The Tariff May Not Break the Contract but It Can Break the Margin

The deadline is real but the scope must be verified

A September White House proclamation states that specified Canadian motor vehicle products are excluded from importation into the United States effective September 29, 2026. A separate proclamation modified the scope of Canadian products subject to additional duties. Canada, meanwhile, placed counter-tariffs on specified U.S. goods effective September 8. These measures do not apply to every cross-border shipment in the same way. Product classification, country of origin, entry date, exclusions, and later guidance can change the answer.

That is why the first response should not be a broad announcement that all Canadian parts are unavailable or that every contract is suspended. It should be a product-level review with customs and trade professionals: identify the applicable Harmonized Tariff Schedule code, the origin analysis, the importer of record, the entry date, and the exact government measure. A mistaken assumption can interrupt production as effectively as the tariff itself.

Michigan companies cannot leave the border problem to another party

Crain’s Detroit Business reported on September 8 about what Canada’s retaliatory tariffs could mean for Michigan. The Wall Street Journal reported on August 26 that the United States and Canada were preparing for a prolonged trade dispute after reciprocal measures, while automotive parts and vehicles remained central to the conflict. For Michigan manufacturers, distributors, service providers, and lenders, the exposure is not limited to the party that files the customs entry.

A Tier 2 supplier may buy a subcomponent from Canada, sell a finished part at a fixed price, and rely on customer releases that can change weekly. A domestic buyer may have promised delivery downstream without confirming whether its upstream supplier can lawfully or economically perform. A lender may be financing inventory whose landed cost, salability, or customer acceptance has changed. The border event moves through the commercial chain by contract, cash, and collateral.

The contract usually answers before the doctrine does

Owners should resist the instinct to begin with the phrase force majeure. Start with the signed documents and the complete order structure: the master supply agreement, purchase order, releases, forecasts, terms and conditions, amendments, logistics terms, and customer-specific manuals. Determine who is responsible for duties and customs compliance, whether price is fixed, whether a tariff or change-in-law adjustment exists, what notice is required, and whether alternative sourcing needs consent.

Also identify termination rights, requirements commitments, minimum volumes, delivery windows, chargebacks, expedited-freight obligations, warranty consequences, and audit rights. A clause labeled force majeure may excuse delay without adjusting price. A price-adjustment clause may cover a duty but not an import prohibition. A purchase order may incorporate other terms that change the result. The label is less important than the language and the hierarchy of documents.

Commercial impracticability is not automatic price relief

Michigan’s Uniform Commercial Code includes a rule that may excuse a seller’s delay or nondelivery in a contract for goods when performance has been made impracticable by a contingency whose nonoccurrence was a basic assumption, or by good-faith compliance with applicable government regulation. But the statute begins with an important limitation: the result can differ when the seller has assumed a greater contractual obligation.

The same provision addresses fair and reasonable allocation when only part of the seller’s capacity is affected and requires seasonable notice of delay, nondelivery, and any estimated allocation. Related sections address the buyer’s response and a party’s ability, in appropriate circumstances, to demand adequate assurance of performance. These rules are fact-sensitive. Increased expense, a disrupted route, or a new government restriction should not be treated as a self-executing right to stop shipping, raise price, or cancel.

A tariff dispute becomes a liquidity problem quickly

The commercial consequences can arrive before the parties resolve the legal interpretation. Duties can increase cash needed at entry. A disputed surcharge can delay payment. Alternative sourcing can require deposits, tooling, validation, expedited freight, or customer approval. Inventory may remain physically present while becoming harder to use or finance. If the customer reduces releases while the supplier holds higher-cost material, the working-capital cycle can change in days.

TheStreet reported in July on the restructuring of a global auto-parts company that cited, among other headwinds, supply-chain disruption, raw-material and energy costs, recent U.S. tariffs, debt obligations, and upcoming maturities. A public restructuring does not predict another company’s outcome. It illustrates the point: trade costs rarely act alone. They become dangerous when fixed-price commitments, leverage, maturities, and thin liquidity converge.

Build the forty eight hour file

A cross-functional response should connect trade classification, contract rights, operations, and cash. The immediate file should include a shipment list matched to HTS codes, country of origin, importer of record, entry dates, and the government measures under review; the complete contract chain for each affected part; and a unit-economics bridge showing duty, freight, validation, tooling, scrap, surcharge, and delay costs by customer program.

Add a 13-week cash forecast that separates paid duties, disputed receivables, supplier deposits, expedited freight, and customer schedule changes; a collateral and covenant bridge showing effects on availability and headroom; and a notice calendar and communications protocol for suppliers, customers, lenders, insurers, customs professionals, and counsel.

The file should distinguish verified facts from assumptions and identify the owner of each next step. The operational team should not promise a price adjustment that the contract does not support. The legal team should not analyze a clause without the shipment and cash facts. The finance team should not assume a customer will reimburse the cost until the customer has agreed in writing.

The practical conclusion

A tariff or import restriction may not end the contract. That can be the more dangerous result if the obligation to deliver continues while the margin disappears. Michigan owners, lenders, and advisors should determine now which products are affected, what the contracts require, how notice must be given, and when the cash impact becomes material. The businesses with the most options will be the ones that convert the border announcement into a documented decision process before the next shipment becomes a dispute.