Tariff turmoil and the relevance of force majeure

In the first quarter of 2025, the United States intensified its tariff policies, imposing additional duties on a broad range of imports from China, Canada, and Mexico, while threatening new measures against other trading partners. On 2 April 2025, new 25% tariffs on cars and car parts coming into the US are due to take effect. The prospect of counter-tariffs with a global impact looms large on the horizon.

Businesses worldwide face increasing uncertainty about cross-border trade flows and how to honour contracts that may suddenly become far more expensive to perform. The abrupt and unpredictable nature of these tariffs leaves importers, exporters, manufacturers and distributors anxious about whether they can still fulfil contractual obligations on commercially viable terms.

A question repeatedly emerging is whether these newly imposed tariffs - or any responsive measures - could be treated as a force majeure event, thereby excusing performance or offering relief under English-law-governed contracts.

Force majeure under English law

Under English law, force majeure is not a standalone doctrine. It exists only if - and to the extent that - the contract provides for it. Standard force majeure clauses excuse or suspend performance when an event beyond the parties’ control severely hinders performance or renders it impossible.

Where a contract contains no force majeure provision, the fallback might be frustration, but that doctrine is narrowly construed. It requires that an event occurring after contract formation has rendered performance physically impossible or illegal, or has radically changed the nature of the obligations such that fulfilling them would be something fundamentally different from what was originally contemplated by the parties when they entered into the contract.

If a force majeure clause does exist, its wording must be examined carefully. Many clauses list specific triggers (e.g. war, embargo, certain acts of government), sometimes followed by a catch-all reference to “any other event beyond a party’s reasonable control.” English courts traditionally interpret such clauses by focusing on the precise clause’s wording and commercial context.

Even if newly imposed tariffs fall within the scope of a governmental action mentioned in the clause, the affected party must still prove that it cannot perform, or that its performance is hindered in the precise manner the clause specifies. English courts draw a distinction between genuine impossibility and mere financial inconvenience, and will not usually allow a party to avoid a contract simply because of diminished profitability. Sometimes, however, dramatic cost escalation can approach genuine impossibility.

Newly imposed US tariffs as force majeure

Applying these principles to the threatened US tariffs, it remains unlikely that most English-law contracts will excuse performance, unless such tariffs fall within the scope of contract’s force majeure wording and unless the tariffs impose a genuinely sufficient obstacle to performance. Absent these conditions, paying more to import goods would rarely equate to a complete inability to perform.

Even if a party were to satisfy the relevant contractual requirements for force majeure, adherence to procedural obligations, if specified under the force majeure clause, can be critical. Many contracts demand that the party relying on force majeure provide timely notice and evidence of reasonable mitigation efforts. Failure to comply precisely with such contractual requirements may undermine a force majeure defence, depending on the exact language used in such provision.

Practical implications

The ongoing and uncertain nature of tariff developments underscores the importance of continuous monitoring and forward planning. Given the volatile climate of international trade policy, companies operating under English-law contracts would be well-advised to review force majeure clauses and risk allocation more generally in both current and future agreements.

Because the courts will examine the contractual language with great care, the more precise and transparent the language of force majeure provisions regarding tariff hikes, the higher the likelihood of successfully invoking it. Notably, foreseeability will likely remain an ever-present challenge; the more widespread and publicly signalled these tariff developments become, the more difficult it will be to contend that a sudden escalation was entirely beyond anticipation.

Because English law so rarely relieves parties of their contractual obligations on grounds of economic adversity alone, many businesses will conclude that the commercial benefits of a negotiated settlement may outweigh the uncertainties of litigation. This might mean renegotiating existing contracts to factor in the additional tariffs through revised pricing structures and delivery terms that distribute the burden more evenly.

A cautious blend of diligent legal review - aimed at verifying whether contractual language offers sufficient protection - and thoughtful commercial planning - focused on spreading risk, reducing exposure, and maintaining supply continuity - will likely yield the most resilient strategy in the face of this evolving trade environment.