Key Takeaways:

• Align project delivery model with business priorities: Choosing the right project delivery structure (Design-Bid-Build, CM@R, Design-Build, or EPC) is critical to balancing cost, speed, design control, and risk management in reshoring projects.
• Select pricing to match project goals: Fixed Price, Cost Plus, and GMP contracts each shift risk differently; manufacturers must weigh cost certainty against flexibility to avoid costly surprises.
• Plan for volatility and disruption: Contracts should proactively address material price escalation, tariffs, procurement timing, and force majeure events to safeguard budgets and schedules in today’s unpredictable environment.

Manufacturers reshoring or expanding in the U.S. often devote the bulk of early planning to where to locate – analyzing workforce markets, incentive packages and transportation links. But once the site is selected, an equally decisive factor comes into play: how the facility will be designed and built. In today’s climate of volatile material costs, unpredictable supply chains and evolving market demands, the construction phase is one of the most risky and challenging elements of the reshoring process. Every decision, from project delivery structure to pricing model, will determine whether the facility comes online on time, on budget and ready to serve for decades. Treating construction contracting as a strategic business function, rather than a routine procurement exercise, is essential to protecting and maximizing the return on your investment.

1. Think Ahead: Match Delivery Model to Business Goals

An early and fundamental decision is selecting the right project delivery model – the framework that dictates who designs the facility, who builds it and when those roles overlap. This choice can have dramatic consequences for cost control, schedule certainty and risk allocation.

Under the traditional »ĺ±đ˛őľ±˛µ˛Ô‑bľ±»ĺ‑błÜľ±±ô»ĺ model, the manufacturer hires a design team to produce complete plans, then competitively bids the work to contractors. This approach can yield competitive pricing, but the sequential process often stretches the schedule and creates fertile ground for change orders if the design needs to shift to meet evolving operational needs.

Another option, construction manager at risk (CM@R), brings the builder in early during the design process to provide constructability reviews, budgeting and scheduling input before constructing the project. This approach can strike a balance between price certainty and design flexibility.

By contrast, the »ĺ±đ˛őľ±˛µ˛Ô‑błÜľ±±ô»ĺ model engages a single entity for both design and construction, fostering collaboration and often compressing schedules. That speed can be invaluable in a reshoring race, but it requires the manufacturer to clearly define performance and quality standards up front to avoid surprises or misalignment later in the process.

For process‑intensive facilities, an engineer‑procure‑construct (EPC) structure consolidates design, procurement and construction responsibilities under one roof. The contractor delivers a turnkey facility, taking on significant performance risk, but this concentrated responsibility may come at a higher starting price and with less direct control over design details.

There is no universal “best” delivery model. The right choice depends on whether speed, cost certainty, design control or risk transfer is your top priority. Too often, manufacturers default to the model they used last time, rather than selecting the one that truly matches their reshoring objectives – a decision that can prove costly later.

2. Price It Right: Choosing the Model That Fits Your Risk Tolerance

Once the delivery model is set, the construction contract becomes the manufacturer’s primary tool for allocating risk, preserving schedule and containing costs. In any construction market – but especially one defined by material volatility and labor constraints – the way you structure pricing will dictate much of your financial exposure.

Under a Fixed‑Price (Lump Sum) contract, the contractor agrees to deliver the project for a set price based on a clearly defined scope. This provides strong budget certainty, but only if the scope is fully documented and stable. In the current market, where design changes may be needed to accommodate rapidly evolving production requirements or unanticipated site conditions, that certainty can quickly erode through change orders. Fixed‑Price agreements place the risk of cost overruns squarely on the contractor, which they may hedge by building premiums into their bid.

A °ä´Ç˛őłŮ‑P±ôłÜ˛ő model reimburses the contractor for actual labor, materials and other allowable project costs, plus a fee or percentage for overhead and profit. This arrangement can be attractive when the design is incomplete, the scope is evolving or the manufacturer wants greater flexibility to make changes mid‑construction. However, it provides minimal cost certainty and requires strong auditing rights and disciplined project management to prevent cost overruns which can quick balloon without such protections in place. While the owner retains more control over design and changes, they also assume nearly all of the financial risk.

