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How can my business protect its margins from tariff increases?
Most businesses combine a few tools. A price-adjustment clause passes a new duty on to customers who accept it. Changing suppliers or buying inventory early can cut your exposure. Standard insurance usually doesn’t cover a higher duty bill. An event contract tied to a defined policy outcome, such as an agreed duty rate taking effect by an agreed date, pays out if that outcome happens. Its upfront cost isn’t returned if the tariff doesn’t take effect.
What are your options?
| Option | What it covers | How it pays | What you pay upfront | Main limit |
|---|---|---|---|---|
| Price-adjustment (tariff surcharge) clause | Duty increases on goods you sell under contracts where the customer accepts the clause. | You add the new duty to the customer’s price, using the clause’s formula. | Nothing. It costs negotiating time. | Customers must agree. Fixed-price bids, competitive markets and orders already priced may not allow it. |
| Supplier and sourcing changes | Future purchases, if you can move to a supplier or country the tariff doesn’t reach. | Lower duty on future shipments. There is no payout. | Search, qualification and switching costs. A new supplier can charge more per unit. | Takes months. Some tariffs apply to most countries, and a new source can be tariffed later. |
| Buying inventory early | Goods that clear customs before a new rate takes effect. | You pay the old duty on the goods you bring in early. | Cash for the goods, plus storage, insurance and financing costs. | Ties up cash and space. Works only if you can forecast demand and act before the effective date. |
| Event contracts set up by Crux | A defined tariff outcome, such as an agreed duty rate taking effect by an agreed date. | If the agreed event happens, the contract pays out under those terms. There’s no claims process. | An upfront cost you see before you approve anything. | Pays under the agreed terms, not on each customs bill. Not every tariff outcome can be covered. |
| Buying event contracts yourself on an exchange | Only the outcomes, dates and terms an exchange already lists. | The contract pays out under the exchange’s terms if the listed outcome happens. | The contract price, plus any fees. | Listed terms may not match your exposure. You choose, buy and manage the contracts yourself. |
| Do nothing (absorb the cost) | Nothing. The business keeps all the risk. | There is no payout. A higher duty comes out of your margin. | Nothing. | One rate increase can erase the margin on goods you have already priced or sold. |
Can you insure against tariffs?
Usually not directly. A 2025 review by the law firm Covington & Burling notes that a search for the word “tariff” in a company’s insurance policies is unlikely to find it.
Trade credit insurance covers the risk that your customers don’t pay you, for example because a buyer becomes insolvent. It pays when a customer doesn’t pay. It doesn’t pay because your own duty bill went up. The same review says direct losses from tariffs may not be covered by trade credit insurance, although the policy may respond if tariffs push a customer into insolvency and the customer can’t pay.
Some specialized supply chain insurance policies can cover lost profits and costs from regulatory changes or political events, with no physical damage required. The review says these policies are highly specialized, tailored to each business and usually not written on standard forms. A commercial insurance broker can tell you whether one is available for your goods and what it costs.
What do event contracts on tariff decisions do?
Tariff rates change through defined government actions, sometimes with little notice. For example, a presidential proclamation signed on June 3, 2025 raised the Section 232 duty on most steel and aluminum imports from 25% to 50%. The new rate took effect the next day.
An event contract pays out if a defined event happens. The Commodity Futures Trading Commission (CFTC) says participants may buy or sell event contracts to manage price risks around whether the events in the contracts will occur. A prediction market that offers event contracts to the public must register with the CFTC as a designated contract market, a kind of regulated exchange.
For tariffs, the event is a policy outcome. Tariff protection is tied to a defined policy outcome, such as an agreed duty rate taking effect by an agreed date, rather than a published price. It pays under those agreed terms, not on each customs bill.
Businesses already use event contracts for policy and cost risks. Reuters reported in August 2026 that Castle Technologies, Susquehanna and Kalshi set up an event contract for Western Grazers, a California goat-grazing business, that pays if state legislators don’t change wage rules that could quadruple its labor costs. Business Insurance reported that the contract pays up to $500,000 if California does not fix the rules by the end of September. In the same Reuters report, the founder of Zest Tea said he used Kalshi to design a contract tied to an index of container shipping costs. He calculates it would cover as much as half of a big surge in his freight costs.
