[Q&A] Do US Tariffs Count as Force Majeure Under Chinese Law?

2025. 4. 18

Question: Does the "reciprocal tariffs" policy implemented by the Trump administration in the United States constitute force majeure in the performance of contracts under Chinese law?

Answer: The Trump administration recently announced a 10% "baseline tariff" on all countries, with additional tailored "reciprocal tariffs" imposed on certain nations. At the time of writing, tariffs on Chinese goods have risen to 145%. Such adjustments in tariff policy may place significant pressure on parties seeking to fulfil contractual obligations in international trade.

In such circumstances, could a party argue that these "reciprocal tariffs" constitute force majeure, thereby exempting them from liability?

Article 180 of the Civil Code of China stipulates that those who are unable to perform civil obligations due to force majeure shall not bear civil liability. If the law provides otherwise, follow its provisions. Force majeure is an objective situation that is unforeseeable, unavoidable, and insurmountable. Common force majeure events include natural disasters such as earthquakes and typhoons, government actions such as expropriation and requisition, as well as sudden events such as epidemics, strikes, riots, and wars.

The essence of force majeure lies in the suddenness and irresistible nature, which will make the performance of the contract objectively impossible. The increase in tariffs is often due to policy adjustments made by countries based on political, economic, and other factors, and is not without warning (such as Trump's policies during his previous presidential term and his words and actions during this presidential campaign). The parties involved may have foreseen it by paying attention to the international situation, and it usually only increases the cost of contract performance, rather than making the contract completely impossible to perform, which does not meet the core principle of force majeure that causing the contract to be unable to be performed. Therefore, it is generally difficult to identify it as force majeure.

Therefore, we tend to believe that the recent implementation of the "reciprocal tariffs" policy by the Trump administration in the United States does not constitute "force majeure" under Chinese law.

However, this may be subject to the "change of circumstances" rule.

Article 533 of the Civil Code of China stipulates that after the formation of a contract, if there is a significant change in the basic conditions of the contract that the parties could not foresee at the time of contract formation and does not constitute a commercial risk, and continuing to perform the contract is clearly unfair to one party, the party adversely affected may renegotiate with the other party; If no agreement can be reached through negotiation within a reasonable period of time, the parties may request the people's court or arbitration institution to modify or terminate the contract. The people's court or arbitration institution shall, based on the actual situation of the case, modify or terminate the contract in accordance with the principle of fairness.

The core of the application of a change in circumstances is a significant change in the basic conditions of the contract, which cannot be foreseen by the parties at the time of contract formation and is not due to their own fault or conventional commercial risks, and continuing to perform the contract would be unfair to one party. If the increase in tariffs occurs after the formation of the contract and before its performance, and the parties were unable to foresee it at the time of contract formation, and it is not caused by either party, and the significant increase in tariffs seriously undermines the expected balance of interests at the time of contract formation, causing a great economic burden on one party to continue to perform, then it may meet the constitutive requirements of a change in circumstances. However, the final judgment still requires the people's court or arbitration institution to uphold the principle of fairness, and carefully determine it based on various factors such as the specific facts, evidence, and relevant legal provisions of the case.

In addition, the corresponding handling of this issue also needs to consider the provisions of the contract itself, including the application of law (such as the United Nations Convention on Contracts for the International Sale of Goods) and jurisdiction (such as arbitration conducted overseas). It is recommended that companies prioritize negotiating and resolving issues with the counterparty based on the terms of the contract. If necessary, seek the assistance of a professional lawyer.