The global tariff war launched by the US has left companies in Asia bewildered and blindsided, triggering a rush to hedge risks by all legal means. Asia Business Law Journal staff report
“What’s really frustrating is the uncertainty. We had these ambitious plans for US expansion, and now we’re having to reassess everything because we just can’t predict what the tariff situation will look like six months from now,” says Jaehwan Lee, president of the Korea In-house Counsel Association (KICA) and general counsel of South Korean multinational fashion retailer Musinsa. “It’s making it really difficult to make confident investment decisions.”
Frustration and the need to reassess plans, arising from uncertainty brought by the Trump administration’s global reciprocal tariff war, have swept across industries and jurisdictions throughout Asia.
Asia Business Law Journal spoke to private practice and in-house lawyers across nine Asian jurisdictions to identify challenges in tackling what some describe as uncertainty, others volatility.
With nearly all Asian countries subject to reciprocal tariffs at different rates, companies in the region have limited options for reassessing their cross-border business and trade.
“Some companies are wary of what might be described as a ‘whack-a-mole’ effect – relocating operations to a new region, only to see that region become the next target of tariff measures or regulatory intervention,” says Minwoo Kim, a special counsel in international trade law and cross-border disputes at Covington & Burling in Washington.
On 2 April, US President Donald Trump announced an additional 10% blanket tariff on imports from all countries, while subjecting nations running large trade deficits with the US to higher tariffs on a jurisdiction-specific basis. Attempting to reduce the US trade deficit by boosting investment in the US and encouraging American-made goods, the Trump administration imposed tariffs at varying rates: 145% on China, 24% on Japan, 25% on South Korea, and 46% on Vietnam.
India was initially hit with a 26% tariff on 2 April, but was temporarily exempted on 9 April, while continuing to face the blanket 10% tariff. In August, the Trump administration imposed a 25% tariff on Indian goods, plus an additional 25% penalty for continuing to purchase Russian oil, raising duties to 50%.
The Trump administration also imposed sector-specific tariffs on imports of certain goods ranging from branded pharmaceuticals and automobiles to steel, furniture and semiconductors.
Governments including Japan, Vietnam and South Korea have since negotiated trade deals with the Trump administration, agreeing to broaden and increase US investment and purchase certain American products.
These deals led to lower tariff rates for those countries. China negotiated a 90-day pause on reciprocal tariff imposition in May, extended for another 90 days in August. The US reduced its tariff on Chinese goods to 30%, while China lowered its levy on US goods to 10%.
But the Trump administration announced on 11 October that it would impose an additional 100% tariff on imports from China, set to take effect on 1 November or earlier.
Renegotiating trade deals
The volatile nature of the Trump administration’s tariff policy has left Asia-based companies, particularly those hit by sector-specific tariffs, such as automakers, in a state of uncertainty about what can and should be done next. The situation has triggered a rush among companies in the region to renegotiate existing contracts with their US trading partners, leading to a surge in client requests for advice on such renegotiations.
“We had seen numerous requests in contract renegotiations, especially concerning pricing clauses, payment terms and delivery schedules, and especially around April and May of this year,” says Vu Phuong Trang, a partner and head of the Saigon office at Dzungsrt & Associates in Vietnam. “We have seen a push to review and redraft contractual protections.”
Vu, who specialises in corporate and commercial law, dispute resolution and shipping, adds that while force majeure clauses are often invoked for natural disasters or political unrest, clients are exploring if and how these clauses can apply to unforeseen tariff shocks.
The World Bank defines force majeure as events beyond the control of the parties that may inhibit them from fulfilling their duties and obligations under project agreements. But most lawyers interviewed by ABLJ say it is almost impossible to invoke force majeure in a tariff war, even if it is beyond the control of the contracting parties.
“Typically, force majeure clauses are calamities, flood, earthquake,” says Suhail Nathani, the managing partner at Economic Laws Practice (ELP) in Mumbai who specialises in trade and competition law, M&A, regulatory and securities law. “Government tariffs are highly unlikely to be included and, in common law jurisprudence, economic hardship is not force majeure.”
Kala Anandarajah, the head of competition, antitrust and trade at Rajah & Tann Singapore, echoes Nathani’s view, saying that it is difficult to argue force majeure, and that the success of such claims depends on the specific wording of the clause and the governing law.
“There has been an uptick in disputes involving force majeure clauses and other contractual escape provisions, but none that have gone to the courts as yet in a big way,” says Anandarajah. “Some disputes have centred on whether tariffs constitute a force majeure event, with outcomes varying by jurisdiction and contract.”