With Crux, you tell us what could hurt the business. We set up the protection and show you the terms and price. You approve it through an account in your business’s name that we help you open. Crux is a broker, not an insurer. Tell us what you import and we’ll confirm what we can protect.
What does protection cost?
Every option has a cost, even when no invoice arrives.
- Price-adjustment clauses cost negotiating time. Some customers will refuse them or buy elsewhere.
- Supplier and sourcing changes cost search and qualification time. A new supplier can charge more per unit, and some tariffs apply to most countries.
- Buying early ties up cash and warehouse space before you sell the goods.
- Event contracts have an upfront cost. It depends on what you’re protecting, how much and for how long. With Crux, you see the upfront cost before you approve anything.
To judge any of these costs, compare it with what a tariff would take from margins you have already committed, such as fixed-price orders or contracts you can’t reprice. If you can pass the duty on to customers, you may not need protection at all.
What if the tariff does not happen?
Then the contract doesn’t pay out, and the upfront cost isn’t returned. Your duty bill stays where it was, so your margin is intact. You paid for protection you didn’t end up needing.
The outcome must also match the agreed terms. If a duty takes effect after the agreed date, or at a lower rate than agreed, the contract may not pay out. Read the outcome, the rate, the date and how the result is confirmed before you approve.
The other tools behave differently. A price-adjustment clause costs nothing if duties stay the same. Inventory bought early still has value, but you carried its cost. A new supplier may cost more than the old one, with no tariff increase to offset.
A worked example
A business imports $2,000,000 of goods a year at a 10% duty, so it pays $200,000 a year in duty. If an agreed 25% rate takes effect by an agreed date, its duty bill rises by $300,000 a year. A contract that pays $300,000 if that outcome happens offsets the first year of the increase.
| If by the agreed date | Contract payout | What it means |
|---|---|---|
| The 25% rate doesn’t take effect | $0 | Your duty stays at $200,000 a year. The contract doesn’t pay out, and the upfront cost isn’t returned. |
| The 25% rate takes effect | $300,000 | Your duty rises to $500,000 a year. The payout offsets the first year of the $300,000 increase. The upfront cost still applies. |
Assumes $2,000,000 of imports a year and one year at the higher rate. Illustrative example. Terms and pricing agreed upfront.
What are the limits?
- If the agreed event doesn’t happen, the contract doesn’t pay out, and the upfront cost isn’t returned.
- The agreed event may not match your actual loss. A contract pays on the measured outcome, not on your own costs or sales. This gap is called basis risk.
- The payout follows the contract terms and the agreed measurement source, such as a published price or a named weather station.
- The contract pays once, for the agreed outcome and amount. If the higher rate lasts longer than the terms cover, the later costs are yours.
- Not every tariff outcome can be covered. Tell us what you import and we’ll confirm what we can protect.
When is Crux not a fit?
- Your customers accept price-adjustment clauses, so you can pass a duty increase on to them.
- You can move to a supplier or country outside the tariff quickly and at a similar cost.
- The possible duty increase is small next to your margin, so absorbing it costs less than protection.
- Your main risk is customers who don’t pay. Trade credit insurance is built for that.
Related guides
Sources
- Possible Insurance Coverage Options for Tariff and Trade Risks, Covington & Burling, May 13, 2025.
- Proclamation 10947: Adjusting Imports of Aluminum and Steel Into the United States, Federal Register, June 9, 2025.
- Prediction Markets; Public Interest Determinations (proposed rule), Commodity Futures Trading Commission, June 10, 2026.
- Prediction markets take a swing at hedging for US small businesses, Reuters, via KFGO, August 28, 2026.
- Goat herder hedges legislative risk using prediction markets, Business Insurance, August 13, 2026.
This guide is general education. It is not an offer, and it is not financial, legal or tax advice. Terms, prices and availability depend on the contract.