Introduction
The Trump Administration’s implementation of significant and widespread tariffs – and the potential for additional and farther-reaching tariffs – represents more than just a trade challenge. For companies engaged in international commerce, the uncertainty created by these measures increases the risk of commercial disputes. Among other things, tariffs can increase costs, reduce margins, and reveal contractual assumptions and ambiguities that lead to disputes throughout the supply chain: between buyers and sellers, manufacturers and distributors, and in a variety of other business dealings.
Below we highlight four key questions for assessing and mitigating commercial dispute risks. Whether reviewing existing contracts or negotiating new ones, companies should take strategic steps to protect their interests and minimize potential disputes and supply chain disruptions.
Background: Tariffs Under the Trump Administration
Since the America First Trade Policy memorandum that President Trump signed on the first day of his second term, the current administration has imposed a variety of country- and product-specific tariffs, threatened additional tariffs, and promised other future actions. Importers, foreign producers, and U.S. purchasers of imported products all face a heightened risk that products that they have contracted to purchase or supply may be impacted by tariffs, at times potentially altering the fundamental bargain between the parties. The threat of retaliatory tariffs leads to even further uncertainty.
At the time of publication, the Trump Administration has imposed or threatened to impose a variety of tariffs under an array of different statutory authorities. For instance:
- Canada, Mexico, and China Tariffs: President Trump ordered 20% tariffs on products from China and 25% tariffs on products from Canada and Mexico not covered by the U.S.-Mexico-Canada Agreement (“USMCA”) under the International Economic Emergency Powers Act (“IEEPA”).
- Steel and Aluminum Tariffs: Separately, for the Section 232 tariffs on steel and aluminum, President Trump removed country-specific exemptions, is phasing out the product-specific exclusions and removing General Approved Exclusions, and is creating a petition process for the expansion of the tariffs to derivative steel and aluminum products not already covered.
- Reciprocal Tariffs: Meanwhile, the Office of the U.S. Trade Representative and the Department of Commerce are leading a broad review of foreign trade partners to determine whether they are imposing nonreciprocal tariffs and other trade restrictive measures, for the United States to respond in kind (possibly with higher tariffs of its own).
- Other Potential Tariffs: All the while, myriad agencies are reporting to the President in April on a variety of trade and tariff issues, which could serve as the foundation for additional, future tariff actions by the Trump Administration.
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