Q1: How do long-term contracts typically handle tariff changes?

Long-term supply agreements, especially for higher-end industrial goods, often contain clauses specifying how tariff costs will be allocated. In many cases, the buyer in the importing country assumes the risk. These provisions were sometimes in place even before recent tariff increases, giving both parties a clear roadmap.

Q2: Do suppliers ever absorb some of the tariff costs?

Yes — in select industries, particularly advanced technology or specialized manufacturing, suppliers may share part of the burden. This usually happens when the importing market is strategically important and offers stronger profit margins than the supplier’s domestic market. Some suppliers even offer extended cancellation deadlines for long-lead-time orders. However, this is the exception rather than the norm.

Q3: What happens if there is no formal supplier contract?

In many industries, companies rely on purchase order terms instead of a full supply agreement. Without clear tariff provisions, negotiations tend to focus on maintaining the relationship rather than forcing one side to take the entire hit. This often requires flexibility and compromise from both sides.

Q4: What are the risks of demanding that suppliers absorb all tariff costs?

Unrealistic demands can lead to:

• Reduced product quality (cheaper materials, smaller specifications, or subcontracting to less qualified manufacturers)
• Questionable workarounds (misrepresenting invoice values, hidden service fees, or rerouting shipments to misstate the country of origin)

Both can create significant legal and compliance risks, from product liability to customs violations.

Q5: How can companies prevent these risks?

Increase oversight:

Conduct more frequent inspections

• Maintain consistent communication with suppliers
• Verify quality standards at each stage of production
• Review compliance and documentation carefully before shipments

Q6: Why are suppliers sometimes unable to grant large price concessions?

Many suppliers already operate on thin margins due to a combination of domestic economic weakness and prior concessions during earlier tariff negotiations. While small discounts may be feasible, larger cuts may be financially unsustainable. Accepting them without due diligence can be risky.

Q7: What should buyers check when a supplier agrees to a large concession?

Investigate whether:

The supplier is overly reliant on your business

• They are reducing quality or compliance standards
• Production is being outsourced to facilities with questionable labor or safety practices
• High levels of financial instability in some supply chains mean that short-term wins can quickly become long-term losses if a supplier goes out of business or engages in unethical practices.

Q8: What’s the best overall approach to managing tariff risk?

Include clear tariff clauses in contracts whenever possible

• Foster a cooperative relationship with suppliers
• Keep inspection and compliance processes active
• Be realistic about what suppliers can afford to absorb
• Perform due diligence before accepting deep discounts

By balancing contractual clarity with strong supplier relationships and ongoing oversight, companies can better navigate tariff uncertainty without sacrificing quality, compliance, or long-term stability.

In a dispute with your Chinese supplier or business partner? Contact us at inquiries@chinalawsolutions.com