Navigating a world of changing tariffs – legal considerations

Background

In April 2025, the US President announced that there would be a minimum tariff of 10% applied to all goods imported into the USA from the UK, with a higher rate of 25% for steel and aluminium, passenger vehicles and automobile parts. The “US-UK Economic Prosperity Deal” (EPD) was announced on 8 May 2025 and, although not legally binding, set out proposals for a trade agreement to reduce the tariffs.

The executive order signed by the President on 16 June 2025 implements the first agreed EPD terms with the key sectors to benefit being:

• Automotive: First 100,000 vehicles imported from the UK each year will attract a 10% tariff rate (thereafter 27.5%).
• Aerospace: UK jet engines and other aerospace products imported from the UK will be zero-rated.
• Agriculture: the UK will increase market access for imports from the US particularly for beef and some other US agricultural products, although details are still awaited.
• Pharmaceuticals: negotiations for preferential treatment of UK products are still ongoing.

What about other sectors?

Whether or not a business is impacted by the EPD terms agreed so far, the general increase in tariffs seen this year may cause commercial difficulty for many UK businesses, particularly those tied into long-term supply agreements with US customers. If this is causing significant damage to margins, a UK supplier might need to review its contracts to understand which are the most onerous and then consider possible mitigations, such as some or all of the following:

• What is the governing law of the contract (this may impact any steps you propose taking)?
• Who bears the risk of increases to tariffs and other costs?
• What currency does the contract require payments to be made in and is there anything here which could be leveraged?
• If the contract operates as a framework, is there any right for the supplier to refuse the customer’s orders?
• Is there anything in the force majeure provision which could be relied upon?
• How long is the contract, does it renew automatically and when is the earliest date it can be terminated?
• What is the mechanism for termination (there is no point seeking to terminate an onerous contract if you don’t do it properly as you could end up finding yourself in breach of contract)?
• Is there a process for price reviews or other contract changes which could be invoked and, if so, what is the mechanism for doing this?
• Are there other factors, away from prices and tariffs, which could be leveraged as part of a renegotiation of the contract? This could include potential breaches by the customer.
• What is the process for recording any agreed contract variations?
• If the supplier is “stuck” with an onerous long-term customer contract, could any changes be made to the contracts with its own suppliers/subcontractors which would ease the burden? Or it might be possible to source components from countries with which the UK has more favourable tariffs. Obviously, supply-side changes also need to be made with care otherwise a business could find itself in breach of both its subcontracts and its contracts with its customers (for example if it substituted cheaper components which didn’t meet the contract standards required by the end customer).

The current climate of unpredictability affecting global trade also means parties should try – to the extent possible(!) – to factor this in when negotiating new commercial arrangements. While it can be difficult for a supplier to “hedge its bets” when trying to secure business from a new customer, one would hope that explaining the concern in a reasonable way which acknowledges that the deal needs to work for both parties despite the uncertain economic backdrop would receive a fair reception.

If you have any questions as a result of this article, please contact: [email protected]