Analysis of Impacts of US Tariffs on Businesses in Italy and Possible Remedies

On 2 April 2025, following the 25% tariffs imposed on 10 February 2025 on steel and aluminium imports, the US set out new tariffs for imported goods. In particular, by way of executive order, a 10% tariff was established for all imported goods, and additional tariffs were set out based on countries and products, including a 25% tariff applicable to the automotive sector and a 20% tariff applicable to all goods imported from the EU, and thus including Italy.

On 9 April 2025, the President of the US announced a 90-day pause for tariffs applicable to "all countries that had not retaliated against US tariffs", including Italy and more broadly the EU, and a lowered reciprocal tariff of 10% during this period, both effective immediately until July 2025.

The imposition of the US tariffs has broad-reaching financial, operational, and legal implications and it introduces new risks and uncertainties for businesses in Italy as well as the EU.

Business operators may seek to protect themselves from such risks in their day-to-day business and also in the context of M&A transactions, and it is therefore essential to be aware of the implications and legal remedies they could resort to.

Trade and Market Implications

The US’ tariffs, particularly on goods like steel, iron, luxury goods, wines, and agricultural products, will likely impact Italian businesses by means of trade and supply chain disruption: Italy is a significant exporter to the US (Italy exports to the US was US $70.16 billion during 2024, according to the United Nations COMTRADE database on international trade, and the imposition of such tariffs will lead to an increase in the costs of Italian products for US consumers. As a consequence, industries such as automotive, food, luxury and fashion, where Italy is a key player, may face a drop in demand due to higher prices resulting from tariffs. This could result in reduced profit margins, lower sales volumes, and ultimately, decreased competitiveness in the American market. Due to the resulting volatile and rapidly changing trade landscape, long-term impacts remain uncertain. Early market reactions, however, underscore growing investor concern about the broader economic fallout, including inflationary pressures, supply shortages, and reduced consumer and business confidence.

At the same time, it should be noted that in response to US tariffs, the EU imposed retaliatory tariffs on American goods, targeting US products like agricultural goods, aircraft and machinery (although the countermeasures were suspended to create room for bilateral negotiations). This may create further uncertainty for Italian businesses that rely on US suppliers or have operations in the US Italian businesses that rely on raw materials or components from the US may face increased costs due to reciprocal tariffs, leading to disruptions in their supply chains.

On the other hand, certain products have not been affected (so far) by the US tariffs, including for instance pharmaceutical goods, gold, silver and copper, timber, and semiconductors.

Contractual Law Implications

The imposition of tariffs may lead to uncertainty in the performance of existing agreements and will require caution in the drafting of new ones, due to the legal consequences which may arise under contractual law, particularly in relation to force majeure and hardship provisions, renegotiation rights and price adjustment clauses.

Preliminarily, applicable law and jurisdiction clauses should be analysed, to assess whether the contract is subject to Italian law and thus the remedies provided by the Italian Civil Code ("Civil Code") may apply.

With respect to the Civil Code, the imposition of tariffs may fall under force majeure or hardship provisions to the extent tariffs make performance under a contract impossible or substantially more difficult and expensive. In such a case, any of the parties may attempt to invoke these clauses to either terminate or delay the execution of contracts or renegotiate their terms. In particular, the following provisions may apply, it being understood that an assessment of their applicability must be carefully evaluated on a case-by-case basis; therefore, the following are provisions of the Civil Code that could be relevant in the context of tariffs' imposition, but must be calibrated to specific cases:

• Force Majeure (Impossibilità sopravvenuta) (Art. 1218, 1256, 1258, 1463, 1464 Civil Code) - pursuant to the Civil Code, a party may be excused from performance due to external, unforeseen, and insurmountable events. Italian businesses may then invoke force majeure clauses in contracts to excuse non-performance due to the imposition of tariffs being an unforeseeable governmental measure impacting contractual performance.
  
  However, the applicability of such clauses will depend on the specific wording and the governing law of the contract.
  