Many manufacturers find the middle ground in °ä´Ç˛őłŮ‑P±ôłÜ˛ő with a Guaranteed Maximum Price (GMP). Here, the contractor is reimbursed for actual costs plus a fee, up to a capped “maximum” amount. Beyond that cap, the contractor absorbs additional costs. This model offers flexibility for changes in scope and design, while establishing a ceiling on cost exposure. GMPs often include allowances and contingencies, so contracts must tightly define how these can be used and who retains any savings. In volatile markets, GMP agreements can balance adaptability with budget discipline, particularly when paired with escalation clauses that fairly address market‑driven price spikes.

The choice among these models should be deliberate and directly tied to the manufacturer’s priorities. If your project demands an unmovable budget, Fixed‑Price may be worth the upfront premium. If adaptability during construction is vital, °ä´Ç˛őłŮ‑P±ôłÜ˛ő may be the best option, provided it is coupled with strong cost controls and stringent owner oversight. And if you need both flexibility and a cap on exposure, °ä´Ç˛őłŮ‑P±ôłÜ˛ő with GMP often offers the best compromise.

3. Plan for the Unplanned: Managing Volatility, Tariffs, and Integration Risks

Even with the right delivery and pricing model, today’s market requires contracts that anticipate volatility. One approach to address material pricing volatility is to agree upon  an approach to price escalation in the contract before such issues arise as the project progresses. Such clauses may provide relief to the contractor for cost increases that exceed an agreed‑upon threshold and could not reasonably have been anticipated at the time the contract was signed. The contractor should be required to substantiate any claim with detailed evidence of the original committed price and the actual cost increase. This ensures relief is granted only for exceptional, documented changes and not routine fluctuations.

The same principle applies to tariffs. Even when production is in the U.S., critical materials or equipment may come from abroad. A well‑drafted tariff clause should allow adjustments only for new or significantly increased tariffs imposed after execution and should bar recovery for tariffs that were known or reasonably foreseeable. As with escalation, the contractor must demonstrate both that the tariff applies to the project’s materials and the extent of its direct cost impact.

Material procurement strategies should also be carefully considered. Specialized materials and equipment frequently have long lead times for delivery, making early procurement provisions essential. Contracts should clearly address title transfer, risk of loss, insurance obligations and storage responsibility to avoid disputes.

Finally, force majeure clauses should be updated to reflect modern realities, including supply chain disruptions, extreme weather events and public health emergencies, rather than relying on boilerplate provisions from more stable times.

The Right Construction Contract Builds Stronger Reshoring Success

Reshoring success isn’t simply about breaking ground quickly; it’s about delivering a facility that launches on schedule, on budget, and with the flexibility to grow. Achieving that outcome depends on aligning your project delivery method with your business priorities, selecting pricing structures that match your risk tolerance and building contract terms that anticipate volatility while hardwiring adaptability into the design.

Where you build will always matter — but how you contract to build will determine whether your investment thrives or falters.

On April 2, 2025, President Trump implemented the steepest American tariffs in over a century. The implications for numerous multinational companies — including importers, manufacturers, distributors, and retailers — will be immense. As an aid to the importing community, we are providing: (1) a summary of the April 2 “reciprocal tariff” and other trade-related proclamations, including how these tariffs fit within other tariff pronouncements and the prior Section 232 and 301 tariffs; (2) an overview of multinational companies that could be most impacted by the reciprocal tariffs; and (3) the implications for importers trying to manage these drastic changes to the cost of importing goods into the United States.