Kenneth Zhou, the head of legal and compliance of SIG Group’s Asia-Pacific North region in Shanghai, adds: “It is quite difficult to successfully persuade buyers to accept this, as it is challenging for US judicial practice to recognise tariff adjustments as falling under force majeure, and there is also controversy in Chinese judicial practice.”
A more common approach in China is to enable both contracting parties to renegotiate the contract in the event of tariff adjustments, says Zhou. He points to the use of the principle of “change of circumstances”, under which a party may request modification or termination of the contract when a tariff increase makes it obviously unfair or commercially unfeasible to perform.
Metro Manila-based law firm Respicio & Co stated in an 11 November 2024 article that, unlike force majeure, which suspends or excuses performance for specific listed events, rebus sic stantibus (change of circumstances) can apply more broadly to drastic and unforeseen changes that fundamentally alter a contract’s basis.
Ameeta Verma Duggal, the co-founder of DGS Associates in New Delhi, says several of the firm’s clients exporting seasonal products such as home accessories and garments to the US have been under pressure from US buyers to give discounts of up to 25%, which they cannot meet.
While her firm has advised against agreeing to such discounts at this stage, it is not considering force majeure clauses because the tariff approach is fluctuating so much. “Companies don’t want to undertake any actions that have long-term implications with their other US commercial partners, because the political situation is very uncertain,” says Duggal, who specialises in M&A, international trade and regulatory practices.
Despite the challenges, Asian companies have come to recognise tariffs and similar measures not just as unavoidable expenses, but as significant risk factors that can be managed through innovative legal structuring and contractual solutions, says Ryoichi Inoue, the head partner of the Southeast Asia practice at Miura & Partners.
“For example, force majeure clauses are being revised to specifically cover trade law changes, export restrictions and customs delays, which were not traditionally contemplated in earlier agreements,” says Inoue. “Clients are also adopting clearer risk-sharing mechanisms that determine in advance how unexpected tariff surcharges or logistics disruptions will be allocated between buyer and seller.”
At the end of the day, companies in Asia are reluctant to damage relationships with US trading partners, as legal action could make future business more difficult. “I would not advise my client today to go running and invoke your force majeure clause, especially if you are seeking to do business in the long term,” says ELP’s Nathani.
Alternatively, to mitigate exposure to shifting US tariffs, supply chain restructuring has been on the radar of many companies in Asia.
Diversifying supply chains
Supply chain restructuring has emerged as one of the most pressing strategic considerations – one marked by complexity and uncertainty.
“We are still in the churn of this disorderly period, where people aren’t completely confident that tariff rates are going to stay the same,” says Benjamin Kostrzewa, a Hong Kong-based partner of Hogan Lovells International.
“If you move your factories out of China to Vietnam or Thailand, but then the tariff rates there end up being similar or higher than China, it leaves little reason to make changes to your supply chain.”
While some companies have explored relocating manufacturing operations, Kostrzewa notes that costs such as facility transfers, raw material availability and transshipment taxes have tempered any large-scale shifts. “I am seeing some movement involving companies outsourcing outside of China to other countries, but that movement hasn’t been an avalanche,” he says.
Kostrzewa, a former assistant general counsel at the Office of the US Trade Representative in Washington DC, observes that October brought a sobering realisation for many businesses, that tariffs are here to stay. Firms are reassessing global footprints, with some onshoring operations in the US despite challenges in capacity, while others see Southeast Asia as a “better bet” for manufacturing diversification.
Junko Suetomi, an international trade, tax and antitrust partner at Baker McKenzie in Tokyo, says her firm is receiving numerous queries from companies considering opening factories in the US. A similar sentiment is emerging in South Korea, where “companies are already building factories in the US,” says Kichang Chung, a senior foreign attorney at Lee & Ko in Seoul who specialises in international trade and dispute resolution.
The energy sector faces a distinct set of hurdles, according to Leslie Zhang, vice president and chief legal officer at United Energy Group in Beijing, who explains that while tariffs on commodities such as crude oil and natural gas, as well as certain manufacturing goods, are limited in direct impact, the ripple effects on upstream equipment, engineering services and related materials’ procurement have indeed been indirectly affected by tariffs and trade friction.
“This impact is mainly reflected in increased supply chain management risks, rising costs due to higher taxes and fees, and issues related to cost allocation,” says Zhang.
