The business landscape in late 2025 has become defined by a single word. President Trump has famously called it the most beautiful word in the dictionary. That word is tariff. For many business owners, however, the beauty is hard to find. We are currently operating in a period many call Trump 2.0. In this era, tariffs have transitioned from being a simple trade tool to a core policy weapon.
If you are a business owner importing goods, you are likely feeling the pressure. The rules of international trade have shifted under our feet. What used to be a predictable expense is now a volatile variable. In a recent discussion on our podcast, Letters of Intent, my co-host Sahil Chaudry and I explored how this regime is reshaping deal risk. We are seeing contracts break in real time because these duties are breaking bank accounts.
The reality is that as of December 18, 2025, we are not just looking at a few targeted duties on steel or aluminum. We are facing a baseline global tariff regime. This includes country-specific penalties, product-specific tariffs, and a complex phenomenon known as tariff stacking. This post will break down why your old legal defenses are likely obsolete and how you can protect your margins in this new environment.
The New Reality of Tariff Stacking
A common mistake for many small to mid-sized businesses is a superficial understanding of these costs. You might hear about a 10% tariff on news reports and think your model can absorb that. But that 10% is often just the baseline. Since April 2025, a 10% baseline reciprocal tariff has been effective on virtually all imports. This is the floor, not the ceiling.
The danger lies in the layers. Once you have that 10% baseline, you may face country-specific reciprocal tariffs. Then come trans shipment penalties, which can hit 40%. You might also face secondary tariffs tied to sanctions on countries like Russia, Iran, or Venezuela. Finally, product-specific tariffs under Section 232 can go as high as 100%.
Consider the apparel industry as a mini case study. If you are importing apparel from India, you are no longer just paying the standard duty. When you stack the baseline tariff with reciprocal duties and sanctions-related penalties, the total can reach 67%. Think about that for a second. If you expected a 10% increase and end up with a 67% landed cost jump, your entire pricing model vaporizes.
This is the “stacking trap.” It is a structural feature of the current trade environment. Businesses that fail to model these cumulative effects are finding themselves in litigation or, worse, facing insolvency. You cannot afford to guess your landed costs anymore. You need a granular understanding of every duty that might apply to your specific product and its country of origin.
Why Force Majeure is No Longer a Shield
When costs spike overnight, the first instinct for many businesses is to look for an exit. Attorneys often reach for the “Force Majeure” clause. Traditionally, this clause allows a party to suspend or terminate a contract due to an “Act of God” or an unanticipated government action beyond their control. But in the world of Trump 2.0, this defense is failing in court.
Courts are consistently ruling that tariffs are now a foreseeable market risk. For an event to qualify as force majeure, it generally must be unanticipated. In an era of rolling executive orders and public tariff threats posted on social media, it is almost impossible to argue that these duties were a surprise. The Federal Circuit and other courts are beginning to view tariffs as an economic reality rather than a legal impossibility.
Imagine you signed a fixed price manufacturing agreement a year ago. If your margins are now negative because of new duties, you might feel the contract is “impossible” to perform. However, the law distinguishes between “impossibility” and “unprofitability.” Just because a deal has become a bad financial move doesn’t mean you have a legal right to walk away.
Courts are holding parties to the language of their agreements. If your contract doesn’t explicitly mention tariff allocation, the law generally assumes the performing party—the importer—accepted the risk. Generic clauses mentioning “acts of government” are simply not working anymore. The burden is on you to prove that the specific event was truly beyond contemplation. In late 2025, that is a very steep hill to climb.
The High Stakes of Litigation and Refund Rights
The legal environment is currently defined by extreme uncertainty. Many of the current tariffs are being challenged in court. For example, the administration has used the International Emergency Economic Powers Act (IEEPA) to justify tariffs related to fentanyl imports from China. The argument is that these drugs constitute a national emergency.
The Supreme Court heard oral arguments on these issues in November 2025, and a decision is currently pending. This creates a bizarre and dangerous situation for importers. You are currently paying tariffs that might eventually be ruled illegal. But here is the catch: if they are ruled illegal, you will not automatically get your money back.
To get a refund, you must actively preserve your refund rights at the time of payment. If you don’t follow the specific administrative procedures to protest the duties, that money is likely gone forever, even if the Supreme Court strikes down the tariff regime next month. This adds a layer of administrative burden that many small businesses are not prepared for.
This uncertainty is “deadly” for fixed price agreements. When neither party knows which tariffs will stick or which will be unwound, it becomes impossible to price long-term deals with confidence. This is why we are seeing a massive shift away from rigid, long-term contracts toward more flexible, “living” documents that can respond to real-time risks.
Auditing Your Contracts for 2026
Given this volatility, the most practical step you can take right now is to audit every single one of your commercial agreements. You cannot wait for the next executive order to see if your business survives. You need to know exactly where you stand today.
Start by reviewing your “Fixed Price” language. Most traditional contracts assume a static cost environment. You need to identify where your contract is silent on tariffs. In the eyes of the court, silence is often interpreted as an acceptance of risk. If your contract doesn’t say who pays, the importer usually pays.
Next, look at your “Change in Law” and “Dispute Resolution” provisions. Where will a dispute be handled if a supplier tries to raise prices unilaterally? Does a new tariff qualify as a “change in law” that triggers a price renegotiation? These details, which once seemed like legal boilerplate, are now the most important paragraphs in your documents.
You also need to look at your financing and credit exposure. If you are taking on high-interest debt to cover landed costs, and your margins are being eroded by 40% jumps in tariffs, you are in a high-risk zone. Forecasting for 2026 must be conservative. We recommend building “tariff stress tests” into your financial models to see how much of a stacking duty your business can actually handle before it breaks.
Drafting the Living Contract
The days of the “set it and forget it” contract are over. To survive in a Trump 2.0 trade environment, your agreements must become living, breathing documents. This requires a fundamental shift in how we draft and negotiate deals.
We are advising our clients to move toward explicit tariff allocation provisions. Don’t leave it to implication. Your contracts should clearly define who pays the base duty and who bears the risk of “stacked” or emergency duties. You should include specific triggers for price adjustments. For example, if duties increase by more than 5%, the parties might be required to meet and renegotiate in good faith.
Consider adding termination rights or renegotiation triggers tied to specific government actions. If a new Section 232 duty is applied to your product, you should have a pre-defined path to adjust the deal or walk away without being sued for breach of contract. This “legal agility” is what will separate the winners from the losers in the coming years.
Working with counsel is no longer a one-off transaction for a single deal. It is an ongoing partnership. You need someone who is tracking these executive orders and court cases in real time to advise you on how they impact your existing obligations. The trade laws are changing faster than most businesses can keep up with.
Final Thoughts for the Road Ahead
Tariffs are no longer an anomaly; they are a structural feature of the global economy. The courts will not rescue you from a poorly drafted contract or a failure to plan for these risks. The responsibility for risk allocation lies entirely within your agreements.
At Carbon Law Group, we understand the unique pressures facing importers and manufacturers today. We are helping our clients navigate this uncertainty by auditing their contracts and drafting robust provisions that protect their bottom line. The goal is to bake the risk into the price or define exactly how it will be shared.
If your agreements haven’t been updated for this new regime, now is the time to act. Don’t wait until your margins are gone and you’re facing a lawsuit you can’t win. Take control of your legal strategy today so you can focus on growing your business tomorrow.
Tariffs, Trump 2.0, Trade War, Supply Chain, Force Majeure, Commercial Contracts, Import/Export, Customs, Risk Management, Tariff Stacking, Carbon Law Group
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