Trade Lawyers Navigate Shifting Tariffs as Clients Seek Guidance

Trade lawyers find no single-best option for clients grappling with the tariffs, as economic data shifts and presidential pronouncements change.

Some clients should seek opportunities to renegotiate or terminate long-term agreements with vendors and seek alternative supply chains and production options, said Joyce Adetutu, a Vinson & Elkins partner for export controls and economic sanctions and national security reviews.

It also makes sense for some clients to wait longer before making moves. Taking “advantage of short-term production capabilities and supply options in order to give them time to have a longer-term view—I think that’s smart business,” Adetutu said.

Just as business owners and economic forecasters have had to struggle to find their way forward in a shifting tariff landscape, these haven’t been easy days for trade lawyers. The impact tariffs are having on the US economy is murky, and an appeals court is hearing arguments on whether President Donald Trump had authority to impose the levies under his emergency powers in the first place.

“It is very difficult to make decisions in this environment,” said A&O Shearman’s Ken Rivlin, co-head of the international trade and environmental and climate law groups. “It is critical to focus on the fundamentals and make sure you fully understand the supply chain to be creative about how you manage it—and then opportunistic about making changes that might help down the road.”

Some company executives in August earnings calls said they have begun to see the higher cost of goods hurting balance sheets and cutting into profit forecasts. Those include Diamondback Energy Inc., which faces steel tariffs that increase the cost of drilling, and Molson Coors Beverage Co., which is contending with the cost of aluminum tariffs.

But US inflation data released Tuesday eased investors’ concerns that tariffs are causing price pressures for goods, Bloomberg News reported.

Who Pays?

A key concern for lawyers and their clients as they tackle tariff pricing is who shoulders these increased costs. In several cases, it is the party that has historically been responsible to pay the import costs. But some companies are looking for creative ways to divide those expenses.

“We’re seeing a lot more companies trying to build in cost-sharing metrics, like a 50-50 share,” Adetutu said. “We’ve also had some companies that have said ‘This is how tariff costs have always been allocated, it is your responsibility, so we’re not going to share the cost.’”

Rivlin said clients are frequently asking lawyers for advice about whether underlying contracts give one party or another the right to seek additional costs, or cost reductions, as a result of tariffs. For instance, lawyers may need to determine whether tariffs constitute a force majeure event.

Companies competing in the same sectors are finding themselves in different postures and positions because of the tariffs, said Warren Payne, Mayer Brown’s senior adviser of international trade, public policy, regulatory and government affairs and tax.

Clients that focused their supply chains or production in high-tariff regions, such as parts of Asia, find they are no longer able to compete with rivals that pegged such operations in regions including Mexico, which are spared some tariffs, Payne said.

Mexico benefits from the United States-Mexico-Canada Agreement (USMCA), under which several goods remain tariff-free, barring some sectors such as automotives, steel and aluminum. Those preferential rates under the USMCA are still set to remain in place for another decade.

“Mexico has a huge advantage because you can export from Mexico tariff free as long as you meet the rules of origin,” Payne said. “When you produce in Mexico, you can access the global supply chain.”

Companies that are able to benefit from those rates “are just in a much stronger position” in terms of cash flow, liquidity, and their ability to obtain financing, he said.

For companies that want to shift to places such as Mexico to take advantage of the tariff regime, “moving operations can take several years and billions of dollars,” Rivlin said. That can be especially futile since “no one knows how long this is going to last.”

During such uncertainty, the best advice trade lawyers can give their clients often is: Wait and see.