  The impossibility to perform may be "permanent" or "temporary", and "total" (i.e. concerning the entire contract) or "partial" (i.e. concerning only part of it). A "permanent" impossibility would entail, respectively, (i) the termination ex lege of either the entire contract, or (ii) a corresponding reduction of the creditor's obligation in light of the clause(s) which became impossible, or the termination of the contract if the creditor is not interested in its partial execution. However, it is unlikely the US tariffs will be considered as causing a "permanent" impossibility, it being more likely to entail at most a "temporary" impossibility to perform, suspending – and not interrupting – the obligations.
  
  In particular, the obliged party may be temporarily exempt from performing, ex art. 1256 paragraph 2 of the Civil Code, in case of delay due to temporary impossibility to fulfil their obligations, but they will have fulfil them once the situation has returned to normal (unless, in exceptional cases, the impossibility persists to such an extent that the interest of the counterparty in the execution of the contract, in relation to the title and/or nature of the obligation, ceases to exist).

• Hardship (Eccessiva onerosità sopravvenuta) (Art. 1467, 1468 Civil Code) - pursuant to the Civil Code, a party may request the termination or renegotiation of a contract if performance becomes excessively onerous due to extraordinary and unforeseeable events, such as the imposition of tariffs. In particular, in the event the imposition of tariffs led to a significant imbalance in the parties' obligations, it may be invoked a "supervening excessive hardship" ex art. 1467 Civil Code, which provides for the termination of the contract, or ex art. 1468 Civil Code (if it is a contract with obligations only upon one of the parties), which provides for the restoration of the performance or contract to equity, both through a judicial decision.
  
  However, it should be noted that the Supreme Court (Corte di Cassazione) stated a principle (Massima n. 56/2020) supporting an obligation upon the parties to renegotiate the contract instead of resolving it.
  
  Furthermore, such remedy may be difficult to apply to contracts concerning the sale of shares or quotas, given that: (i) contingencies ex art. 1467 and 1468 Civil Code should concern the market value or profitability of the company, rather than the shares or quotas being sold; and (ii) an inherent risk is normally existing in so-called "sale and purchase agreements" and regulated by means of price adjustment and indemnity clauses, among others. It will thus be important to focus on the criteria by which the price is determined (e.g. minimum price, fair market value on a given date), given that the agreement itself could already provide for mechanisms to address the fluctuations caused by tariffs.

• Interpretation and integration of the contract (Art. 1175, 1366, 1374, 1375 Civil Code) - as a result of the above, pursuant to the Civil Code, contracts shall be interpreted (and potentially integrated if necessary for their execution) by the general principles of fairness and good faith, which could also be invoked when aiming to renegotiate the terms of a contract which unforeseeably became excessively burdensome.

Other contractual implications that may occur following the imposition of tariffs, not strictly related to the Civil Code, are the following: we recommend taking them into account in ongoing contracts negotiations, based on the respective interest, in order to be better protected against the risks that could arise from the imposition of tariffs.

• Price adjustment clauses: in contracts where the prices of goods or services are subject to fluctuation, businesses may include price adjustment clauses, which allow the parties to adjust the price of a contract based on changes in the economic or legal environment, such as currency fluctuations or significant changes in costs (e.g. due to tariffs). For existing contracts containing such clauses, the imposition of the US tariffs may trigger their application.
• Material adverse change ("MAC") clauses: similarly, the tariffs could lead to a material adverse change in the business environment, triggering termination rights or exit strategies under existing M&A agreements containing MAC clauses. However, the applicability of such clauses will ultimately depend on the specific wording of the clause itself.
• Renegotiation: finally, parties may seek to renegotiate in good faith the terms of their contracts to mitigate the impact of tariffs, such as extending delivery times or adjusting quantities. This may occur if the agreement includes specific clauses which allow renegotiation in certain circumstances, or (more frequently) in order to rebalance positions in the context of a settlement negotiation following an onset litigation.

