US tariffs: how will these affect commercial contracts and what can be done to mitigate any impact?
Published on 7th April 2025
President Trump's recent tariffs announcements may prompt the need to renegotiate contracts

The tariffs announced by President Trump on US imports from around the world may significantly affect the contractual arrangements governing commercial transactions and supply chains.
Businesses will want to understand how their current and future commercial contracts are affected and consider ways to address the changing economics of those contracts.
This may include conducting an audit of commercial contracts currently in effect in order to assess: which are likely to be the most heavily affected; their continued economic viability; and, if there is a desire to keep the deal alive, the action to take to renegotiate the arrangement if feasible.
Commercial consequences of tariffs
Additional costs
Essentially, tariffs are taxes on imports of goods (not services). In a simple example, businesses in the US importing goods from the UK will have to pay an extra amount equivalent to 10% of the value of the goods to the US government to do so. These additional costs may be absorbed by the importer, recovered from the exporter, or passed on to the consumer, or a mix of all three. So, importers in the US may be unable or unwilling to bear the costs of the tariff and seek either to renegotiate the price with their supplier or end the relationship (possibly risking litigation) if that is in fact likely to be less expensive for the business than remaining in the contractual arrangement.
Increased customs scrutiny
Given that different tariffs apply to different countries, it is also likely that, to ensure that the correct tariff is applied, there will be additional or increased checks from US customs officials, for example, where the good coming in is made up of various different component parts originating from different countries.
This increased customs scrutiny may be particularly pertinent in relation to goods exported from Northern Ireland to the US where customs officials are likely to be checking that goods have not in fact come from the Republic of Ireland, which is part of the EU, into Northern Ireland before being sent to the US, thereby by-passing the larger EU tariff. These increased checks may cause delays and increase transaction costs.
Uncertainty
There is also an increased level of uncertainty in relation to commercial transactions and global trade. The relevant Executive Order states that the President can remove, decrease or increase tariffs at any point, and expressly reserves the right of the President to increase tariffs if a country retaliates.
There is also some uncertainty around how long the tariffs will remain in place. The Executive Order simply states that they will last until such time that the President decides that the "underlying conditions" (the perceived damage to US trade from tariffs imposed on the export of US goods to countries across the world or the goods trade deficit those countries have with the US) are "satisfied, resolved, or mitigated”. This makes it difficult for businesses to plan and, indeed, to make decisions about their existing contracts.
What does the contract say?
Depending on where the contract fits in the supply chain and whether a business is the supplier or the customer in relation to any particular contract affected by the tariffs, the analysis of the contract will be different, but points to consider include price, variation, termination and force majeure.
Price
A major question to consider is whether the contract is a fixed-price contract or whether it contains any price adjustment mechanisms or a price escalation clause, allowing for price increases by the supplier due to the costs of third-party elements elsewhere in the supply chain rising. Businesses should consider whether the price includes additional fees and costs, such as taxes and customs duties, whether tariffs are included, and who is obliged to bear these costs. Check also whether the clause addresses tariffs expressly in any way.
In a contract for direct supply to the US, a major question is whether the contract obliges the customer or the supplier to pay all customs duties and taxes in the US (the contract may contain Incoterms governing these, and other, rules). If the supplier is to bear these costs, then a US importer will not have to absorb the new tariff and the obligation to pay the new tariff will remain with the exporter.
Additionally, the contract may contain a Most Favoured Nation clause that might affect decisions to increase prices for certain customers in certain territories.
Variation
If the parties want to keep the deal alive and ensure the relationship continues, renegotiating the contract to come to a compromise and varying the provisions of the contract might be the way forward. The contract may contain express clauses governing renegotiation, but in any event, checking the clauses on variation is essential.
Some contracts give the supplier a unilateral right to vary the contract, but the more usual position is that any variations must be agreed between the parties in writing. The clause may also include specific formalities that must be followed in order for a variation to be effective. It is important to comply with the terms of a variation clause and beware of inadvertently varying the contract through informal discussions, especially if the clause states that variations must be made in writing.
