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A tariff is a tax or duty imposed by a government on imported (and sometimes exported) goods. It is usually calculated as a percentage of the product’s value and is paid by importers when the goods enter the country.
On April 2, a date he dubbed “Liberation Day”, Trump announced several economic measures under the 1977 U.S. International Emergency Economic Powers Act to impose a universal 10% tariff on nearly all imported goods. This was accompanied by higher tariffs – up to 50% – on goods from 57 specific countries, although implementation has been paused for multiple, due to legal challenges.
Tariffs also targeted specific industries and countries. For example, the administration doubled existing steel and aluminum tariffs from 25% to 50%, with the United Kingdom temporarily exempted at the original rate due to ongoing negotiations. These measures significantly raised costs for U.S. manufacturers reliant on foreign raw materials and components.
China was once again a central focus, with the administration escalating tariffs on Chinese goods, starting at 10% and eventually peaking at 145%, before being partially reduced to around 30% later in the spring. The justification remained similar to the 2018–2020 trade war: alleged unfair trade practices, intellectual property theft, and state subsidies distorting global markets. Other countries, including Canada and Mexico, were also hit with 25% tariffs in March. This led to retaliatory duties from both nations, although certain goods compliant with the United States-Mexico-Canada Agreement were eventually exempted. In a further move, Trump signed Executive Order 14245, applying a 25% tariff on countries importing Venezuelan oil, aimed at punishing governments seen as supporting authoritarian regimes.
Despite being the world’s second largest economy, the EU continues to underperform due to inherent gaps in productivity, and is operating below its potential. In particular, Trump’s actions may force the EU to consider further its fragmented defence spending. A useful response could be to amalgamate spending and streamline procurement and innovation in sectors such as tech, to extrapolate itself from reliance on US goods.If executed effectively, this could also drive innovation, particularly in strategic industries such as artificial intelligence and advanced digital infrastructure. Furthermore, the EU could seek to reduce internal barriers in order to effectively compete, to accelerate growth and unlock its economic potential, now more necessary than ever to ensure European strategic autonomy.
The tariffs have particularly impacted international retailers. For example, Nike has recently told investors that its business costs will go up $1bn (£728m) this year if the tariffs remain at the current level. It follows a warning from the sports brand last month that it would raise prices due to the taxes imposed on imports. Work to bring down costs is under way, including reducing supplies from China to the US. Clothing prices in the US are set to rise for consumers generally, with Daniel Ervér, the chief executive of H&M acknowledging that the retailer is witnessing competitors in the US raising prices; some aggressively and some more cautiously. Further, clothing companies have seen rapid drops in share price as a result of the tariff announcements. For example, shares in the owner of Primark fell earlier in the Spring, after the chain posted a sharp drop in UK sales and lost market share. The company warned that consumer confidence was likely to worsen further. Further drops in share price for retailers cannot be ruled out.
Additionally, there could be more widespread concern for the economy while the trade wars continue. For example, Associated British Foods, which also owns household food brands such as Ryvita and Kingsmill, said that several countries may yet slide into recession as a result of U.S. trade policy, especially as consumer confidence is likely to drop further, in the wake likely increases in individual debt.
When companies agree to buy and sell goods across international borders, they need to think carefully about a few important contract terms that can protect them if prices suddenly rise because of tariffs.
First, they should decide whether the buyer will purchase exclusively from the seller and whether the buyer must commit to buying a minimum amount. If the contract names the seller as the only supplier and sets a minimum purchase commitment, the buyer cannot order from someone else or buy less than the agreed amount without risking a breach of contract. On the other hand, if there is no exclusivity or minimum purchase requirement, the buyer has more flexibility. For example, if tariffs make the goods too expensive, the buyer could threaten to stop ordering unless the seller agrees to share or absorb part of the extra cost. This possibility gives the buyer leverage to negotiate with the seller when markets change.
Second, contracts often include a “force majeure” clause, which allows either party to pause or end the agreement if an unforeseeable event – such as a natural disaster – makes it impossible to perform the contract. However, because tariffs only increase costs rather than making trade impossible, they usually do not qualify as a force majeure event. Unless the contract specifically states that government‐imposed tariffs count as force majeure, the buyer must continue to buy the goods, even at higher prices.
Finally, companies can ask to include a “financial hardship” or “material adverse impact” clause. These provisions allow a party to exit the contract if external events cause serious financial strain or upset the commercial balance of the deal. Because trade rules and tariffs can change unpredictably, more contracts now contain such clauses. Buyers should seek to cover additional expenses caused by tariffs—such as extra paperwork or shipping fees—while sellers should propose clear, measurable triggers. For example, they might agree that the buyer can only terminate if tariffs increase by more than 20 percent. By carefully drafting these terms, both buyers and sellers can protect themselves against sudden tariff shocks.
Three months after the implementation of Trump’s sweeping tariff measures, the global and domestic consequences are becoming increasingly clear. Economically, these tariffs have driven up production costs for American manufacturers, strained international supply chains, and triggered retaliatory measures from key trade partners. Retailers like Nike and H&M are already feeling the pressure, passing costs onto consumers and warning of further financial impacts. Politically, the tariffs have reignited trade tensions, particularly with China, and may inadvertently accelerate economic divergence between the U.S. and its allies, notably the EU, which now faces renewed urgency to pursue strategic autonomy. Legally and commercially, businesses are adapting by re-evaluating contracts and risk mitigation strategies to better shield themselves from future trade shocks. While Trump’s policies were framed as a move toward economic nationalism and self-reliance, their longer-term fallout suggests heightened global uncertainty, slower growth, and greater regulatory complexity for international trade.
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