How to Navigate US EU Trade Tariffs in Manufacturing

Contracts are powerful instruments that can help firms navigate the growing uncertainty of global tariffs. In an international trading environment marked by frequent policy shifts, tariff changes can disrupt supply chains, inflate costs, and erode profit margins. Well-crafted contracts allow companies to anticipate these risks and allocate responsibilities in ways that protect operational stability and business continuity: 1). One of the most effective strategies involves specifying the payment of duties and taxes through the USE of internationally recognized INCOTERMS. By clearly defining whether tariffs fall under the responsibility of the seller or the buyer, companies can avoid ambiguity and legal disputes. For example, terms such as Delivered Duty Paid (DDP) place the burden on the seller, while Ex Works (EXW) shifts it to the buyer. This clarity is essential in cross-border trade relationships, where unexpected tariff increases can trigger tension and financial losses. 2). Firms can also EMBED PRICE ADJUSTMENT CLAUSES that allow for contractual prices to shift in response to tariff-related cost increases. These clauses ensure that neither party is disproportionately affected by external economic shocks. If new tariffs raise production or import costs, the agreed price can be renegotiated, preserving the economic intent of the contract. In addition, “change in law” provisions can provide further flexibility. Such clauses allow for contract modifications—or even termination—if new regulations, including tariffs, substantially alter the conditions under which the contract was signed. These mechanisms protect both parties and encourage continued cooperation even amid trade volatility. 3). Another useful feature is the inclusion of hardship or FORCE MAJEURE CLAUSES. While traditional force majeure clauses often cover natural disasters or wars, they may not account for the economic hardship caused by sudden tariffs. Tailoring these clauses to include significant cost increases due to tariffs enables firms to seek relief or renegotiation when fulfilling the contract becomes excessively burdensome. In some cases, this might also lead to the contract’s termination if performance becomes economically unviable. 4). Regular CONTRACT REVIEW is also critical. In a world where tariffs can change with the stroke of a pen, businesses must routinely assess their contractual exposure and ensure terms remain aligned with current trade realities. This includes updating dispute resolution procedures to facilitate quicker, more efficient outcomes if disagreements arise. Firms should also leverage technology, such as contract lifecycle management tools, to monitor obligations, assess tariff impact, and simulate risk scenarios. These systems support informed decision-making and ensure that necessary changes are implemented in a timely manner.

50% tariffs are here, but it’s not the end of the world. Dear early-stage founders, I hope you’re not losing sleep over this. As troublesome as this economic situation is, there’s a lot that you can do. Firstly, if you’re not looking into FTZ, now is the time. In the US, good moved to a FTZ aren’t taxed at entry, you only have to pay duties if they enter US commerce. In case the need arises, you can even send it back, no duties paid. Also, if you assemble or transform the product inside this zone, you could even apply for a lower duty rate (if applicable). Secondly, the tariff rate itself may be fixed, but you can control costs around it. For eg, choosing the right port of entry as per your specific needs can reduce fees as well as delays. And if you classify goods under the correct HTS codes you would be paying the lowest legitimate duty rate. ⭐ Thirdly, (my most favourite) tariff engineering. If you slightly modify your final product, it can fall into another lower duty category. And it’s absolutely legal. For eg, if you sell shoes: Ship the shoe and the lace separately. It’ll be treated as raw parts, which means you pay a much lower duty rate. Lastly, challenges like this one will always be there. But not to fret. Do your research, consult, talk to subject matter experts and work to find a solution. There's always a way. If you’re looking to avoid the most common pitfalls or have no idea where to go from here, do check out Assiduus, or just DM me :) Happy to help!

📦💥 TARIFF WARS: What is your plan when the rules change overnight? What do you do then?   Another day, another tariff. Rare earths? Taxed. Semiconductors? Taxed. Predictability? No more.   If your company depends on a global supply chain, this isn't just noise, it's your new reality. So let's talk strategy, so there's no panic at this cautious time:   ⏰ Audit your exposure as soon as possible → If your list of SKUs is related to China and involves essential inputs (such as lithium, chips or rare metals), expect tariffs. The cost will be higher and you need to be prepared.   🌏 China + 1 is old. China + MANY is the change. → Vietnam, India, Mexico - even Mars, if it's shipped in time. Diversify your sourcing as you do your investment portfolio. You need to keep an eye on all markets to take advantage of opportunities that arise.   📝 Reorganize your contracts. → Tariff clauses are no longer optional. Flexibility is an advantage. That five-year contract with the supplier? Rethink it.   🤝 Bring production closer to the market. → Nearshore. If you sell in the US, build in the US. If you sell in Europe, move closer. Global agility is the name of the game.   💻 Commercial technology is your advantage. → There are AI tools for tariff classification and tax optimization. If you're not using them, customs will - and not in your favor.   ✏️ Redesign the product to avoid the tariff. → Change parts, alter specifications or get creative. Your engineering team loves a challenge. So does your CFO.   🖥️ Create a real-time dashboard. → “Tariff Tracker 3000” isn't just a fun name. It's your visibility tool for material costs, policy changes and delivery times.   Conclusion: The tariffs are here. You can't control the storm - but you can come down hard.   At Drummond Advisors, we support businesses navigating the intersection of tax, trade, and regulation across jurisdictions. Our multidisciplinary team helps clients: ✅ Analyze and document transfer pricing in line with OECD standards ✅ Develop global tax strategies across the U.S., Latin America, and Europe ✅ Minimize the impact of tariffs through trade planning and structuring ✅ Stay compliant - and competitive - in a changing global economy Ready to rethink your global position? Let's connect.   #SupplyChainHumor #TariffTrouble #RareEarths #ResilienceByDesign #GlobalLogistics #ManufacturingLife #SourcingStrategy #TradeWarSurvivalKit