How U.S. Manufacturers Are Responding to New Tariff Uncertainty

# Overview Felix Faerber, a shareholder at Baker Donelson, explains how manufacturers are coping with a renewed wave of tariffs amid high interest rates and other unpredictable variables. The immediate pressures are practical: tariffs change landed costs, and manufacturers must adapt commercial and operational decisions to preserve margins and supply continuity.

# What's changing for manufacturers Tariff actions have wide regulatory implications. Manufacturers are re-examining three technical areas immediately:

• Harmonized Tariff Schedule (HTS) codes for products and components to confirm the correct duties and avoid surprises.
• Existing contracts with suppliers and customers to determine which party bears new or shifting costs.
• Currency exposure, since exchange-rate movements can alter cost competitiveness alongside tariffs.

Faerber notes awareness alone is insufficient. Companies need concrete contract language and pricing strategies that reflect the new trade reality.

# Contract-level responses Manufacturers are taking specific contractual steps:

• Reopening price and cost-allocation terms where rising costs were not foreseen at contract formation.
• Seeking clauses that allocate increases in duties or related regulatory costs, since force majeure clauses generally do not cover regulatory changes.
• Introducing or planning for currency-adjustment provisions to reduce unexpected margin erosion when exchange rates move.

# Pricing and passing costs

• Indexing prices to specific input-cost drivers or tariff bands where contract terms allow.
• Negotiating one-off price adjustments when new tariffs materially change landed costs.
• freight, duty, and compliance surcharges into commercial terms.

Faerber emphasizes that full absorption of tariff-driven costs is often not feasible, so partial cost recovery strategies are more realistic for many manufacturers.

# Supply-chain and sourcing implications Some manufacturers are reconsidering offshore production in favor of domestic sites when landed-cost calculations — including tariffs and other trade barriers — make U.S. production more competitive despite higher labor costs. This is presented as a longer-term strategic reaction rather than an immediate fix.

# Immediate practical checklist

• Reclassify and verify HTS codes for all key products and components.
• Audit existing contracts for price-review, allocation-of-cost, and currency clauses.
• Open renegotiation talks with major suppliers and customers where tariffs change cost baselines.
• Model landed-cost scenarios that include tariffs, interest-rate impacts, and currency shifts to inform sourcing decisions.

# Bottom line