Navigating New Tariffs: What Energy Project Developers Need to Know About Equipment Procurement and Supplier Negotiations

For energy project developers, the rapidly changing global trade landscape introduces substantial complexity and risk into the procurement process. In this environment, strategic planning and thoughtful contract negotiation with major equipment suppliers are essential. Here is what to keep in mind.

Understanding the Tariffs

The newly announced tariffs target a broad array of imported goods, with key impacts on steel, aluminum, electrical equipment, and components commonly used in solar, wind, and other infrastructure-heavy energy projects. As of April 2025, tariffs are not only higher—often ranging from 10% to 49% depending on the country of origin and product type—but are also, in many cases, stackable. For example, goods from China may face multiple layers of tariffs, including baseline, reciprocal, and country- or product-specific duties, resulting in combined rates that can exceed 100%. This stacking effect has led to sharp price increases and longer lead times for key pieces of equipment.

These changes can increase the total installed cost of energy projects—especially for those reliant on imported equipment—unless mitigated through design changes, alternative sourcing, or commercial negotiation.

Key Considerations for Equipment Procurement

1. Reassess Sourcing Strategies

Developers should review their supply chains and evaluate potential exposure to tariff-impacted components. Identifying domestic or tariff-exempt alternatives may reduce cost volatility, although availability and lead times should be carefully assessed.

2. Incorporate Cost Contingencies

Budgeting practices should be adjusted to include a contingency buffer for potential price increases. This is especially critical for projects in the pre-financial close stage, where procurement terms may not yet be locked in.

3. Stay Informed on Trade Policy Developments

Trade policies can evolve rapidly. Developers should monitor policy updates and consider engaging trade advisors or legal counsel to assess whether their equipment falls under exempt categories or qualifies for duty drawback programs.

Negotiating with Equipment Suppliers

1. Price-Adjustment Clauses

In today’s tariff-aware environment, where all parties closely monitor trade risks, contracts must move beyond binary choices between fixed pricing or simple pass-through clauses. While fixed pricing remains an option, it often requires prohibitively large contingencies given current tariff levels and mutual recognition of volatility. Instead, developers should implement structured pass-through mechanisms with built-in reconciliation processes (e.g., quarterly adjustments tied to changes in tariffs, whether from customs rulings, executive orders, or other government actions) that preserve flexibility to capture retroactive changes, exclusions or exemptions. These approaches are increasingly incorporating shared-incentive frameworks—such as requiring suppliers to actively pursue tariff exclusions for their specific products (including seeking recovery of previously paid duties that become retroactively refundable) and allowing them to share in some of the resulting duty savings.

2. Delivery and Timing Considerations

Tariffs may impact production schedules and delivery times, particularly if suppliers need to reroute manufacturing or adjust their supply chains. To address this, contracts should not only set clear delivery timelines and remedies for delays to protect project schedules, but also embed flexible, pre-mapped alternative sourcing arrangements for critical or expensive equipment in lower-tariff or tariff-exempt countries.  These arrangements can include pre-agreed schedule and cost adjustment mechanisms, allowing developers and contractors to quickly and smoothly pivot to such alternatives. By negotiating the right to activate alternative suppliers and transparently weighing the trade-off between cost and schedule, developers retain control and agility.

3. Force Majeure and Change in Law Provisions

Developers should seek to minimize uncontrolled exposure to cost and schedule related risks associated with changing tariffs as much as possible, treating them as predictable variables, not black swan events. Embedding tariff-specific mechanisms, such as structured pass-throughs, pre-negotiated alternate sourcing, and supplier duty-defense obligations, within contracts removes—or at least weakens—the justification for separate, broad-form force majeure or change in law relief to be made available for tariff impacts.

Conversely, if developers or contractors enter into fixed price contracts that include contingencies for existing tariffs, change in law clauses should include revocations of tariffs (not just imposition) and include the flexibility to make corresponding negative contract price adjustments.

4. Diversification of Suppliers

Requiring dual-sourcing—mandating that key components be sourced from multiple suppliers across different regions—can help hedge against tariff exposure and increase procurement flexibility. Suppliers are increasingly being asked to disclose their full supply chain for critical items and to maintain “ready-now” backup options, so that switching can happen with minimal disruption. By building these requirements into procurement processes and contracts, parties create a dynamic procurement ecosystem that reduces single-source risk, fosters competitive pricing, and ensures that alternative supply lines are ready to activate without renegotiation.

5. Off-Ramps

To help parties plan amid uncertainty, contracts can include exit ramps if tariffs exceed agreed thresholds. These clauses will sometimes provide for notice and renegotiation periods before termination, and address both sides’ needs—for example, allowing the developer to retain rights to use documents to pursue alternatives, and ensuring the supplier is compensated for initial work through a non-refundable deposit or fee.

6. Reporting and Audit

Developer audit rights and contractor and supplier reporting obligations are essential for making the types of structured contract mechanisms we have discussed work in practice. Developers should be careful to ensure that they have access to the data needed to verify compliance, track costs, and confirm that counterparties are following agreed procedures.

Long-Term Outlook

While tariffs may be designed to boost domestic manufacturing capacity over time, the short-term impact is a more constrained procurement environment for developers. Those who adapt early—through strategic sourcing, flexible contract structures, and strong supplier relationships—will be best positioned to manage cost pressures and maintain project viability.

Energy project development remains a long-horizon endeavor, and, while policy shifts can present challenges, they also offer opportunities for innovation and resilience in supply chain management. Developers who proactively engage with these dynamics will likely gain a competitive edge in a rapidly evolving market.

Given the on-again, off-again nature of recent tariff and policy announcements, developers should recognize that the trade landscape is currently very volatile. Regular communication with suppliers, trade advisors and legal counsel will be essential as these policies continue to evolve.

Please reach out to your Vinson & Elkins team for more information, including for the latest on the current tariff landscape, any ongoing developments, and what we are seeing in the marketplace across renewable and traditional energy projects alike.