Navigating the evolving tariff landscape – how to mitigate supply chain and other risks?

Insights|April 25, 2025

On 2 April 2025, the United States government announced that it would impose tariffs on nearly all of its trading partners.

The rate ranged from 10 % to higher rates imposed on some countries. The European Union, for example, now faces a 20 % tariff on goods imported to the U.S., in addition to the already existing import duties. Currently the newly introduced trade policy with aforesaid tariff increases is partly on hold following the U.S. government’s 9 April 2025 announcement of a 90-day pause on some of the imposed tariffs. The pause does not apply to certain industry specific tariffs, e.g. on steel and aluminum imports, nor does it affect the 10 % baseline tariff on all imports. Although the EU has already published countermeasures and retaliatory tariffs, it has reciprocally decided to suspend these measures for 90 days in order to pursue negotiations for a trade agreement with the U.S.

This development has fundamentally shifted the landscape of international trade and highlighted how quickly tariffs can disrupt supply chains and cost structures of businesses. Companies that rely on imports and exports, and have an exposure to U.S. markets, now face potentially escalating costs and uncertainty around supply availability and costs related to exports. The increased tariffs will inevitably lead to higher prices of raw materials and finished goods. From the perspective of an individual business, the question of whether it or its counter-parties will bear these increased costs depends primarily on the terms governing delivery responsibilities and risk allocation that it has in place in contracts with its business partners. The following overview highlights key considerations that are helpful to mitigate supply chain risks, remain contractually prepared, and prepare for potential claims arising from unanticipated tariffs.

Examine supply chain and tariff exposure

To mitigate tariff-related risks, businesses are advised to examine their supplier networks. This helps to understand where in the supply chain additional tariffs may be triggered and how these costs are allocated. International trade contracts often specify that the importer bears the cost of tariffs. However, contractual provisions such as “Delivery Duty Paid” or “Ex Works” and/or reference to the ICC’s International Commercial Terms (known as Incoterms) can shift the financial burden in either direction. It is equally important for a company to identify what provisions relating to price adjustments, renegotiation, effects of changes in law, and unforeseen circumstances are included in its commercial contracts. These provisions can determine whether additional costs can be passed up or down the supply chain. Provisions covering unforeseen circumstances, such as force majeure or hardships clauses, should be examined to determine whether severe cost escalations could warrant a suspension of performance, renegotiation, or even termination of a contract. Hence, doing a thorough contract review can therefore be key in order to identify the exposure to unexpected tariffs and determine where to channel renegotiation efforts or take other actions.

Contractual tools and potential defenses

As noted above there are a number of contractual mechanisms through which businesses might seek relief to avoid unanticipated tariff liabilities and cost exposure. Force majeure considerations might be raised when new or increased tariffs render contractual obligations unfeasible. Force majeure clauses typically apply to unforeseen and unavoidable events beyond the control of the parties that prevent or hinder the performance of a contractual obligation. In principle, if the contract defines force majeure broadly, the imposition of tariffs could fall within its scope. However, claims based solely on increased expenses can be difficult to sustain, particularly if the force majeure provision or other relevant contract clause does not expressly recognize “economic hardship” or “extreme price fluctuations”. Furthermore, increased tariffs are unlikely to render the performance of a contractual obligation impossible – which is often required for a force majeure clause to apply – as they are likely only going to make the performance more expensive or unprofitable, rather than preventing it altogether.

Where a contract provides for a governing law that recognizes hardship doctrines, or contains a hardship provision, a party may be entitled to amend, renegotiate or even terminate the contract on the basis of financial hardship, i.e., increased costs that make the performance of the contract unreasonably burdensome. Whether a party will prevail in invoking a “hardship” objection depends on the precise wording of the contract provision in question and the legal framework governing the contract. Under Finnish and Swedish law, it is possible under Section 36 of the countries’ respective Contracts Act to modify or set aside a contractual term if such term is unconscionable having regard to the contents of the contract, the position of the parties, the circumstances prevailing at the time the contract was entered into, subsequent circumstances, and circumstances in general. In theory this may enable businesses to renegotiate contractual terms relating to tariff costs but in practice the section is seldomly applied in a business context where each party is on a similar level of bargaining power.  

In the absence of hardship or force majeure provisions, “change in law” clauses may be helpful. These can trigger a party’s right to renegotiate if new tariffs or regulatory measures change the legal conditions of the contract so that performance becomes significantly more difficult. Whether the new or increased tariffs trigger such clause depends on how “change in law” is defined in the contract.

If no clear path exists in the contractual terms for renegotiation, cost-sharing or price adjustments, termination of the contract may be a necessary last resort. Considering this option, it is vital to examine whether the contract allows for termination for convenience, which may be subject to certain payment obligations, or termination due to major increases in expenses. Termination should be approached with due diligence to avoid allegations of wrongful termination which may in itself constitute a breach of contract and result in liability. Early consultation with legal counsel can help manage risk factors and facilitate negotiations for either interim or permanent solutions.

Preparing for possible claims

If neither party is willing or able to shoulder the newly imposed tariffs, contract breaches – such as failure or refusal to supply or pay – could occur, opening the door to claims for various types of damages or equitable remedies such as specific performance, injunctions and other. Disputes may also arise as buyers seek to terminate or renegotiate contracts due to increased costs. By examining existing contracts and risk exposure, companies can proactively prepare for contract renegotiations, settlement discussions or where it is unavoidable legal proceedings. Gathering relevant documents, understanding applicable force majeure, hardship and other relevant clauses, and calculating the cost impact of the tariffs will help businesses build a robust foundation to levy or tackle potential claims.

We advise our clients to proactively examine their supply chains and collaborate with all parties to manage tariff-related uncertainties. We regularly assist companies in evaluating the relevant contractual provisions relating to tariffs and taxes, as well as assessing whether recent changes in trade policy or newly implemented tariffs provide a basis for invoking force majeure, hardship or other relevant clauses. Early engagement in these areas helps prevent unexpected liabilities and prepare businesses for potential claims or disputes that may arise if contractual performance becomes untenable. Through tailored risk assessments, strategic contract reviews and support with business partner correspondence, we help our clients anticipate legal and financial impacts, reserve their rights and protect their interests, and navigate complex regulatory regimes as global trade policies continue to evolve.