Legal Ramifications 

The immediate effect of these tariffs was a surge in financial market volatility, followed by a temporary improvement in economic sentiment after reciprocal tariffs were reduced to 10% for most countries during a 90-day pause (excluding China). However, uncertainty persists as nations scramble to negotiate trade deals with the U.S. The tariffs are likely to spark a wave of contractual disputes as companies struggle to adapt to the new economic reality. Legal questions will center on whether parties can be excused from performance or obtain relief under various doctrines and contractual provisions: 

Force Majeure: Many international trade contracts contain force majeure clauses. These clauses may excuse non-performance if tariffs qualify as unforeseeable government actions. However, their applicability depends on the precise language used in the contract. For instance, contracts explicitly listing "government orders" or "import/export restrictions" as force majeure events are more likely to provide relief. What relief might be available under a contractual force majeure clause will also depend on whether the clause in question is interpreted to require that the event renders performance impossible rather than merely uneconomic, which in practice is often the case. Where a contract does not contain a force majeure clause, some laws, including Swiss law, may nonetheless provide relief under the concept of force majeure. Whether tariffs fall within the usually narrow interpretation of force majeure under the governing law will need to be determined in each individual case. 

Hardship Clauses: Contracts containing hardship provisions may allow renegotiation if tariffs fundamentally alter the economic balance of the agreement. Such clauses often require good faith negotiations to restore equilibrium and may permit arbitration if no resolution is reached. 

Clausula Rebus Sic Stantibus: This doctrine allows for the modification or termination of contracts when a fundamental change in circumstances renders performance grossly unfair or impractical. It applies only when the original circumstances were objectively essential to the contract and have substantially changed. Under Swiss law, this principle may be invoked in long-term contracts where unforeseen events, which may include steep tariffs, create a substantial economic imbalance. However, courts and arbitral tribunals will carefully assess whether the change was unforeseeable, unavoidable, and beyond normal business risks, as well as whether the contract contains provisions assigning such risk to any of the parties. 

Impossibility to Perform: Swiss law recognizes impossibility under Article 119 of the Swiss Code of Obligations. If performance becomes permanently impossible due to unforeseen circumstances beyond a party's control, such as prohibitive tariffs, the affected party is excused from its obligations without liability for damages. However, temporary impossibility or mere commercial impracticality will usually not suffice; parties must prove that performance is fundamentally unachievable. 

Conclusion 

Current tariff policies are set to increase arbitration and litigation globally as businesses will be seeking remedies for disrupted operations and investments. Each dispute will require careful analysis of contractual provisions and governing law to determine whether relief is available. Companies should proactively review contracts to mitigate risks in this volatile environment. 

In addition to reviewing their contracts, it is essential for businesses to determine which party is responsible under their agreements for paying tariffs. This will ultimately depend on the agreed terms (e.g., INCOTERMS). Furthermore, parties are advised to keep diligent records of all communications and transactions related to tariff impacts, be mindful of any duties to mitigate losses, and ensure that all contractual and legal rights are preserved and properly exercised.