Not long after starting his second term, U.S. President Donald J. Trump announced tariffs on numerous imports from some of the nation’s major trading counterparties, with tariff amounts varying depending on the country and commodity type. Adding uncertainty to the developing situation, some states1 and businesses2 have filed suit to challenge the imposition of tariffs, and several countries are considering counter-tariffs. While the administration has modified or paused some of the planned tariffs, the actual and anticipated economic policy shift is expected to have wide-ranging impacts on cross-border commerce and contracts.
The introduction of new or increased tariffs will likely lead to the renegotiation of existing contracts. Where renegotiation is not possible or desirable, litigation may arise, particularly around the legal doctrines of force majeure, impossibility, and impracticability, if parties assert they are unable to meet their contractual obligations due to new tariffs. Whether these doctrines apply to a given transaction depends on several factors, including, but not limited to, the contractual terms governing a transaction, the governing law, the subject matter of the transaction, the course of dealing, and the parties’ negotiations.
What is Force Majeure?
A force majeure clause is a “contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.”3 Force majeure clauses vary widely by their terms, and their scope and effect depend on the specific contract language and not on any traditional definition of the term.4 Under both Texas5 and New York6 law, the burden of proof falls on the party seeking to excuse its performance under a force majeure clause.
What are the doctrines of Impossibility and Impracticability?
The impossibility defense is also referred to by Texas courts as impossibility of performance, commercial impracticability, and frustration of purpose.7 Impossibility of performance, commercial impracticability, or frustration of purpose may excuse contractual performance under Texas law “if an event occurs and the contract was made on the basic assumption that the event would not occur.”8 Similarly, under New York law, the impossibility defense—also referred to as the impracticability defense—excuses a party’s performance when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible.9
Force Majeure Case Studies
Force majeure arguments have been invoked in the context of natural disasters,10 the COVID-19 pandemic,11 and other analogous situations where large-scale, unforeseen events cause significant market disruption. As discussed below, courts engage in highly fact-intensive analyses to determine whether to apply doctrines like force majeure, impossibility, or impracticability arising from tariffs or “trade wars.”
Shelter Forest Int’l Acquisition, Inc. v. COSCO Shipping (USA) Inc.:12 This case, out of the United States District Court for the District of Oregon, involved a fixed-price wood products contract between an Oregon-based importer of lumber and building materials and a Chinese shipping company transporting cargo internationally. The importer argued that new tariffs on Chinese wood products and the administration’s “broad trade war against China” constituted a force majeure, excusing its obligations under the minimum quantity provision of the parties’ fixed-priced contract.
The court held that the force majeure clause did not excuse non-performance. Important to the court was the fact that the importer was aware of the impending tariffs at the time of contracting and continued shipping even after they were implemented. The court noted, “[i]n the context of fixed-price contracts, courts have been particularly hesitant to find that market changes resulting from governmental policies constitute a force majeure.”
Kyocera Corp. v. Hemlock Semiconductor, LLC:13 In this Michigan Court of Appeals case, a dispute arose out of a take-or-pay contract. There, a buyer-plaintiff argued that a trade war in the solar industry made it impossible to pay the negotiated prices. Specifically, the buyer claimed that, after the agreement was signed, the Chinese government aimed to dominate the solar industry by providing illegal subsidies to state-owned companies. The buyer alleged that these companies engaged in “large-scale dumping,” selling products below production costs to manipulate the market and gain share.
Invoking a force majeure provision, the buyer argued that, because of the effect of the “trade war” in the solar industry market, it could no longer pay the seller-defendant the prices that the parties negotiated in the agreement, and would be forced to leave the solar panel industry if it remained liable under the contract. Rejecting this argument, the court found that the deflation of market prices, regardless of the cause, was a risk assumed by the buyer in the contract. The court held, “[t]he risk of such a deflation of market prices—no matter the cause—was expressly assumed by the plaintiff in its take-or-pay contract with the defendant. Plaintiff opted not to protect itself with a contractual limitation on the degree of market price risk that it would assume.” The court held that the buyer could not “by judicial action, manufacture a contractual limitation that it may in hindsight desire by broadly interpreting the force majeure clause to say something that it does not.” Construing the force majeure clause narrowly, the court held that the trade war did not constitute a force majeure event.
Impossibility and Impracticability Cases
Courts have also analyzed the doctrines of impossibility and impracticability in the context of tariffs.
Murphy Marine Services, Inc. v. Dole Fresh Fruit Co.:14 In the Murphy Marine Services case out of the United States District Court of the District of Delaware, for instance, the court analyzed the doctrine of commercial impracticability in the face of a privately imposed tariff. There, a stevedore company had contracted to unload a counterparty’s ships at the Port of Wilmington. The arrangement was disrupted when Delaware privatized the port, and the new operator imposed new fees—characterized as tariffs—on all stevedores. Faced with the prospect of losing money on each unloading, the stevedores invoked the doctrine of commercial impracticability and informed the company that they could not continue their services unless reimbursed for the tariff. The court held that the new fees undermined a basic assumption of the agreement, making it commercially impracticable for the stevedores to perform their duties. Consequently, the court ruled that the tariff disrupted the deal, rendering it commercially impracticable for the stevedores to perform.
