The use of international arbitration for tariff-related disputes is becoming increasingly relevant as the Trump administration’s tariffs disrupt global supply chains, trigger commercial instability, and generate a wave of cross-border conflicts.
Trump’s Tariff Policy and the Disruption of International Supply Chains
Tariffs are defined as customs duties on merchandise imports.[1] They are often used to shield domestic industries from foreign competition.[2]
Historically, the United States has long relied on tariff measures. However, under Trump’s second presidency, their application has expanded significantly. U.S. tariff levels have now reached heights unseen since the 1930s.
This policy shift has already triggered significant litigation within the United States. For instance, on 28 May 2025, the U.S. Court of International Trade ruled that President Trump’s sweeping “Liberation Day” tariffs, introduced in April, were “unlawful” and exceeded the President’s statutory authority.[3] Subsequently, all executive orders imposing tariffs on the basis of the International Emergency Economic Powers Act were declared to be invalid as contrary to law.[4] The next day, U.S. District Court for the District of Columbia issued a preliminary injunction, temporarily suspending the enforcement of specific tariffs for two small businesses that import educational products primarily from Asia.[5]
Yet, it is clear that the tariff-related disputes arising from Trump’s trade measures will extend beyond the bounds of U.S. domestic litigation and spill into the international legal arena. According to a recent OECD report, protectionist measures of this scale are likely to result in “significant disruptions” to global supply chains.[6]
In light of this, commercial actors may increasingly consider international arbitration for tariff-related disputes as it is a neutral and effective means of resolving international disputes triggered by sudden cost surges, delayed deliveries, or broken supply contracts.
In a previous note, we examined which foreign investors might sue the United States under international investment treaties in response to Trump-era trade measures. Here, we focus instead on international commercial arbitration and how it may serve to resolve private disputes arising from tariffs and trade instability.
International Arbitration as a Tool for Resolving Trade-Related Disputes
Complex international contracts underpin global supply chains. When a government unexpectedly impose steep tariffs, these contracts may suddenly become unviable, leading to performance failures, cost renegotiations, or complete breakdowns. A supplier may no longer be able to deliver goods at the agreed price. A buyer may refuse acceptance. A joint venture may collapse under regulatory pressure.
In such scenarios, if these contracts include arbitration clauses, the parties may refer their disputes to an international arbitral tribunal. International arbitration offers key advantages for tariff-related disputes, including neutrality, the enforceability of awards under the New York Convention, confidentiality, and flexible procedures tailored to international trade.
Several types of contractual claims could be considered in arbitral settings.[7] The most common legal arguments include:
- Force Majeure: Many contracts contain force majeure clauses excusing non-performance due to extraordinary events or circumstances. In the context of newly imposed tariffs, a party may attempt to invoke such a clause where the economic burden or regulatory change renders contractual obligations unfeasible. Whether tariffs fall within this scope depends on the language of the contract. If it includes terms such as “regulatory changes” or “import/export restrictions,” tariffs may be considered a qualifying event. In contrast, a narrow clause covering only natural disasters or war may not suffice.[8] Moreover, it is clear from case law that “mere difficulty in performance”, or a modest increase in the cost of fulfilling contractual obligations, do not justify non-performance.[9] A substantially greater impediment must be shown.[10]
- Hardship or Economic Equilibrium: Tariffs can trigger hardship clauses, allowing parties to seek renegotiation of contract terms. Such rights may be invoked when “an event […] fundamentally alters the economic balance of the contract and renders performance excessively onerous.”[11] If renegotiation fails, the clause may provide for resolution through international arbitration.
- Price Review or Adjustment Clauses: In sectors such as energy or infrastructure, long-term contracts often include price adjustment mechanisms tied to objective economic indicators. A sharp increase in tariffs may trigger such clauses, allowing prices to be revised.[12]
- Material Adverse Change Clauses: In M&A transactions, contracts often permit a party to walk away or renegotiate if a Material Adverse Change occurs between the signing and closing dates. Whether tariffs qualify depends on the language of the clause and the impact on the transaction.[13]
- General Legal Doctrines: Arbitral tribunals may apply doctrines such as frustration, impossibility, or the doctrine of rebus sic stantibus under the applicable law. Generally, these doctrines imply high thresholds to meet but may apply where tariffs render contractual obligations fundamentally altered or impossible.[14]
Conclusion
Ultimately, in a world where governments can unilaterally alter the global supply chain with tariffs, international arbitration remains a crucial tool for businesses seeking to enforce contracts, recover losses, or resolve disputes fairly. As trade tensions continue to shape the global economy, international arbitration will play an increasingly important role in protecting international business interests.
[1] World Trade Organization, Tariffs, https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm (last accessed 6 June 2025)
[2] World Trade Organization, Tariffs, https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm (last accessed 6 June 2025)
[3] V.O.S. Selections, Inc. v. United States, Slip Op. 25-66, Ct. Int’l Trade, May 28, 2025.
[4] V.O.S. Selections, Inc. v. United States, Slip Op. 25-66, Ct. Int’l Trade, May 28, 2025.
[5] Learning Resources, Inc. v. Trump, No. 1:25-cv-01248, 2025 WL 4567890 (D.D.C. May 29, 2025).
[6] OECD, Tackling Uncertainty, Reviving Growth, 2025(1) OECD Economic Outlook, p. 11.
[7] M. Mangan and G. Lee, Trump’s tariffs – the legal fallout, 10 April 2025, https://globalarbitrationreview.com/article/trumps-tariffs-the-legal-fallout (last accessed 6 June 2025).
[8] M. Mangan and G. Lee, Trump’s tariffs – the legal fallout, 10 April 2025, https://globalarbitrationreview.com/article/trumps-tariffs-the-legal-fallout (last accessed 6 June 2025).
[9] Force Majeure and Tariffs: International Contracts Under Stress, 73(3) No. Dispute Resolution Journal, p. 63.
[10] Force Majeure and Tariffs: International Contracts Under Stress, 73(3) No. Dispute Resolution Journal, p. 63.
[11] M. Mangan and G. Lee, Trump’s tariffs – the legal fallout, 10 April 2025, https://globalarbitrationreview.com/article/trumps-tariffs-the-legal-fallout (last accessed 6 June 2025).
[12] M. Mangan and G. Lee, Trump’s tariffs – the legal fallout, 10 April 2025, https://globalarbitrationreview.com/article/trumps-tariffs-the-legal-fallout (last accessed 6 June 2025).
[13] M. Mangan and G. Lee, Trump’s tariffs – the legal fallout, 10 April 2025, https://globalarbitrationreview.com/article/trumps-tariffs-the-legal-fallout (last accessed 6 June 2025).
[14] M. Mangan and G. Lee, Trump’s tariffs – the legal fallout, 10 April 2025, https://globalarbitrationreview.com/article/trumps-tariffs-the-legal-fallout (last accessed 6 June 2025).