In the past three months, the U.S.–China trade conflict has escalated with significant consequences for global business operations. The U.S. has imposed new tariffs of up to 145% on certain Chinese imports, while China retaliated by imposing a 125% tariff on U.S. goods and suspending critical exports, such as rare-earth metals. These developments have sparked disruptions across industries like manufacturing, technology, and agribusiness, leaving businesses with heightened uncertainty about their contracts, supply chains, and legal obligations. One area of concern is the use of force majeure clauses—often relied upon to mitigate the impact of unforeseen events like government actions or tariffs.

 

Understanding Force Majeure in the Context of Tariffs

 

A force majeure clause is a contract provision that protects parties from the inability to perform due to external events beyond their control. Typically, these events are defined as “acts of God” (such as natural disasters) or government actions (like new laws, regulations, or trade barriers). However, not every government action automatically qualifies as force majeure. To invoke a force majeure clause successfully, the event must render performance impossible or commercially impractical—not just more expensive.

 

Current Tariff War: Implications for Businesses

 

Since January 2025, the U.S. has implemented substantial tariffs on Chinese goods, with rates now as high as 145%. These tariffs have directly impacted industries reliant on Chinese imports, including manufacturing, technology, and agriculture. For example, manufacturers importing components like semiconductors and rare-earth metals face increasing costs that may disrupt production schedules. Similarly, agribusinesses reliant on the U.S. export market now face retaliatory tariffs that make their products more expensive, diminishing their competitive edge.

 

These developments highlight the critical importance of understanding how force majeure clauses can provide legal relief under such disruptions. However, businesses must note that force majeure typically does not cover tariffs unless explicitly included in the contract language.

 

Legal Precedents: Force Majeure and Tariffs

 

The legal framework for force majeure clauses is well-established, but courts have generally been reluctant to excuse performance based solely on the imposition of tariffs unless explicitly addressed in the contract. A series of U.S. cases have shaped the current understanding of how tariffs and trade-related disruptions are treated under force majeure.

 

• Coker International v. Burlington Industries (1990): This case involved a buyer of textile equipment who argued that government-imposed trade restrictions made it impossible to resell the goods as originally planned. The court found that while the government action (a restriction on exports) increased costs, it did not constitute force majeure, as performance was still possible, even though it was no longer profitable. The court stressed that economic hardship, without more, is insufficient to invoke force majeure.
  • Key takeaway: Force majeure clauses do not automatically excuse performance due to increased costs or disruptions unless the event physically prevents the performance or makes it legally impossible.
  • Coker Int’l, Inc. v. Burlington Indus., Inc., 747 F. Supp. 1168 (D.S.C. 1990), aff’d, 935 F.2d 267 (4th Cir. 1991).
• Shelter Forest v. COSCO Shipping (2020): In this case, the plaintiff sought to invoke force majeure following the imposition of tariffs that significantly increased shipping costs. The court ruled that while the tariffs raised costs, they did not excuse the performance under the contract because the tariffs did not prevent the plaintiff from fulfilling its obligations—performance was merely more expensive.
  • Key takeaway: A mere price increase due to tariffs or trade restrictions is not sufficient to trigger force majeure unless the event completely hinders the ability to perform.
  • Shelter Forest Int’l Acquisition, Inc. v. COSCO Shipping (USA) Inc., 475 F. Supp. 3d 1171 (D. Ore. 2020).
• Kyocera Corp. v. Hemlock Semiconductor (2015): In a case involving the solar industry, the buyer argued that a significant drop in silicon prices due to international trade policy changes, including tariffs, should excuse their performance. The court ruled that the buyer’s obligations were not excused by force majeure, as the tariff situation only made performance unprofitable, not impossible.
  • Key takeaway: Force majeure clauses are not intended to shield parties from the risks of market changes or economic downturns, even if caused by government actions like tariffs.
  • Kyocera Corp. v. Hemlock Semiconductor, LLC, 313 Mich. App. 437, 886 N.W.2d 445 (2015).

These precedents demonstrate a consistent trend: While tariffs and trade barriers can significantly affect business operations, they are typically not considered force majeure events unless the clause specifically includes such events or the impact makes performance impossible rather than just commercially impractical.

 

Industry Impact: Sectors Most Vulnerable to Tariff Disruptions

 

Sectors such as manufacturing, agribusiness, and technology are particularly vulnerable to tariff-related disruptions. The impact of tariffs is not just financial but strategic, affecting supply chains, production schedules, and profit margins.

 

• Manufacturing: U.S.-Asia supply chains are highly integrated, with many manufacturers relying on imported raw materials or components. A sudden tariff increase can raise production costs significantly or force businesses to find alternative sources of supply.
• Agribusiness: Countries in Latin America and Asia face retaliatory tariffs from both China and the U.S., disrupting the flow of essential goods like agricultural products.
• Technology: For tech companies reliant on Chinese components for products such as electronics and semiconductors, tariffs can disrupt production and delay delivery schedules. These issues can lead to breaches of contract or the need to renegotiate terms.

For these businesses, it is essential to reevaluate existing contracts and determine whether their force majeure clauses cover such trade disruptions. Without specific language addressing tariffs, companies may find themselves unable to invoke force majeure successfully.

 

Proactive Legal Strategies: Adapting to Evolving Trade Policies

 

Given the rising unpredictability of trade policy, legal teams should begin incorporating tariff-specific provisions into their contract templates. Businesses must ensure their agreements are not only protective but adaptable, enabling them to respond quickly and strategically to shifts in global trade policies. This may include provisions for price adjustments, supply chain delays, or alternative performance strategies if tariffs or trade restrictions are imposed.

 

Reviewing Existing Contracts and Preparing for the Future

 

With tariffs already impacting current agreements, businesses must approach this challenge on two fronts:

 

• Review Existing Contracts: Companies should audit their contracts to identify potential remedies under force majeure clauses. If tariffs are not explicitly addressed, businesses may need to consider renegotiating or seeking a resolution through dispute resolution clauses.
• Incorporate Future Protections: As new tariffs and trade policies continue to emerge, businesses must future-proof their contracts by incorporating specific language that addresses tariffs, trade wars, and other government-imposed restrictions.

By proactively reviewing contracts and integrating flexible provisions, businesses can minimize risks and protect their interests as global trade dynamics evolve.

 

Real-World Insights: Protecting Against Unforeseen Disruptions

 

In recent months, we have worked closely with clients across various industries, advising them on supplier contracts impacted by sudden tariff increases. Our clients in manufacturing and technology have faced significant cost increases due to new tariffs, highlighting the importance of clear and tailored force majeure language. By adjusting their contracts to address tariff risks directly, they were able to mitigate potential disputes and avoid major disruptions in their operations.

 

Conclusion: Strengthening Legal Protections in a Volatile Trade Environment

 

The recent escalation in U.S.–China trade tensions underscores the critical need for businesses to revisit their force majeure clauses and ensure that they are prepared for unforeseen disruptions. While tariffs alone may not qualify as force majeure events, proactive contract adjustments can ensure that businesses remain resilient amid shifting global trade policies.

 

At Saltiel Law Group, we advise multinational clients with commercial interests in the U.S. and abroad on the strategic use of force majeure clauses when navigating evolving trade and regulatory environments. Hubert Menendez is an attorney at Saltiel Law Group, where he advises U.S. and multinational businesses on international trade, contract enforcement, and cross-border risk mitigation. He is currently working with clients to proactively review and strengthen their force majeure frameworks in light of recent trade policy shifts.