Changes in US policy have resulted in sudden changes to tariff
liability for imports into the United States. US exporters have
faced equally sudden retaliation, and in some cases retaliatory
export restrictions have denied access to needed raw materials.
Measures have been imposed, paused, and varied. Old international
agreements have been ignored; new agreements concluded but not
implemented. Uncertainty abounds.
These developments are having a substantial impact on cross-border
relationships and supply chains globally.
Who bears the costs and risks from changes in tariff
policy?
How can a company exit or suspend a relationship made
unprofitable by tariff changes?
How to insist on performance, when tariffs or retaliatory
measures give a counterparty second thoughts?
These questions are being asked in real time, as good deals turn
bad because of changing trade policy conditions. But they are also
matters for which companies can plan as part of a proactive
strategy to deal with uncertain geoeconomic conditions.
This note highlights key contractual provisions and legal
principles from different jurisdictions relevant to these
questions.
Hardship and Material Adverse Changes
Hardship clauses and clauses addressing material adverse changes
(sometimes known as "MAC clauses") are a common way to
address the impact of tariffs. Hardship and MAC clauses provide a
remedy if a change in circumstances renders its performance
excessively burdensome or impractical.
The precise wording of the clause is important. The threshold
allowing for a remedy can be set at different levels: for instance,
it may require the change to be unforeseeable, or that the change
affect the balance of the contract. The remedies can also differ.
The Parties may be required negotiate in good faith to restore the
equilibrium of the contract and/or they might permit the
impacted party to terminate.
In some legal systems, even if the Parties have not agreed to a
hardship clause, the remedy will be available on a statutory basis.
For instance, under Art. 1195 of the French civil code.
In many cases, there will be a good argument that tariff changes
have made performance sufficiently burdensome to allow recourse to
such clauses.
For instance, in the English case Associated British Ports v. Tata
Steel, in 2017, Tata Steel argued that US steel tariffs
contributed, along with other factors, to a "major...financial
change in circumstances affecting the operation" of Tata's
works at Port Talbot, Wales, justifying a renegotiation. This case
is a useful reminder that, depending on the applicable rules, it
may be possible to combine the impact of tariffs with other factors
to trigger the relevant clause.
Force Majeure
Force majeure clauses allow a party to suspend or
terminate its contractual obligations, without liability, if an
unforeseeable and unavoidable event beyond its control prevents or
impedes its performance. And, like hardship clauses, in some
systems the argument will be available on a statutory basis even if
the Parties have not agreed to it contractually (see e.g. Art. 1218
of the French civil code).
However, again, not all force majeure clauses are created
equal. Often relevant clauses set forth a list of events (usually
non-exhaustive) amounting to force majeure. It is
relatively unusual for such lists to explicitly include tariffs.
More general descriptions of government action and changes in law,
which arguably include tariffs, are often seen. The pro
forma ICC force majeure clause was also amended in
2020 to include "trade restriction" in its list. Still,
to avoid debate, Parties wishing to cover tariffs under a force
majeure would best mention the term explicitly.
Where tariff changes do not fall within the scope of listed events,
depending on the wording of the clause and the thresholds it sets,
there may be scope to argue the clause has nevertheless been
triggered. This will depend inter alia on whether it
requires performance to be impossible or just materially affected.
Often though, events that just make performance more expensive do
not qualify as force majeure: this will often exclude changes in
tariffs.
Two cases before different American courts illustrate the point.
The United States District Court for the District of Oregon found,
in Shelter Forest Int'l Acquisition v. Cosco
Shipping (USA) that Shelter, an Oregon-based lumber
importer, could not rely on a force majeure clause in a fixed-price
contract with Cosco, a Chinese shipping company, when the US
imposed new tariffs on Chinese wood products. The Court found the
tariff was not unforeseeable and emphasized that "[i]n the
context of fixed-price contracts, courts have been particularly
hesitant to find that market changes resulting from governmental
policies constitute a force majeure." Price increases caused
by tariffs on Chinese-manufactured components of solar panels also
failed to trigger a force majeure clause in Kyocera Corp. v. Hemlock
Semiconductor, in 2012 before the Court of Appeals of
Michigan.
Price Definitions and Pricing Clauses
The impact of sudden tariff changes will often have a direct impact
on contractual mechanisms. They must be closely examined to
determine which party bears the increased costs from tariffs. In
many cases contracts will explicitly allocate the risk of tariffs.
If not, there may be an argument tariffs are covered by language
dealing with related terms such as taxes, duties and levies. In
other contracts the responsibility may be addressed by reference to
standard trade terms such as Incoterms.
That said, examining pricing clauses is often only the first step,
allowing the parties to determine where the burden of tariffs
falls. If that is unsustainable for the party bearing the burden it
will then be necessary for that party to consider the hardship and
force majeure issues above, as well as to consider on what
other grounds the relationship may be renegotiated or
terminated.
Duty of Mitigation
In most circumstances parties affected by tariffs will, regardless
of their access to any of the solutions addressed above, be under a
duty to mitigate loss arising from tariff disruptions.
Boeing's recent conduct demonstrates a practical approach to
such matters. In April 2025, it was reported that "China has ordered its
airlines not to take further deliveries of Boeing jets in response
to the U.S. decision to impose 145% tariffs on Chinese goods,"
and that some jets had even been returned. Boeing was clear it would seek to
minimize costs stemming from these trade disruptions by marketing
the planes elsewhere. Boeing's CEO stated that it was "not
going to continue to build airplanes for customers who are not
going to take them" and that "we believe Boeing will have
no difficulty reallocating these aircraft to other airlines
requiring additional capacity, with India emerging as a likely
candidate".
Tariffs and related trade policy developments are having significant impacts on cross-border relationships and contracts. It is important to review your agreements for terms that allocate tariff risk, and terms that provide for rights and obligations, including the possibility to terminate, when faced with those risks. This exercise should assist you in understanding your rights and obligations where tariffs have already had an impact, as well as helping identify in advance any relationships that are vulnerable to the impact of tariffs. It can be helpful to evaluate how these clauses will operate in both realistic "high" and "low" tariff scenarios. Of course, these exercises are equally important to consider when drafting and negotiating new contracts in the present climate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
