Trump tariffs leave UK firms scrambling to renegotiate contracts

Times

4 hours ago

British companies are looking to renegotiate supplier contracts as they scramble to find savings that can protect them from the impact of escalating US tariffs, according to new data.
A survey of firms with more than 5,000 employees found that 90 per cent fear that President Trump's import duties would hurt their revenues and profits, with businesses looking at a series of ways to manage rising costs.
More than half (55 per cent) said their main tool to deal with tariff threats was to review existing contracts to find savings or renegotiate better terms with break clauses that could account for the imposition of new levies, according to Acertis, which provides contract management software.
Bernadette Bulacan at Icertis said companies' first resort 'to protect margins is to take a critical look at customer and supplier relationships. For many companies, the path to surviving tariff disruption starts not with policy lobbying but with a forensic look at what's already been committed to on paper.'
She said firms were taking measures to include rules of termination and force majeure clauses in contracts to deal with costs caused by tariffs, while also seeking out new suppliers in countries that were not affected by sweeping US levies.
The Trump administration applied a 90-day pause on reciprocal tariffs he had announced on most of the world economy on April 8, which is due to expire in early July. The president has signed a partial tariff deal with the UK, but most British goods will still be subject to a 10 per cent tariff when selling to US markets, raising the average US tariff rate from about 1 per cent last year to more than 6 per cent.
The European Union is also in talks with the White House about avoiding a potential 55 per cent tariff on all its goods exports.
• Britain's exporters at a loss over US tariff turmoil
The debate over contractual terms between suppliers and customers is part of a swathe of legal complexities about who should shoulder the cost of import taxes. In April, Howmet Aerospace, an American supplier of components to the sector, declared a force majeure event that would allow it to stop shipments if it remained subject to US tariffs.
Although the full gamut of threatened tariffs has not yet been applied on most countries, recent data has shown a spike in invoice rejections as businesses attempt to delay supplier payments until they have more certainty about US trade policy.
Icertis's survey, which included 1,000 companies across Britain, the United States and India, found that just under half of them were 're-evaluating' where to find suppliers to avoid tariffs, restructuring their supply chains and manufacturing plants, and also considering 'sunsetting relationships that no longer serve under new cost and compliance pressures'.
About 40 per cent of UK firms said they would absorb higher costs into their margins and just over a third said they were planning to raise prices charged to consumers to deal with tariffs.
Bulacan said companies should also consider price adjustment clauses that account for tariff changes. 'In the same way that force majeure clauses changed fundamentally during the pandemic, these clauses could be invoked against new tariffs to prevent potential losses,' she said.