From reciprocal tariffs and retaliatory investigations to paused agreements and looming re-escalations, the global tariff landscape remains as turbulent as ever. Morgan Lewis recently hosted a three-part webinar series examining the evolving tariff climate from the perspectives of the United States, China, and the European Union and United Kingdom. While the specifics of tariff schedules and trade actions continue to shift near-daily, the panelists discussed several foundational strategies that companies can rely on regardless of the next political turn.
Here, we share some key takeaways and long-term best practices for companies managing cross-border trade during this complicated time.
- Understand Your Supply Chain at a Granular Level: Detailed visibility into your inputs, vendors, manufacturing processes, and shipping routes is more critical than ever. It is important to know exactly where goods originate and how they are classified to assess exposure to new or revised tariffs.
- Use Product Classification Strategically: Accurate Harmonized System code classification can significantly impact duty rates. Misclassification can lead to penalties or delays, but strategic classification, based on component materials or end use, may offer more favorable treatment in certain jurisdictions.
- Assess Country-of-Origin Rules Carefully: Rules of origin, particularly the “substantial transformation” or international equivalent test, are key to determining tariff exposure. Companies would do well to explore restructuring production steps to legally shift origin designations.
- Mitigation Tools Are Available: Companies should proactively pursue mitigation strategies such as exclusion requests, foreign trade zones, customs unions, bonded warehouses, and country-specific deals where available. These tools can defer or reduce tariff burdens and improve cash flow.
- Document Everything: Increased scrutiny by US Customs and Border Protection and international customs authorities makes robust documentation essential. Maintain thorough records of inputs, valuation, and transformation processes to support claims during audits or disputes.
- Watch for Non-Tariff Retaliatory Measures: China in particular has leaned heavily on non-tariff responses such as export controls, antitrust investigations, and inclusion on “unreliable entity” lists. These tactics may be aimed at broader strategic or political goals and can significantly disrupt business operations. The EU could use its anti-coercion instrument, which allows for a wider range of non-tariff countermeasures.
- Beware of Enforcement Escalation: US enforcement is ramping up: companies found misclassifying imports or evading duties could face civil and criminal penalties, including under the False Claims Act. The US Department of Justice recently flagged customs fraud as a key enforcement priority. Other jurisdictions will step up controls to prevent deviated influx.
- Factor Tariffs into Contractual Risk Allocation: Firms are increasingly using price-adjustment clauses and allocation provisions in contracts to address future tariffs or trade remedies. Contractual flexibility can help ensure that cost adjustments remain manageable rather than disruptive.
- Monitor Digital Trade and Data Localization Developments: Tariff-related tensions are increasingly touching on digital trade restrictions, including data localization requirements, cross-border data transfer limits, and export controls on digital services and software. Companies in the tech and services sectors should treat trade compliance and digital regulatory strategy as interconnected.
- Leverage Trade Agreements—But Stay Realistic: Bilateral deals can create opportunity, but the current political appetite for zero-tariff frameworks remains low. Firms should monitor negotiations but avoid overreliance on promised relief.
- Expect Negotiations, But Don’t Count on Resolution: Temporary deals and 90-day pauses have become the norm rather than the solution. Because many of the recently announced trade agreements between the United States and other nations remain nonbinding frameworks, businesses should expect—and plan for—continued uncertainty.
- Prepare for Further Political Influence on Tariffs: Tariff policy remains heavily influenced by broader political objectives, whether those are onshoring supply chains, addressing labor rights, or curbing the flow of fentanyl. Companies should engage in scenario planning that accounts for geopolitical, rather than purely economic, drivers.
- Stay Informed on Legal Challenges to Tariffs: Recent court rulings have called into question the constitutionality of certain tariffs imposed under the International Emergency Economic Powers Act (IEEPA). For example, in V.O.S. Selections, Inc. v. United States, the Court of International Trade ruled that the president lacked authority under IEEPA to impose specific tariffs, leading to a temporary injunction. However, a federal appeals court has since granted a stay, allowing the tariffs to remain in effect pending further legal proceedings. Businesses should monitor these developments closely as outcomes may impact tariff obligations and compliance strategies.
Conclusion
The evolving global trade environment rewards businesses that take a forward-looking, proactive approach. By strengthening compliance infrastructure, diversifying supply chains, and building contractual and operational flexibility, companies can mitigate the impact of future tariff shocks. Tariff levels may rise or fall, but strategic preparedness remains a constant asset.