Where a supplier is exporting goods directly to the US, although its US customer may wish to pass some or all of the cost of the tariff on to the supplier, the supplier could choose not to renegotiate and to insist on performance (payment) by the customer, at least for a certain period. This may, however, result in non-payment by the customer, which may amount to breach of a condition (if the breach goes to the heart of the contract) possibly resulting in termination of the contract and an end to the relationship. The supplier would then have to sue to recover its losses, in which case the dispute resolution and jurisdiction clauses in the contract will be particularly relevant.
Termination
If a customer is unable or unwilling to absorb any price increases imposed as a result of the tariffs, it may wish to consider terminating the contract.
The main question to ask is whether the contract allows for termination for convenience or whether termination rights are limited to particular breaches or "material breach" by the other party. If the latter, it is unlikely that the customer would be able to terminate on the basis that the contract is no longer economic.
Getting termination right is crucial, as if you get it wrong, the other party could sue you for damages for wrongful termination or seek to keep the contract going, meaning that obligations to perform continue.
Force majeure
Whether a force majeure clause is triggered, giving you the right to suspend or delay performance as a result of tariffs being imposed, will depend on the exact wording of the clause, particularly any list of events considered "beyond your reasonable control" that the clause might contain. Unless this list expressly describes the imposition of tariffs as an event the clause is intended to cover or it includes "government action" and that is taken to include the imposition of tariffs, it is unlikely that it would be considered "beyond your reasonable control".
However, a change in economic circumstances affecting the profitability of a contract, or the ease with which the parties’ obligations can be performed, has been held by the English courts not to be a force majeure event, even where a contract has become drastically more expensive to perform. Therefore, while the express inclusion of tariffs or government action in the list of events, showing that it has been negotiated and agreed by the parties, would be taken into account by the courts, they may still decide, based on this previous case law, that it is not a force majeure event.
Frustration under common law
The doctrine of frustration is a common law concept, which is applied narrowly by the courts. Where a contract is frustrated, it will be discharged, and the parties are no longer bound to perform their obligations. However, the frustrating event must render further performance impossible, illegal, or make it radically different from that contemplated by the parties at the time they entered into the contract.
It is a high bar to reach. In addition, the English courts have held that a contract is not frustrated where it is merely more expensive or more onerous to perform, or where an alternative method of performance is possible.
What changes should you be making to contracts?
As well as amending the clauses set out above to ensure they account for the sudden imposition of, or changes to, tariffs, there are additional clauses that could be included in a contract to minimise the impact: clauses to protect against the imposition of tariffs, customs checks or other increases in costs and change in law clauses.
Protective clauses
In these uncertain times, a supplier should consider including clauses that seek to share the burden of any increased costs, including tariffs, in supplying the goods in accordance with the agreement. Agreements could set out assumptions on which the charges, or the price, are based, and include a mechanism to make adjustments where those assumptions change. The assumptions could include the tariffs recently imposed, applicable tax rates and treatment, and the level of complexity and cost of customs checks. The mechanism for adjustments would set out what will happen if those assumptions change.
Change in law clauses
Change in law clauses are designed to address the impact of new laws or amendments to existing laws on the contractual obligations of the parties. How they operate and to what they refer depends entirely on the specific wording of the clause. Therefore, they can be drafted to apply to tariff increases or other changes in related regulations.
Typically, such clauses will outline:
- The kinds of legal changes covered (for example, new legislation or regulations).
- The scope of the changes (for example, whether it includes financial implications like tariff increases).
- The process for addressing the impact of these changes (for example, renegotiation, variation of terms, termination rights).
Osborne Clarke comment
While businesses will obviously make commercial decisions as to how to proceed in the light of these tariffs, the contract and its terms will play a major role.
Depending on the exact terms, parties may find that they have various ways to mitigate the impact of tariffs or, alternatively, that they are more limited in what they can do. Either way, to avoid a potentially costly dispute further down the line, the terms of the contract should be reviewed before making any decisions.