Tariffs Changed the Economics of the Deal. Now What?

The margin changed. The commitment did not disappear.

You agreed to supply imported building materials for a construction project at a fixed price. The deal left you with a 10% margin. Before the next shipment arrives, tariffs increase your costs enough to reduce that margin to 2%. The customer still expects delivery at the agreed price.

Tariffs don’t tear up your contract. They just blow a hole in your profit margin.

Your first instinct may be to pick up the phone: “We can’t supply at that price anymore. We need an adjustment.”

But needing a better price and being entitled to one are different things. Before making that call, understand what the agreement allows and what would give the customer a reason to reconsider the terms.

Get smart on your position first.

Pull out the agreement before reopening the deal

Before you panic, before you call anyone, read the contract. There may be provisions that help you. There may also be language that puts the increased cost squarely on your side.

Review these four areas with counsel:

• Material adverse change (MAC): Does the clause cover this kind of disruption, and what does it allow you to do? A painful increase in costs does not automatically meet its requirements.
• Price adjustment: Can the price move when specified costs increase? Look for which costs qualify, any limits on the adjustment, and the notice or documentation required.
• Change in law: Does the provision cover newly imposed tariffs or tariff increases? If it does, check what relief it provides. Coverage alone does not tell you who pays.
• Termination rights: Is there a way out, what would it cost, and what conditions apply? Understand the exit before putting it on the table.

The point is to find out what helps you and what hurts you. You may have a right to seek an adjustment through an agreed process. You may need the customer to agree to something the contract does not require.

Before calling the customer, review your position with counsel so you know what you can require and what you’ll need to negotiate.

The contract is only part of your leverage

The agreement may give you little room to raise the price. That does not mean the customer has no reason to work with you.

If you are the only supplier who can deliver the volume they need on schedule, replacing you may be expensive or impractical. A price adjustment could cost them less than a delayed project. That matters when you approach the conversation.

But look at the other side, too. Can they source elsewhere? How dependent are you on their business? If your own supplier has raised prices and you have no alternative source, that limits your flexibility.

What helps you? What hurts you?

Tariff contract renegotiation requires an honest assessment of both. Your customer may have a strong contractual position and still have a business reason to share the increased cost. Understanding that reason helps you bring a proposal they can consider, instead of assuming your shrinking margin will persuade them.

Know what you are asking for before you make the call

Once you understand your position, decide what would make the deal workable. You may need a price adjustment, but sharing the added cost, changing the scope, or revising delivery timing could also help. If none of those solves the problem, you need to understand your exit options.

Bring the numbers. Bring a solution.

Show which costs changed, how much of the increase comes from tariffs, and how it affects the remaining work. Then propose a way forward the customer can evaluate:

We’ve calculated the additional cost on the remaining shipments. Here’s a way we could share it and keep your delivery schedule intact.

That opens a more useful conversation than announcing that you cannot continue at the agreed price.

Before sending that proposal, review it with counsel. You want to understand what your wording commits you to and where you still have room to negotiate.

The goal is a deal both parties can continue performing. A customer protecting its budget and a supplier protecting its margin may still have a shared interest in keeping the project moving.