Legal remedies for M&A transactions

Further to the framework provided by the Civil Code to manage the risks which the US tariffs entail, several contractual and non-contractual remedies can be applied to minimise the potential impact with particular reference to M&A transactions:

• Due Diligence: one of the key areas where tariffs' risks must be addressed is the due diligence process.
  
  The acquiring party must evaluate how tariffs may affect the target company’s operations and financial standing, including the impact on supply chains, costs, and market access, particularly if the target relies heavily on exports to the US or imports from the US.
  
  Moreover, the due diligence activity must ensure compliance with both US and EU trade regulations to avoid potential legal issues.

• Representations and Warranties ("R&W"): contracts should include specific representations and warranties, related to compliance with trade laws and the absence of significant tariff exposure, which can be crucial for evaluating the target company's exposure to risks. R&Ws may reference the status of existing international contracts, the effect of tariffs, or the legal feasibility of continuing exports to the US without significant additional costs.
• Price adjustments clauses: as seen above, price adjustment clauses (e.g. earn-out, deferred payments, earn-in) may be included in contracts in order to account for unforeseen changes (such as the imposition of tariffs), making the transaction more flexible and adaptable to external shocks. If tariffs significantly alter the cost structures or margins of the target company, this clause could trigger an adjustment of the purchase price.
• MAC clauses: as seen above, MAC clauses may be included as condition precedents, to make completion of the sale contingent on the absence of negative impacts potentially caused by tariffs to the target business between the signing of the agreement and the closing date. If the tariff impositions significantly alter the value of the target or cause an unacceptable financial burden upon the buyer, it may allow renegotiation or (more rarely) termination of the agreement ex art. 1373 Civil Code.
  
  It is recommended to ensure that MAC clauses are specific enough to cover the imposition of tariffs and other trade-related disruptions.

• Renegotiation clauses: renegotiation clauses are very rare in M&A transactions, due to the risks of uncertainty and indeterminateness they entail, however they might be considered as well as potential remedy, so that if tariffs significantly alter the cost structures or margins of the target company, this clause could trigger the renegotiation of the purchase price or lead to contract termination.
• Exit strategies: to further mitigate the risk posed by tariffs, it will be essential to negotiate the duration and modalities of the buyers' exit from an investment (e.g. deferring the obligation to launch an exit process while the market conditions are adverse).
• Indemnities: M&A transactions may involve mechanisms such indemnity clauses (sometimes secured by escrow arrangements) to protect the buyer from any post-transaction liabilities arising due to tariff impacts. For instance, if tariffs lead to financial losses or operational disruptions after the acquisition, the seller may be required to indemnify the buyer for these losses. Indemnity clauses, for instance, may provide that the seller compensates the buyer for damages incurred due to the imposition of tariffs that were not disclosed during the due diligence process.

Business Remedies for M&A Transactions

Finally, from a business viewpoint, the following actions may be considered to minimise the impacts of the application of the US tariffs, prior or post-transaction:

• Market diversification and optimisation: diversification of supply chains and markets may be encouraged to reduce dependency on the US market and mitigate the impact of tariffs.
• Supply chain audits and reconfiguration: conducting audits to assess tariff impact and reconfiguring supply chains post-transaction may minimize tariff exposure, for instance by sourcing from non-US suppliers or suppliers with lower tariffs.
• Cost management and pricing models: implementing cost management strategies and pricing strategies (such as dynamic pricing models or discounts to support demand) will be relevant in order to offset increased costs due to tariffs. Investing in companies on top of the supply chain might also reduce the implication of the increased costs due to tariffs.
• Identifying exemptions and leveraging US content: Monitoring of US exemption lists and exploring whether there is any possibility to incorporate US goods or goods with US content, as there is an exemption in place for imported goods containing at least 20% US-origin content by value.

If you would like further information on how you or your business may be impacted, please contact a member of our team.

See our Global trade tariffs and business resilience resources page for more Ashurst publications on this topic.