Home / The effect of US tariffs and their impact on Force Majeure clauses
17th April 2025
Laura Crowe, Associate
On April 2nd 2025, President Donald Trump announced the United States’ updated tariff policies, causing international concern over the effects on foreign trade. As a result, many businesses may be questioning how/if they will be able to trade in the US and in particular, whether the contracts they have in place with US entities include Force Majeure clauses, which may assist them if the newly imposed tariff policies are going to disrupt their ability to perform their obligations.
In practice, Force Majeure clauses are included in contracts to protect a party if they are unable to perform their obligations due the occurrence of an event beyond the party’s control, such as the coronavirus (COVID-19) pandemic. Ultimately, it is up to the party seeking to rely on the Force Majeure clause to prove that the alleged event falls within the clause and that the party’s non-performance was due to this event.
As we have seen from the impact of the COVID-19 pandemic, the US government-imposed tariffs will cause disruptions in supply chains and will likely have an impact on businesses financial situations, potentially hindering their ability to perform under their contract. But is this likely to be Force Majeure?
In determining whether a Force Majeure clause is applicable, you will need to review the specific wording of the clause. Force Majeure clauses should be explicitly drafted to address the events which both parties would like to be covered. These may include (but are not limited to) natural disasters, acts of war or terrorism, changes in law, or acts of government. It is arguable that the current US tariff situation would be covered by the references to “acts of government” or “changes in law” and could result in termination, depending on the specified remedies and wording included in the contract. However. English case law has historically established that a change in economic or market circumstances, affecting the profitability of a contract or the ease with which the parties’ obligations can be performed, is not regarded as Force Majeure.
In addition, whether a Force Majeure clause is triggered by an event will depend on the proper interpretation of the clause and the threshold to be met. For example, does the clause require a party to be “prevented” from performing an obligation before it can rely on Force Majeure, or is there a lesser threshold such as “hindered” or “delayed”?
The wording of the clause is therefore key.
In the first instance, concerned businesses should seek legal advice to assess the impact of the tariffs and their practical implications on how the business will perform their obligations under existing contracts. If there is any doubt regarding their ability to perform under said contracts, a business should carry out a full review of their Force Majeure clauses to ensure that tariffs and/or trade restrictions are covered to avoid uncertainty together with any other remedies that may be provided for in the contract. This is a paramount consideration when entering into new contracts and Force Majeure clauses should be drafted accordingly.
The tariffs imposed by President Trump in April 2025 will undoubtedly produce challenges for businesses around the globe and may ultimately lead to their inability to perform their obligations under their contracts. Whether businesses can rely on Force Majeure clauses will depend on the drafting of their contractual terms and the extent to which they cannot perform under the contract. Therefore, businesses should review their contracts and seek independent legal advice to manage potential risk to their business deals in light of the ever-changing trade measures.