The results of Murphy and other cases involving the impossibility and impracticability doctrine are highly dependent on the unique facts of each case as well as the applicable law.15
Implications
These case studies demonstrate that courts will weigh a number of factors to determine whether tariffs will excuse performance, including: the specific language of the contract, especially its force majeure clause, the type of contract (fixed-price, take or pay, etc.), the law being applied, the extent to which the tariffs were foreseeable at the time the contracts were executed, and the parties’ conduct after the imposition of tariffs. Each case will hinge on its own unique facts, contractual language, and circumstances. It will also hinge on the ability of the party invoking an excuse to demonstrate that the tariffs qualify as force majeure or that they render performance impossible or impracticable. Past litigation from natural disasters—e.g., Winter Storm Uri and the COVID-19 pandemic—may be illustrative.
Conclusion
New tariffs imposed by the U.S. government will likely create significant changes for international trade, agreements, and disputes. Understanding the implications of doctrines like force majeure, impossibility, and impracticability on the potential for renegotiation or litigation will be crucial in navigating the impact of these tariffs in the months and years ahead.
1 See State of California v. Trump, No. 3:25-cv-03372 (N.D. Cal. Apr. 16, 2025), available at https://www.gov.ca.gov/wp-content/uploads/2025/04/FILE_8502.pdf.
2 See V.O.S. Selections, Inc. et al, No. 1:25-cv-00066 (Court of International Trade Apr. 14, 2025), available at https://libertyjusticecenter.org/wp-content/uploads/002-VOS-Selections-v.-Trump-Compl-2025.04.14-1.pdf.
3 Freeport LNG Mktg., LLC v. Kinder Morgan Texas Pipeline LLC, No. 14-22-00864-CV, 2025 WL 1109028, at *5 (Tex. App.—Houston [14th Dist.] Apr. 15, 2025) (citing Point Energy Partners Permian, LLC v. MRC Permian Co., 669 S.W.3d 796, 805 (Tex. 2023)).
4 Id.
5 Va. Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397, 402 (Tex. App.—Houston [14th Dist.] 2009, pet. denied).
6 Aukema v. Chesapeake Appalachia, LLC, 904 F. Supp. 2d 199, 210 (N.D.N.Y. 2012).
7 Imperial Charters v. Redwood Fire and Casualty Ins. Co., No. 02-24-00237-CV, 2025 WL 1006279, at *4 (Tex. App.—Ft. Worth, Apr. 3, 2025) (citing Key Energy Servs., Inc. v. Eustace, 290 S.W.3d 332, 339 (Tex. App.—Eastland 2009, no pet.))
8 Zemos Logistics, LLC v. BKT Enters., No. 02-23-00049-CV, 2023 WL 8467374, at *5 (Tex. App.—Fort Worth Dec. 7, 2023, no pet.) (mem. op.) (quoting Philips v. McNease, 467 S.W.3d 688, 695–96 (Tex. App.—Houston [14th Dist.] 2015, no pet.)); see Centex Corp. v. Dalton, 840 S.W.2d 952, 954 (Tex. 1992); Restatement (Second) of Contracts § 265 (Am. Law Inst. 1981) (“Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.”).
9 Siemens Energy, Inc. v. Petróleos de Venezuela, S.A., 82 F.4th 144, 153 (2d Cir. 2023).
10 Freeport LNG Mktg., LLC v. Kinder Morgan Texas Pipeline LLC, No. 14-22-00864-CV, 2025 WL 1109028, at *5 (Tex. App.—Houston [14th Dist.] Apr. 15, 2025) (during Winter Storm Uri, natural gas supplier claimed force majeure excused curtailment of gas delivery to customer); Mieco, L.L.C. v. Pioneer Nat. Res. USA, Inc., 109 F.4th 710, 713 (5th Cir. 2024) (during Winter Storm Uri in 2021, seller invoked contract’s force majeure clause to excuse its failure to deliver agreed-upon amounts of gas); Ergon-W. Virginia, Inc. v. Dynegy Mktg. & Trade, 706 F.3d 419, 422 (5th Cir. 2013) (natural gas supplier invoked contractual force majeure provision when Hurricanes Katrina and Rita hit in 2005 and caused extensive damage to the gas industry’s infrastructure).
11 Goldberg v. Pace Univ., 88 F.4th 204, 212 (2d Cir. 2023) (university invoked force majeure “emergency closings” clause in light of COVID-19 pandemic).
12 Shelter Forest Int’l Acquisition, Inc. v. COSCO Shipping (USA) Inc., 475 F. Supp. 3d 1171 (D. Or. 2020).
13 Kyocera Corp. v. Hemlock Semiconductor, LLC, 313 Mich. App. 437, 439, 886 N.W.2d 445, 447 (2015).
14 Murphy Marine Servs., Inc. v. Dole Fresh Fruit Co., No. 1:20-CV-25-SB, 2022 WL 610755, at *1 (D. Del. Jan. 13, 2022.
15 Great Lakes Gas Transmission Ltd. P’ship v. Essar Steel Minnesota, LLC, 871 F. Supp. 2d 843, 856 (D. Minn. 2012) (addressing impracticability and impossibility based on tariffs); TPL, Inc. v. United States, 118 Fed. Cl. 434, 443 (2014) (addressing impracticability based on tariffs); Murphy Marine Services, Inc. v. Dole Fresh Fruit Co., No. 1:20-CV-25-SB, 2022 WL 610755, at *2 (D. Del. Jan. 13, 2022) (analyzing commercial impracticability based on tariffs); Shelter Forest Int’l Acquisition, Inc. v. COSCO Shipping (USA) Inc., 475 F. Supp. 3d 1171, 1188 (D. Or. 2020) (addressing impossibility based on tariffs).
