As senior supply chain leaders gather for budget reviews as 2025 ends, one line item is burning a hole in every forecast – tariffs. Average duties on Chinese electronics now sit at 51.1 percent, with semiconductors facing 25 percent – up to 100 percent in threatened or sector-specific escalations tied to national security reviews, EV batteries 75 percent, and rare-earth-dependent components under threat of 100 percent if export curbs tighten again.
For large enterprise OEMs, that translates into 10-30 percent BOM inflation and extended lead-times that can kill your quarter’s numbers. The good news? Your EMS providers control 60-80 percent of sourcing decisions determining how much of that pain lands on your P&L. Restructure these relationships now, and you can turn a tariff storm into a competitive edge.
Tariff landscape as of November 2025
Laptops and smartphones imported from China do not benefit from extensions of Biden-era Section 301 product exclusions into 2026. Those specific exclusions never covered these consumer devices in a comprehensive or permanent way, and the few that existed expired years ago.
Instead, tariff relief these products have today is from a separate temporary exemption introduced in April 2025, which shields smartphones, laptops, personal computers, and certain related components from the steep reciprocal tariffs (imposed under IEEPA authority) that otherwise pushed the trade-weighted average duty on Chinese goods to around 51 percent. That exemption was extended multiple times and, as of November 10, 2025, remains in effect until at least November 10, 2026. This is per the latest US–China agreement suspending further escalations.
However, this relief is narrow and limited to finished consumer electronics. It does not extend to most upstream components and sub-assemblies. Some identified below:
- Legacy/mature-node semiconductors (≥28 nm process nodes)
- Printed circuit boards (PCB)
- Passive components (resistors, capacitors, inductors…)
- Most battery sub-assemblies and modules
All of the above continue to face full cumulative tariffs, which now range from 25 percent, to over 100 percent, depending on product category and whether additional national security or rare earth related penalties apply.
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Meanwhile, the Trump administration’s opening salvo, of 25 percent on all Chinese goods the day after inauguration, has already been layered on top of existing duties, creating a ‘cascading’ effect that few EMS-OEM contracts signed in 2023 anticipated.
Throughout 2025, large EMS providers I speak with are reporting passing through price increases of 15-35 percent, and over half of electronics procurement executives I talk to, with a China-dominant sourcing strategy are saying they will shift at least 15-20 percent of volume out of China by mid 2026.
The window to act without paying premium expedite fees is closing fast. So, while your iPhone or laptop avoids the sharp teeth of tariff escalation for now, virtually every component inside it – made in China – is still hit hard.
Ground zero: EMS contract agreements
I see a lot of different EMS service level contract agreements presented by EMS to OEM customers and prospective customers. Currently, the vast majority of these EMS agreements were signed before 2024 and they contain vague ‘cost-plus’ or ‘open-book’ language in clauses that quietly allow full tariff pass-through.
To make matters worse, typical change-of-law provisions in these contracts are often one-way streets favoring EMS providers. The result is your margin becomes the shock absorber. Smart OEMs are pushing back, treating EMS partners as risk-sharing allies rather than vendors. OEMs who move first are locking in shared-cost models and regionalization roadmaps that competitors will pay dearly for starting 2026.
Below are three ideas for strategies OEMs reading this to consider.
1.) Use tariff swing clauses with asymmetric caps
It’s common for EMS clauses to let providers raise fees and pricing dollar-for-dollar, driven by any new duty. Instead, negotiate for a split on increases above, say, 5 percent and hard cap at 15 percent without OEM approval. This works, I’ve seen one Fortune 100 server equipment OEM save almost $200 million by renegotiating 20 SLAs. Be mindful, EMS finance hates back-dating, so tie any cap reset dates to U.S. Federal Register publication date, not the invoice date.
2.) Production passport for each SKU
Demand your EMS providers give you a one-page, digital passport detailing country-of-origin for every line-item on your program BOMs where component price is >1 percent of total BOM cost. Ask them to update this quarterly. You’ll find this single effort can help cut tariff-audit penalties, considerably, and doing this will also expose hidden ‘China’ content in sub-assemblies and assemblies assembled in Vietnam, Thailand – common in motherboards where PCB fab is quietly inventoried in Shenzhen.
3.) IMMEX Maquiladora duty relief
Since 2020, the United States Mexico-Canada-Agreement (USMCA), and Mexico’s longstanding Industria Manufacturera, Maquiladora y de Servicios de Exportación (IMMEX) program, enable EMS providers like Jabil, Flex, Celestica and others to use twin-plant models: Chinese components enter bonded Tijuana facilities, undergo final assembly and systems integration, and enter the US duty-free if substantial transformation is met – even with up to 40 percent Chinese value in qualifying cases. One EV maker cut battery pack landed costs more than 20 percent by shifting final wiring harness work to Mexico. When negotiating contracts, insist on a clause that locks EMS providers into maintaining IMMEX certification or the EMS partner absorbs any retroactive duties.
Next steps
OEMs should pull every master agreement you have with your EMS partners and then flag tariff clauses older than 24 months. Use your ERP system to run a quick tariff risk exposure analysis at the SKU level. Bookmark the Federal Register and set Google alerts for “Section 301” and “USTR”, and monitor the US International Trade Commission’s Harmonized Tariff Schedule (HTS).
OEMs treating EMS partners as fixed-cost vendors will erode margins for years. Those investing 90 days now to forge shared-risk, regionalized, data-driven partnerships will gain lower costs, shorter lead times, and supply chains competitors cannot replicate at any price. Tariffs and other EMS manufacturing concerns are privately discussed with VIP Access subscribers to my newsletter.
Take the guess work out of your next EMS contract negotiations – contact us at insight@ventureoutsource.com
