Italian Lessons in Negotiation: Beyond Dispute Avoidance to Contract Value Maximization During Times of Trade Wars*

New tariffs—whether imposed, merely threatened, or temporarily suspended—along with economic shocks, are placing immense strain on business contracts and relationships. For companies entangled in long-term agreements, the instinctive reaction—litigating or engaging in a zero-sum renegotiation over who absorbs the increased costs—often leads to mutual losses. The traditional adversarial model, where one party’s gain is another’s loss, is fundamentally ill-suited to these challenges. Instead, business leaders and sophisticated legal professionals must recognize that their best move is not battling over shrinking margins, but rethinking the deal itself.

Pareto’s Principle and the Art of Creative Renegotiation

Enter Vilfredo Pareto, whose principle of optimal resource allocation teaches us that value in any agreement can often be unlocked by restructuring terms creatively rather than simply redistributing burdens. Instead of a rigid standoff over who absorbs tariff-induced costs, companies should explore opportunities for trade-offs—adjusting delivery timelines, payment terms, or volume commitments, or even expanding cooperation in other business areas. With a problem-solving mindset, renegotiation becomes more than just salvaging contracts; it transforms them into arrangements that generate better outcomes for both parties.

Unlike traditional Nash equilibrium strategies, which assume each party will act solely in its own interest given the other’s position, Pareto-optimal negotiations prioritize mutual value creation. This framework aligns with integrative bargaining, a technique that seeks to maximize shared gains rather than simply dividing resources. By shifting the focus from competition to collaboration, negotiators can uncover solutions that benefit all sides.

Real-World Applications: How Companies Have Benefited from Pareto-Optimized Negotiation

1. Manufacturing supply chain adjustment: A European electronics manufacturer dependent on Chinese suppliers faced an unexpected tariff increase. Instead of terminating the contract or engaging in a legal battle, mediation facilitated a creative solution. The manufacturer agreed to longer payment terms, allowing the supplier to manage cash flow more effectively, while the supplier, in turn, sourced certain components from a different country to partially offset the tariff impact. Both parties benefited—costs were mitigated without jeopardizing the supply chain.

2. Retailer/Wholesaler partnership pivot: A U.S.-based retail chain was locked into a long-term contract with a South American coffee producer when new import duties threatened to make the deal unprofitable. A mediated negotiation uncovered a way to rebalance the agreement: The retailer agreed to expand its product line to include premium, higher-margin coffee varieties from the same producer, while the supplier adjusted its pricing structure to accommodate some of the tariff increases. Instead of a bitter dispute or contract termination, both businesses enhanced their offerings and profitability.

Beyond Numbers: The Critical Role of Cultural Intelligence in Negotiation

However, unlocking this value required more than just financial creativity—it required cultural proficiency. In the European-Chinese negotiation, power distance played a crucial role. The North European company, accustomed to egalitarian structures, initially struggled to engage with the Chinese supplier’s hierarchical approach to decision-making. The mediator, understanding this dynamic, helped the European executives adapt their negotiation style, ensuring they engaged with the right decision-makers and demonstrated respect for seniority—ultimately enabling a cooperative outcome. In the South American case, cultural dimensions of individualism and uncertainty avoidance were at play. The U.S. retailer, operating in a highly individualistic and transactional business culture, had to adjust to the coffee producer’s preference for long-term relationships and aversion to abrupt changes. The mediator facilitated discussions that emphasized mutual trust and stability, leading to a deal that provided certainty for the producer while allowing the retailer to grow its product offerings.

The Challenges and Unfinished Work of Negotiation

At the same time, it’s important to acknowledge that these strategies have limitations and do not guarantee success in every situation. Power imbalances, bad-faith negotiating tactics, or restrictive legal and regulatory frameworks can undermine even the most creative and cooperative efforts. Moreover, while the examples provided here demonstrate how culture can affect negotiations, they only scratch the surface of cultural complexities that can arise in international business. Further empirical research—including robust case studies and data from varied industries—would help validate and refine these approaches, as would more focused exploration of trust-building strategies for companies of all sizes. In highlighting both the promise and the pitfalls of such negotiations, we can raise public awareness of how renegotiation and cultural understanding can unlock new value—even if many businesspeople (and the general public) have yet to fully recognize the potential.

The Role of Mediators in Modern Business Negotiation

But here’s the catch: Successful negotiation is a high-trust endeavor requiring open communication, strategic flexibility, and cultural awareness—qualities that experienced mediators bring to the table.

Even the most skilled negotiators face significant barriers. Strategic obstacles like power imbalances and misaligned incentives can stall progress, while cognitive biases—such as loss aversion and reactive devaluation—lead parties to dismiss beneficial proposals. However, the greatest challenge in today’s globalized world is cultural difference. Misunderstandings in communication styles, decision-making approaches, and definitions of fairness can turn potential agreements into deadlocks.

This is where mediators add immense value. As neutral facilitators, they help reframe disputes, clarify priorities, and bridge cultural gaps, unlocking solutions that might otherwise go unnoticed. By fostering dialogue and structuring negotiations, mediators prevent costly impasses and enable creative, high-value agreements.

And when considering the financial and strategic benefits of a well-structured deal, the cost of mediation is often a fraction of the value it unlocks. In a complex, uncertain business environment, mediation isn’t just a dispute resolution tool—it’s a catalyst for maximizing contract value and sustaining long-term partnerships.

Conclusion

For businesses facing today’s global uncertainties, the most valuable resource is not just capital or contracts—it is the ability to negotiate with creativity and trust. Future studies, alongside new training and curricula for lawyers, mediators and business leaders, will be crucial in honing these skills and ensuring that win-win negotiations--whether face-to-face or facilitated by mediators--become more than just aspirational talking points.

* This short contribution is based on “Tariffs, Contracts and the Negotiation Imperative: Why the Old Playbook Won’t Work”, published on the JAMS Blog in the context of iLaw2025, the The Florida Bar International Law Section Global Forum on International Law. See: https://www.jamsadr.com/blog/2025/tariffs-contracts-and-the-negotiation-imperative.