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?
We share our perspective on navigating tariff negotiations and contract negotiations in this new environment. It also highlights how ContractKen – a world-leading contract AI company – enables legal and commercial teams to review, negotiate, and amend contracts with unprecedented speed, minimizing tariff exposure and other negative implications.
Companies are already feeling the impact of tariff changes. In early 2025, for example, sweeping tariffs (25% on imports from Canada and Mexico, and 10% on Chinese goods) sent businesses scrambling to adjust contracts and supply chains. 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.
This volatile tariff environment has tangible consequences for companies. We’ve seen this before: aggressive tariffs in prior trade disputes fractured supply chains and sparked contract disputes, leaving companies entangled in costly legal battles over suddenly unworkable obligations. Now, the stakes are even higher. Contracts drafted just months ago may no longer reflect the new economic reality, and firms that fail to adapt could find themselves locked into unprofitable or even impossible deals.
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. Next, we discuss how specific contract language can make all the difference.
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 – and many commercial contracts have clauses to address changes in law, force majeure events, or cost shifts. However, the effectiveness of those clauses depends entirely on how precise and forward-thinking the contract language is.
The Power of Language – Specificity Matters: The key to all these clauses is precise drafting. Vague or generic provisions might give a false sense of security. As trade lawyers advise, a change-in-law clause or force majeure clause should clearly delineate triggers and remedies. “A vague provision allowing renegotiation due to ‘regulatory changes’ is ripe for dispute,” one analysis warns, urging that the clause define a threshold (e.g. cost increase beyond a certain percentage, or tariffs above a set rate) that constitutes a significant change. The more clearly an event is defined, the more likely the parties will agree on the outcome and avoid legal fights. This level of clarity is part of tariff risk mitigation – essentially doing the negotiating now (at contract drafting time) about what happens if tariffs are imposed, rather than arguing later.
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). Below is a summary of 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.
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:
In the face of rapidly changing tariffs and the flurry of contract reviews and revisions they necessitate, one of the most powerful tools at an executive team’s disposal is Artificial Intelligence (AI) for contract analysis. 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. Leveraging AI in contract negotiations provides a genuine competitive advantage in turbulent times.
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How ContractKen’s AI Copilot Helps: ContractKen, as a leading contract AI platform, 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. AI-powered contract analysis significantly reduces review time and human error while enhancing risk identification across large contract portfolios, as studies have shown.
ContractKen’s AI acts as an intelligent assistant that not only finds and flags issues but also suggests solutions. For example, if a particular supplier contract is missing a change-in-law clause, the AI (drawing from its knowledge base and playbooks) can recommend language to add, perhaps even providing a draft amendment. During contract negotiations, having this AI at your side is like having a tireless junior lawyer or contract manager who never misses a detail. The AI can compare third-party proposed language against your company’s standards and highlight deviations – so if a counterparty slips in a clause that would make you bear all future tariffs (a red flag), it will be caught instantly and brought to your attention for counter-proposal.
Importantly for negotiations, AI provides an information advantage. ContractKen’s philosophy is to let lawyers and negotiators work “from a position of information advantage and maintain consistency across thousands of documents”. What does this mean in practice? It means when you sit down to renegotiate with a supplier, you already know which of your other supplier contracts have agreed tariff-sharing clauses (because AI summarized it), so you can confidently push for similar terms, citing precedent. It means if a sales manager is discussing price increases with a customer, they have at their fingertips a report (produced by AI) of that customer’s contractual rights, any force majeure language, and even suggestions for new terms to propose. Consistency is another huge benefit – AI ensures that any amendments you generate use consistent language across all contracts, reducing the risk of loopholes. Humans negotiating contract by contract might inadvertently use different wording; an AI can be trained to apply the approved clause uniformly, acting as a guardrail.
For example, ContractKen’s system might 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.
Companies that harness AI for contract negotiations gain agility. They can respond to tariff announcements faster than competitors (who might still be in the manual slog of finding out what the impact is). Deals get renegotiated faster, risk is contained sooner, and opportunities to exploit changes (e.g., quickly adjusting a deal to capitalize on a tariff exemption) are seized. On the flip side, without AI, a company might be weeks behind in understanding its exposure – during which time it might unknowingly commit to unprofitable deliveries or miss the window to renegotiate with a struggling supplier.
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.