To mitigate these risks, he says energy companies are pursuing regional diversification and local procurement strategies, establishing alternative sourcing channels across the Middle East, South Asia and Eastern Europe to avoid reliance on a single source. Companies also use “locally manufactured or assembled components in resource countries as much as possible”.
Hideyuki Sakamoto, president of the Japan In-House Lawyers Association, notes that many companies in Japan are sourcing more from the US, or alternative Asian jurisdictions, but doubts over US trade policy are deterring any bold moves.
This trend is mirrored elsewhere. Jocelyn Chow, a partner at Eversheds Sutherland’s Hong Kong office who leads its competition, trade and foreign investment practice, says the firm is working intensively with clients on tariff mitigation strategies, with lawyers studying bilateral free-trade agreements for potential solutions.
“Many of our clients have decided to address the potential impact by actively exploring supply chain restructuring,” says Chow.
From a sectoral perspective, KICA’s Lee tells ABLJ that the electronics, semiconductor and automotive industries are bearing the brunt of tariff pressures. “Some companies are doing what’s called ‘tariff engineering’, basically redesigning products or changing component sourcing so they fall under a different tariff classification at a lower rate,” says Lee. “It’s perfectly legal, just requires careful planning.”
He adds that still others are setting up operations in US foreign trade zones to defer or reduce tariffs, while some companies are pursuing legal challenges before the US Court of International Trade.
“It’s expensive and time consuming, but when you’re facing millions in tariff costs, it might be worth it,” says Lee.
In India, companies are exploring new markets beyond the region.
“We are not seeing a shift in trade towards Asia,” says DGS Associates’ Duggal. “Where we are seeing an increase is in the Gulf region, the EU, New Zealand and Australia.”
Duggal explains that India’s trade remedy measures have largely targeted Asian countries, making them less preferred partners, and the focus is now on strengthening relationships with Western markets beyond the US.
Summing up the mood, Anandarajah of Rajah & Tann Singapore, says that while the questions vary in scope and timeframe, they ultimately centre on one concern: how to adjust supply chains to minimise risk.
Takayuki Kitajima, CEO and general counsel at Visionaria Integritas Plus, a Tokyo-based company, observes: “It is becoming increasingly necessary to reconsider trade strategies and restructure supply chains.”
Experts caution, however, that any restructuring decision must be made with care. “Rising tariff exposure has prompted many companies to rethink sourcing, manufacturing and distribution strategies,” says Covington & Burling’s Kim, but “restructuring is rarely a simple or one-dimensional issue” due to uncertainty over future tariff levels and potential changes to rules of origin.
Kitajima agrees: “Many Japanese companies find it difficult to simply withdraw from business with the US.”
For some industries, particularly pharmaceuticals, restructuring supply chains is especially challenging, says Sandeep Rathod, global general counsel of Piramal Pharma in Mumbai.
On 25 September, the Trump administration announced a 100% tariff on imports of branded and patented pharmaceutical products, effective from 1 October. As Indian pharmaceutical companies are more into the generic segment of the business, they are not currently affected.
But should the 100% tariff be expanded to cover generic medicines, Rathod says most Indian generic pharmaceutical companies would struggle to make supply chain changes quickly due to time, cost and laws involved.
“It is not easy to change supply chains in pharma quickly, because every change that we do has to be notified to the various governments where we are having our products registered, such as with the US’ FDA [Food and Drug Administration], UK’s MHRA [Medicines and Healthcare products Regulatory Agency] and EMA [European Medicines Agency] in Europe, and the notification requirement is very stringent,” says Rathod.
He explains that Indian companies must specify details in their original regulatory submissions, including the source of APIs (active pharmaceutical ingredients), raw materials, and the final manufacturing site in India.
“If you are substituting an API coming from one company with the API from another company, you have to do a lot of stability testing and chemical testing, etc.,” he says. “Substitution is only possible after such data has been generated and submitted to the government, hence substitution of key materials is a very long and complicated process.”
Amid the turbulence, companies remain cautious, balancing the high costs and risks of relocation against the risks of inaction in a world where tariff policy remains a moving target.
Toeing the circumvention line
While companies have been exploring supply chain restructuring to reduce tariffs’ impact on cross-border commerce, trade lawyers say this is easier said than done – particularly in light of the Trump administration’s recent move to toughen its crackdown on transshipped goods imported into the US.
In an executive order on 31 July, the US imposed an additional 40% punitive duty on goods found to have been transshipped through a third country to take advantage of a lower tariff rate.
