle clauses like these like an expert! Check out Clause Library from ContractKen.
It helps with extraction (from your contract repository), curation, management, tagging (as preferred, fallback, etc.), commenting and controlled access. Additionally, we have populated 700+ commercial contracting clauses examples for use out-of-the-box. Each clause is enriched with attributes like Jurisdiction, Type of Contract, Party Favored, etc.
Beyond the contract clauses themselves, companies need a game plan for tariff negotiations and for adapting existing agreements. “Tariff negotiations” in this context means the discussions and maneuvers companies engage in to mitigate tariff impacts – whether negotiating with suppliers, customers, or even lobbying governments for relief. Below are key strategies that C-suites and procurement leaders should consider a tariff response action plan:
Modern AI solutions, like ContractKen, are revolutionizing how legal and commercial teams manage contracts, offering speed, precision, and insight at a scale that traditional manual methods cannot match. Lets understand the key benefits.
How ContractKen’s AI Copilot Helps: ContractKen is designed to amplify legal and procurement teams’ capabilities by handling the heavy lift of contract review and initial drafting tasks. It can quickly scan and analyze large volumes of contracts to spot critical terms like Incoterms, force majeure clauses, change-in-law provisions, pricing terms, and any mention of duties or tariffs. This means the tool can, within minutes, generate a report of all contracts that lack a tariff clause, or all contracts where your company would be responsible for import duties under DDP terms, etc.
For example, ContractKen will quickly find that out of 500 supplier contracts, 120 have DDP terms (seller pays duties) and 380 have FOB (buyer pays duties). With that insight, you can focus your renegotiation efforts on the subset that exposes your company to the new tariffs. The AI can even prioritize them by contract value or expiration date, so you tackle the most impactful ones first. Additionally, ContractKen integrates with tools like Microsoft Word (as a Word add-in), meaning legal teams can use the AI right in their normal workflow. They can pull up a contract and ask the AI (via a chat-like interface) questions such as, “Does this contract allow price increases for new taxes?” or “Highlight any force majeure clause in this document.” The AI’s natural language processing can handle these requests, pointing the user to the exact sections or answering in plain English what the contract states. This kind of on-demand analysis is invaluable for decision-making in live negotiations.
Tariffs will always fluctuate with geopolitical tides, but your contracts shouldn't. Proactive contract management isn't just smart business; it's essential strategy. Embed protective clauses, negotiate agile agreements, and keep your business resilient, no matter how tariffs change.
Turn uncertainty into competitive advantage. With ContractKen’s AI-driven contract analysis, your team can swiftly spot risks, tighten terms, and strategize effectively, freeing you to focus on relationships and growth, not panic-driven amendments.
Don’t let tariffs dictate your business decisions. Take control.