As the dust settles – the (un)intended consequences of Trump’s tariffs on UK businesses.

On the 12 March, US President Trump imposed 25% tariffs on all aluminium, steel and derived goods imported from the UK into the US. From the 3 April, all passenger vehicles, light trucks and car parts have been subjected to 25% tariffs. Then on the 5 April, with much fanfare and debatable arithmetic, a 10% base line on almost all imports was imposed, (the so-called “reciprocal tariff”). 

Sarah Conroy has produced an article on how these events have affected domestic businesses, and areas where those business should consider taking legal advice. The focus of this article is contracts of an international or cross-border nature. 

The lie of the land

In 2024, the UK exported £59 billion of goods into the United States, some 16% of total UK exports. So while UK businesses may feel that they have dodged a proverbial bullet on reciprocal tariffs by comparison to their counterparts in the EU (20%), Japan (24%), South Korea (25%), India (26%) or China (145% and counting!), they can hardly feel gratitude for having to face what seems to be a decidedly rough patch in trading relations.

For a few days in April 2025 it was hard to tell whether we were coming or going on the US Government’s tariff plans. However, for now at least, we know that the UK is unlikely to face a higher reciprocal tariff than 10%, (chiefly because there is no real trade deficit between the countries and services are not subject to tariffs), and there is no plan on this side of the Atlantic to retaliate. There are signals that a partial trade deal may be in the offing, possibly in time to be signed off with a typical made-for-TV flourish during the planned Autumn state visit. However, even with tariffs at this level for the UK, and given the possibility of a reimposition of the previously announced reciprocal tariffs against other countries in July when the 90-day moratorium is set to end, and particularly the impact of extremely high tariffs against the world’s largest manufacturing economy, China, global trade will remain highly febrile for some time. 

Aside from an inevitable and wholly intended drop in demand for UK goods that have just become more expensive in the US – particularly British made cars - many UK companies rely on global supply chains that include components from various regions. Higher tariffs can result in increased costs for imported raw materials and components, leading to supply chain disruptions and necessitating a re-evaluation of supplier relationships. Businesses may need to explore alternative sourcing options, possibly “US-shoring” operations and/or seeking different suppliers in more customs-favourable locations, thus increasing operational complexity. This may well prove an opportunity as well as a challenge for UK businesses. 

Imports

Tariffs are typically paid by those businesses or individuals who are importing the goods in question. This invariably results in price rises which will either be absorbed in importer’s margin or, where not possible, passed immediately on to the consumer. 

In the longer term we may see some affected countries “dumping” their goods here with a view to achieving a sale and therefore causing a crash in the price of good or raw material in the market. Then, domestic businesses might find themselves unable to compete on price and anti-competitive practices, (such as price protecting cartels), grow over time leading to run-ins with the competition authorities. 

You don’t need a creative imagination to understand the kind of impact that wide-ranging overnight changes to the cost of importing most goods to the world’s largest economy may have to cross-border business. We have already seen major global courier and delivery businesses pull out of delivering imported goods to US consumers, (DHL), and major product launches subjected to delay and last-minute pricing changes, (Nintendo’s Switch 2). Uncertainty is bad for business and is likely to lead to fewer opportunities for growth

Commodities

Commodities such as raw materials for manufacture, as well as certain staples, are bought and sold weeks and months ahead of time by individual contracts which often set the price long before an import event takes place, (fixed price contracts). Such contracts cannot be revised without renegotiation, which one party may be unwilling to do. 

Other commodity contracts provide price adjustment or complex clearing processes which are intended to take account of price fluctuations between the point of purchase or even embarkation on cargo ships, to the point of arrival. Those contracts may be able to take account of sudden events such as the raising of customs and taxes. But not all do, and it is unlikely that such contracts can be revised in terms of the quantity to be delivered, (for which there may no longer be a market on arrival). Some of these contracts might not be honoured. 

The UK is a major centre for the purchase and sale of commodities of all kinds – often by way of contracts which are governed by the law of England and Wales and with exclusive jurisdiction given to the national courts and (confidential) arbitration tribunals based in this country. Many trade associations which promulgate the rules and terms of global trade in commodities are based in and around London. The quality of decisions made by trade arbitration panels is variable and have been the subject of many an appeal in the recent past. 

UK businesses, and also foreign businesses, whose products are sold subject to rules set in this country and whose disputes go before a trade tribunal here, may well find that they no longer wish to perform a contract whose commercial terms, (price, quantity, point of delivery), were fixed well before the tariffs came into play, or that they are having difficulties getting a counter-party to honour those contracts. 

Alternatively, such a business may need advice on how to interpret a contract in circumstances where the unexpected was not adequately catered for.

Trade finance

Then there is the banking system which underlies and finances much of international trade. The services of banks are essential to the proper performance of internation contracts, particularly between parties who are located in different jurisdictions and where there is an inherent risk of non-performance. Bank performance guarantees or bonds are a classic example. A bank will issue a guarantee, (known as a documentary credit), against a customer’s obligation under a contract. This means that on the failure of the customer to abide by an order, or a contract, the bank must pay out.

This can lead to all sorts of complications for the customer and the enforcing counter-party, as well as the bank who may wish to escape liability to pay. This area of the law is highly technical and sensitive to individual facts. As noted above, the fault may lie not with a bank’s customer but with their supplier upstream. This is fertile ground for large, complex cross-border disputes for which the Commercial Court and London Commercial Court are ideally suited.

Similar issues arise out of insurance contracts and invoice factoring arrangements.

Disputes

International facing businesses and the lawyers advising them must grapple with the fast-changing variables that flow directly from the world’s largest economy suddenly and unaccountably raising its proverbial drawbridge. The intention is clearly to force the “re-shoring” of large parts of the US manufacturing sector and to reverse decades of globalised supply chains. The fact that the tariffs will cause pain and disruption to businesses is built into the equation. 

Disputes are therefore inevitable and will trickle out of the purely commercial sphere and into the hands of specialist lawyers in the coming weeks and months. We are expecting a significant uptick in cross-border contract disputes, financial and insurance claims and particularly commodities arbitrations.  

Weightmans LLP specialist international lawyers are well placed to support businesses by providing advice and representation in respect of:

• advising on the construction of contractual provisions in cross-border contracts for goods 
• advising on fair extrication strategies and terminations
• advice on regulatory and compliance matters, including trade law and competition 
• representation in claims brought by supply chain participants, banks and insurers 
• representation in claims against defaulting importers and customers 
• enforcement of foreign judgments and awards in England and the recognition of English judgments abroad 
• arbitrations, (institutional, trade body and contractual), and appealing arbitration awards.