In today's volatile global trade environment, businesses are facing a tough question: Can a tariff hike justify increasing the price in a contract?
If you're in a B2B agreement—whether you're selling machinery, importing raw materials, or distributing consumer goods—you might be dealing with rising costs due to the latest tariff wars. And naturally, you're wondering, "Can I pass this cost on to the other party? Or am I stuck eating the loss?"
As a Florida-based business litigation firm, we see these issues come up more and more. The good news? You may have legal options. But first, let's talk about what those are, and what they aren't.
What Is a Tariff Hike, and Why Should You Care?
Tariffs are taxes on imported goods. When the government raises tariffs, it increases the cost of those goods. For example, if you import steel and the tariff goes up 25%, your costs just shot up by that amount—overnight.
And when you have a fixed-price contract with your buyer or vendor? You can't just hike your price unless the contract gives you that right.
That's where the legal gray area begins.
When Can You Raise Prices in a Contract?
There are three key places to look in your contract to know if a tariff hike gives you any wiggle room:
1. Force Majeure Clauses: This clause covers "acts of God" and unforeseen events. Some contracts include government actions, like tariff hikes, as force majeure events. But even then, courts interpret these narrowly. If your clause doesn't clearly list "tariff" or "government trade restrictions," it may not apply.
Example: If your contract says you're excused from performance due to "government actions impacting imports," you might be able to renegotiate pricing—or even exit the contract entirely.
2. Price Adjustment Clauses: These clauses allow one or both parties to modify pricing based on market changes, material cost increases, or government regulations. If your contract has one, great—you may be in the clear.
No price adjustment clause? You'll have a harder time justifying a unilateral price increase.
3. Impracticability or Commercial Frustration: Under the Uniform Commercial Code (UCC) and common law, you may be excused from a contract if performance becomes "impracticable" or "frustrated." But this standard is high.
You must prove:
- The tariff hike was unforeseeable at the time of signing.
- It significantly altered the economics of the deal.
- You didn't assume the risk in the contract.
Courts are cautious here—they don't want businesses backing out of deals just because margins shrank.
Can You Renegotiate the Contract?
Absolutely—and this is often your best bet. If the cost increase caused by tariffs is substantial, you should approach the other party and try to renegotiate in good faith.
Here's how:
- Document everything. Show the impact of the tariff hike on your
business.
Propose fair adjustments. Don't just pass the cost 100% to the other party—try to share the burden. - Get any changes in writing. Always amend the contract formally, not just by email or handshake.
What If the Other Party Refuses?
If your request to increase the price is denied, you have a few legal options—but they come with risk.
Option 1: Perform Under Protest: You could perform the contract as agreed and later seek damages in court. But this assumes you have a valid legal claim (force majeure, impracticability, etc.). Not recommended without talking to a lawyer first.
Option 2: Breach the Contract: Walking away might feel tempting—but it can backfire. You could be sued for breach and held liable for damages. If you're considering this, consult with an attorney before you make a move.
Proactive Tips for Businesses Going Forward
Tariff hikes are unpredictable—but contract language is something you can control. Here's what we recommend:
- Include clear price adjustment clauses that account for tariff changes, material costs, or government policy shifts.
- Spell out force majeure events in detail, including tariffs and trade restrictions.
- Use shorter contract terms when global markets are volatile—this gives you more flexibility.
- Work with legal counsel to review contracts before signing, especially in international transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