At its core, the reciprocal tariff announcement consists of a baseline 10% tariff on all exports to the United States, with significantly higher duties on approximately 60 nations. In essence, countries that maintain a trade surplus or roughly equal trade in manufactured goods were hit with a 10% tariff, while countries that maintain significant trade surpluses — including China, the European Union (EU), Japan, Cambodia, and Vietnam — face steep new levies. China, the primary target of Trump’s trade war, now faces tariffs exceeding 50% on nearly all goods, and tariffs approaching 89% for many imports. Moreover, the tariffs are almost as great on countries that generally have formed the “China +1” strategy of many multinational companies, such as Cambodia, Vietnam, and Malaysia. The net result is an average tariff rate that has climbed from a historic average of under 3% to around 23% — the highest level in over a century.

Details of the Reciprocal Tariff Plan

A statement from the U.S. Trade Representative confirmed that the Trump administration calculated tariffs primarily based on trade imbalances rather than an analysis of trade barriers, as was initially telegraphed by the administration. Countries with neutral trade patterns or even trade deficits with the United States face a minimum 10% duty (the global tariff), while all other major trading partners (with the exception of Canada and Mexico) will be subject to sharply higher rates (the reciprocal tariffs). Tariffs will be imposed using the following timetable:

• Implementation Timeline: The 10% global tariff takes effect at 12:01 a.m. on April 5, 2025. The higher reciprocal tariffs will take effect at 12:01 a.m. on April 9, 2025. It is not clear if Customs is already equipped to handle collecting these special tariffs, which likely will require implementation in the Automated Commercial Environment (ACE) portal that Customs maintains for importers to submit import-related information and to pay tariffs.

• Notable Exemptions: Prior Trump administration tariffs were carved out:
  • 25% Steel and Aluminum Tariffs:The tariffs on steel and aluminum, and identified derivative products, remain undisturbed at 25%.
  • 25% Canada and Mexico:Canada and Mexico also are exempt from this round of tariffs, although separate 25% tariffs imposed due to the Trump administration’s concerns regarding unauthorized immigration and fentanyl imports remain in place. These latter tariffs continue to be partially suspended for United States-Mexico-Canada Agreement (USMCA)-compliant goods.
  • 25% Automotive Tariffs: The reciprocal tariffs also exclude all automobiles and automotive parts, subject to the additional 25% duties imposed in Proclamation 10908 (“Adjusting Imports of Automobiles and Automobile Parts into the United States”) on March 26, 2025. The automotive tariffs, which became effective on April 3, impose a 25% sectoral tariff on sedans, SUVs, crossovers, minivans, cargo vans, and light trucks up to 8,500 pounds, with a payload capacity up to 4,000 pounds. The tariffs also extend to automobile parts such as engines, transmissions, powertrain parts, and electrical components, beginning on May 3, 2025. Again, this tariff construct is left untouched.
  • Sector-Specific Exclusions: Certain products, such as copper, pharmaceuticals, semiconductors, lumber, critical minerals, and energy products, are unaffected by the April 2 reciprocal announcement. It is expected that these products will be subject to future tariffs, thus making this an “exemption” to allow for future action, rather than indicating no tariff imposition.
  • Future Sectoral Tariffs: The proclamation states that it will not apply to any future special tariffs that might be imposed under Section 232.
• U.S.-Origin Content: The proclamation states that “the ad valorem rates of duty set forth in this order shall apply only to the non-U.S. content of a subject article, provided at least 20 percent of the value of the subject article is U.S. originating.”

Finally, President Trump also announced the end of duty-free shipping for many small parcels using the “de minimis” exemption. This further tightens trade restrictions, particularly on goods from China, which most commonly used the exemption.

U.S. Multinational Companies and Importers Hit Hardest Hit by the New Tariff Announcements

The new tariffs are likely to hit U.S. multinationals hardest in the following areas:

• Companies that Import from China: China, which runs the largest trade surplus with the United States, continues to bear the brunt of duties. Goods from China now have to pay: (1) the normal Chapter 1-97 duties (generally 3%–6%); (2) the 20% additional duties imposed earlier this year by the Trump administration, related to Chinese government’s alleged failure to prevent fentanyl precursor exports; (3) a 34% reciprocal tariff rate; and (4) for about half of all Chinese imports, the 2018 Section 301 tariffs, which range from 7.5% to 25%. All of these tariffs stack, meaning that imports of Chinese-origin goods now face duties of 55%–60% and potentially up to 89%. There are no exceptions for goods produced by U.S.-owned subsidiaries.

