Adapting contracts governed by U.S. law to unforeseen changes: U.S. tariffs imposed on Swiss companies

   1.  Introduction

Under the tariffs announced by the U.S. government on April 2, 2025, all Swiss products exported to the U.S. would be subject to tariffs of 31% or 32%. As a result, Switzerland would face particularly high additional tariffs compared with other US trading partners (EU: 20%, UK: 10%, Japan: 24%). Although the US administration has declared a 90-day suspension, during which time only a 10% tariff will apply to Swiss exports to the United States, the situation remains uncertain for the future.

If tariffs of 31% or 32% really were to be applied to Swiss companies exporting to the United States at the end of the 90-day suspension, some of these companies would be tempted to terminate or modify certain contracts with US business partners.

But is this possible, and if so, on what basis?

Under Swiss law, although there is a principle of the binding nature of contracts (pacta sunt servanda), it is permissible in exceptional circumstances to revise contracts based on the principle of good faith (art. 2 CC) and the theory of “clausula rebus sic stantibus“, which is often applied in practice. The parties to a contract often decide to include contractual clauses known as the hardship clause or the material adverse change (MAC) clause. The main elements of these clauses were presented in a previous paper of our law firm (MAC – hardship, clausula rebus sic stantibus – Kesako? | Wilhelm Avocats).

However, in practice, most contracts between Swiss and American companies provide for a place of jurisdiction in New York (US) and the application of American law (New York State law) to the exclusion of the Vienna Convention on Contracts for the International Sale of Goods (CISG).

In such a case, can Swiss companies subject to tariffs of 31% or even 32% also invoke contractual defenses similar to Swiss law under New York State law?

   2.  Force majeure under New York law

Under New York State law, force majeure is the best contractual defense when a party wishes to obtain a modification of the contract: it only applies, however, if the contract actually contains a force majeure clause. Indeed, there is no general doctrine of force majeure in common law. Under the Parol Evidence Rule, which protects the primacy of the written contract as a faithful reflection of the will of the parties, American courts tend to apply force majeure clauses restrictively, based strictly on the wording used in the contract.

As a general rule, a force majeure clause generally relieves a party of its performance obligation when an unforeseen event beyond its control renders performance impossible or impracticable.

   3.  Conditions for the application of force majeure to customs duties

a. Sufficiently specific force majeure clause

Tariffs and custom duties can fall under a force majeure clause if the clause can be interpreted broadly, i.e. if it includes terms such as “government actions“, “acts of authorities“, “changes in law“, “import/export restrictions” or “tariffs“. In this case, the imposition of tariffs could potentially be considered a force majeure case under the contract.

However, if only generic terms are used, the chances of a U.S. court applying the force majeure clause to tariffs are relatively slim.

b. Forseeability

New York courts will then consider whether the tariffs were reasonably foreseeable at the time the contract was signed. If a contract was signed after the start of the trade war, or after the tariff threats were made public, the courts will be more likely to reject the application of the force majeure clause.

c. Impossibility vs. Increased Cost

The next point that New York courts will consider is whether tariffs simply increase costs and thus reduce profitability, or whether they make performance of the contract impossible. Generally speaking, New York courts are reluctant to waive contractual performance solely on the grounds of increased costs or reduced profitability. Duties that simply make performance more costly may not be enough – they must make it genuinely impracticable or impossible.

In the particular case of Switzerland, where customs duties are significantly higher than those applied to other countries, we believe that New York courts will be more likely to admit an impossibility.

d. Mitigation

Finally, the New York courts will examine whether the parties to the contract have done everything possible to mitigate the impact of the tariffs. Indeed, the parties are expected to take active steps to mitigate the impact, for example by seeking alternative suppliers or adjusting their pricing structures. If the party relying on the force majeure clause has taken no such steps, New York courts will tend to reject the application of the force majeure clause.

   4.  Conclusion

In summary, it can be concluded that it is possible for a Swiss company which has signed a contract subject to American law and the jurisdiction of the State of New York with an American buyer to invoke a force majeure clause and hence waive contractual performance.

However, this clause must include terms such as “government actions“, “acts of authorities“, “changes in law“, “import/export restrictions” or “tariffs“.

The Swiss company must also demonstrate that (i) the tariffs were not foreseeable, (ii) they are of such a nature as to render the contract genuinely impracticable or impossible, and (iii) it has taken all measures at its disposal to mitigate the consequences of the tariffs.

Should the New York courts conclude that force majeure does not apply, the parties may still seek to apply (i) the notion of impracticability under UCC § 2-615, for contracts involving the sale of goods, (ii) the doctrine of frustration of purpose, although rarely applied by New York courts, or (iii) hardship clauses, if included in the contract (although more common in civil law jurisdictions).

Ultimately, it is recommended to consult a lawyer beforehand to analyze the chances of success of such an approach.