P&K Insights: The impact of US Tariffs on International Sales Contracts

The U.S. government’s recent announcement of substantial tariffs affecting all trading partners, including Switzerland, has rocked the global economy and threatens to severely affect the stability of major international markets, including global stock markets.

The U.S. President defended the sweeping tariffs to be imposed on imports into the U.S. market with a remark that “sometimes you have to take medicine to fix something”. These tariffs will be a bitter pill to swallow for the consumers, major corporations and entire economies.

Aside from a plethora of issues that arise from the wave of tariffs launched by the U.S. government on a political and macro-economic level, the question arises what consequences such tariffs have on the supply chains and – for the purposes of this article – on international sales contracts. Who bears the risk and financial burden of these import tariffs?

Further, could the unexpected nature of these tariffs provide grounds for modifying or excusing performance under international contracts (e.g. on the basis of force majeure or hardship)?

Flavio Peter, Clio Mordivoglia and Carolina Solis Villares provide a brief overview on those questions from a Swiss law perspective, as well as from the angle of the United Nations Convention on Contracts for the International Sale of Goods (CISG), and the Incoterms 2020.