• Companies that Pivoted from China, Using a “China +1 Strategy”: In response to the tariffs imposed on China during the first Trump administration, many multinational companies — with the encouragement of both the Trump and the Biden administrations — pivoted to a “China +1” strategy. This involved generally moving production out of China and into other countries (the +1) to minimize tariffs and geopolitical risks and to reduce dependency on Chinese production. But the countries that most popularly used this strategy — Cambodia, Vietnam, Thailand, Malaysia, and India — now are facing high tariffs of their own, upending the benefits of the China +1 strategy.

• Companies that Import from the EU: Companies importing goods from the European Union will be impacted more than anticipated by the reciprocal tariffs, with the Trump administration imposing a 20% duty on EU-origin products.

• Automotive Companies: Automotive companies will be hit particularly hard in the new tariff environment, as they face increased costs on multiple fronts. Automobiles and automotive parts that fall under the specific automotive tariffs will see significant duty hikes, raising the cost of manufacturing and assembly. Additionally, reciprocal tariffs on all other imported components will further strain supply chains and profit margins.

Moreover, the following countries and sectors, while not a focus of the new tariffs, are at heightened risk for future tariff increases:

• U.S. Importers Already Hit by High Reciprocal Tariffs: According to administration officials, the currently announced tariffs are the “ceiling” — unless other countries retaliate. To this end, many countries (and the European Union) have announced plans to develop retaliatory tariffs. The currently announced tariffs could thus increase even further if other countries implement their own retaliatory tariffs.

• Canada and Mexico: Canada and Mexico were carved out from the April 2 tariffs, but this exemption is largely because of previously implemented tariffs on certain imports from these countries. For some importers, it may seem encouraging that USMCA-compliant products from Canada and Mexico remain duty-free. This relief, however, may be temporary. The USMCA is set to be reviewed by 2026, creating uncertainty about future trade terms.

• Lumber, Pharmaceuticals, and Copper: While lumber, pharmaceuticals, and copper were excluded from the new reciprocal tariffs, this exemption is not expected to provide long-term relief for importers in these sectors. Instead, it is widely anticipated that these goods will be targeted by separate sector-specific tariffs in the coming months.

• U.S. Companies Selling U.S.-Origin Goods into the EU, Canada, Japan, Korea, and Other Countries Hit by High U.S. Tariffs: While the Trump administration has cautioned countries from retaliating, all of the countries listed above are known to be preparing retaliatory tariffs, which potentially will be done on a joint basis.

Implications of the Tariff Announcements

The April 2 tariffs exceed initial expectations, both in scale and impact. The average U.S. tariff rate was just 2.7% at the outset of the first Trump administration, with earlier increases confined to one country and a couple of products. It now stands at 23% or higher, a nearly fourfold increase. The U.S. government is projected to collect $600–700 billion in tariffs annually, up from $95 billion per year — with importers of record (generally, U.S. companies) paying these tariffs. Further, unlike prior tariffs, the administration has signaled that few, if any, exemptions will be granted.

The April 2 tariffs also introduce significant compliance and cost-allocation challenges for U.S. importers. In this new trade environment, we expect CBP will increase its enforcement efforts considerably, focusing on high-tariff goods. Further, while previous tariffs generally were focused on one country (China), tariff-related risks are now spreading out to a large number of countries, especially those that once benefited from U.S. efforts to reduce reliance on China such as Cambodia, Vietnam, Thailand, and Malaysia.