Eversheds Sutherland’s Chow says that many of her clients are actively exploring supply chain restructuring to achieve substantial transformation in a third country and effectively change the origin of their goods to one attracting a lower tariff rate.
“[But] whether this can be achieved depends on complex questions of rules on substantial transformation, which vary across products, also depending on whether the third country benefits from preferential treatment from the country of import, such that more lenient rules on substantial transformation would apply,” says Chow.
The US International Trade Administration defines substantial transformation as “the good having undergone a fundamental change in form, appearance or nature … This change adds to the good’s value at an amount or percentage that is significant, compared to the value which the good had when exported from the country where it was first made or grown.”
Separately, Sandler Travis & Rosenberg (ST&R), a US-based international trade law firm with offices in Hong Kong and Guangzhou, explains in its 31 July trade report that transshipment, when defined in trade facilitation and enforcement terms, “takes on a more specific and often contentious meaning, distinguishing between legitimate logistical practices and illicit attempts to circumvent trade regulations”.
ST&R elaborates that legal transshipment “involves goods remaining under customs control in an intermediate country, not entering that country’s commerce, and undergoing only necessary operations like uploading, unloading or activities to preserve the goods’ condition”.
Illegal transshipment, by contrast, “involves deceptive practices aimed at avoiding tariffs or other trade restrictions by misrepresenting a good’s true country of origin, involving physically diverting goods through a third country, performing minimal or no operations there, claiming it as the country of origin despite no substantial transformation occurring there, and so on”.
KICA’s Lee says: “[With] the transshipment controls, they’ve [US] made everything so much more complicated. You know, we used to route shipments through certain countries, and now there’s so much more verification required. It’s slowing everything down.”
As a senior trade lawyer based in Singapore, a major transshipment hub in Asia, Rajah & Tann’s Anandarajah notes that rules of origin have become a major sticking point in structuring deals and ensuring compliance, with US authorities intensifying scrutiny to prevent tariff circumvention.
“This has led to more detailed contract provisions, increased documentation requirements and, in some cases, delays or cancellations of shipments,” says Anandarajah. “Disputes over origin certification and liability for misstatements are also on the rise.”
Also based in Singapore, Rinita Daniati, head of legal for the Asia-Pacific region at Mitsubishi Chemical Group, says that the scarcity of precedents and the rapidly evolving nature of tariff and transshipment rules have left corporate in-house lawyers with very few “analogues for guidance”.
“In-house lawyers often need to make deeper legal judgments and provide strategic input where guidance is limited,” says Daniati. “This means that legal advice is no longer purely reactive; it now plays a strategic role in shaping business solutions and supply chain decisions.”
With tougher US transshipment penalties, legal advice has become ever more important, as the consequences of violations can be severe. “The Department of Justice could prosecute companies under the False Claims Act for transshipment issues, for which you pay treble damages for violations,” notes Hogan Lovells International’s Kostrzewa.
“Companies are worried that if they were to set up shop in Vietnam or Thailand, and not meet those rules of origin requirements, that they could face significant penalties and even accusations of fraud,” he says. “I think companies need to be careful if they have large amounts of Chinese raw materials or component parts now.”
David Wolber, a Hong Kong-based international trade and financial regulatory partner at Gibson Dunn & Crutcher, observes that companies are now conducting far more thorough due diligence and showing greater awareness regarding transshipment and rules of origin.
Wolber adds that companies facing more customer inquiries about the origin of products are assessing controls, procedures and processes to identify gaps and improve compliance. “I’m not sure that I’ve seen a panacea to how to manage this,” he says.
Wait and watch
The region’s trade landscape now sits uneasily between caution and adaptation. Shifting tariff policies have left even the most seasoned corporate strategists reluctant to make decisive moves. While some companies are quietly advancing contingency plans and revising legal frameworks to better withstand the next policy shock, most remain hesitant to commit to sweeping overhauls that could prove premature or costly.
As Economic Laws Practice’s Nathani concludes: “Companies are in a wait-and-watch mode.” This sentiment encapsulates the reality across Asia: uncertainty, more than the tariffs themselves, has become the greatest disruptor. Businesses are recalibrating, not retreating, navigating each new policy turn with pragmatism and restraint.
For experts, the coming months will likely be defined not by bold restructuring but by quiet vigilance. The legal playbook is still being written and, until clarity emerges from Washington, most companies appear content to hold their ground, watching, waiting and preparing for whatever version of stability comes next.