Multinational companies thus should carefully and thoroughly reevaluate their import and customs programs in light of the new tariffs to ensure compliance and to mitigate potential financial risks. Below are several items that merit a special Customs and tariff compliance focus:

• Country of Origin Determination: The level of tariffs is now most heavily influenced by the country of origin of imported goods, making accurate country of origin determinations a top (if not the highest) priority. Incorrect origin reporting could result in penalties, back duties, and potential legal consequences. To help prevent these outcomes, importers should focus on the following:
  • Importers should conduct thorough origin analysis by reviewing raw material/component sourcing, manufacturing processes, and assembly locations to ensure compliance with CBP transformation requirements.
  • Importers should consider working with customs compliance specialists or trade attorneys to assist with complex origin determinations and to avoid unexpected tariff liabilities.
  • Importers should prepare reasonable care memorandums to document the methodology and evidence used in determining the country of origin, providing a defensible position in case of an audit.
  • Importers should consider requesting advisory opinions regarding gray areas relating to the country of origin.

• USMCA Compliance: USMCA-compliant goods may be exempt from many of the newly imposed tariffs, including the April 2 reciprocal tariffs. Accordingly, we expect Customs will focus heavily on ensuring all goods claiming preferential status under the USMCA in fact meet all requirements. Items for a probing compliance review in these areas include:
  • To take advantage of duty-free treatment under the USMCA, companies must have valid and complete USMCA certificates of origin at the time of entry. Post-entry certification is not permitted.
  • CBP is expected to closely scrutinize USMCA claims, so importers should immediately confirm all originating status claims are well documented. This includes conducting product-specific audits to verify that products meet regional value content (RVC) and tariff shift rules, ensuring eligibility before making a claim.

• Anti-Dumping and Countervailing Duties (AD/CVD): In addition to reciprocal tariffs, we expect CBP to continue its strict enforcement of AD/CVD orders, particularly on imports from China and Southeast Asia. Importers should take steps to ensure compliance and minimize exposure to unexpected duty liabilities, including:
  • Importers should closely review Commerce Department scope determinations to confirm whether their products fall within the scope of existing AD/CVD orders.
  • Customs entry documentation (CF-7501) and supplier contracts should be carefully reviewed to ensure proper classification and duty payment. Importers should be prepared for enhanced CBP audits and verifications.

• Chinese Parts and Components: We expect that the presence of Chinese-origin parts and components in finished goods will continue to be an area of particular CBP scrutiny. Consistent with the above point regarding country-of-origin determinations, the presence of Chinese-origin parts and components raises concerns about substantial transformation claims, which determine whether a product’s country of origin is considered China or another jurisdiction. Importers should consider putting reasonable care memorandums in place to document the analysis supporting substantial transformation claims, including descriptions of manufacturing processes and component alterations and supporting CBP advisory rulings.

• Direct and Indirect Supply Chain Costs: Companies should take a holistic approach when evaluating the impact of tariffs, considering not just the direct cost but also indirect costs associated with supply chain adjustments, contract renegotiations, and compliance risks. Steps to consider include the following:
  • Importers should review supplier contracts to determine how tariff costs are allocated between buyers and sellers.
  • Importers should consider that supply chain disruptions due to increased tariffs may lead to delays in production and ordering, higher transportation costs, and the need to identify alternative sourcing options.
  • Companies should conduct cost-benefit analyses to evaluate whether shifting production to low-tariff jurisdictions or USMCA partners would provide long-term savings, despite short-term transition costs.

The message from Washington is clear: We are entering what will likely be an extended high-tariff, high-enforcement environment. The current trade landscape has vastly multiplied the need for multinational companies to understand the new importing rules and emphasize full compliance. The Â鶹´«Ă˝ International Trade & National Security Practice is monitoring all tariff-related developments, including any modifications, clarifications/guidance, or additional measures introduced by the Trump administration, including an expected series of new instructions from Customs on the implementation of these new tariffs. As new information becomes available, we will provide updates and analysis to help importers navigate the evolving trade policies effectively.

If you have questions or concerns about this article, please feel free to reach out to any of the authors or your Â鶹´«Ă˝ & Lardner attorney. If you would like to see future updates regarding “What Every Multinational Company Needs to Know” about operating in today’s complicated international trade world, please sign up for our biweekly email list. .

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