On 2 April 2025, the United States (“US”) government announced extensive global tariffs on imports from various countries, including Malaysia. According to the announcement, Malaysian imports into the US will be subject to “reciprocal tariffs” at the rate of 24%.[1]
Although implementation of the tariff has been temporarily suspended for 90 days with effect from 9 April 2025 to facilitate negotiations between the US and the affected nations,[2] the potential imposition of tariffs has generated much uncertainty for Malaysian businesses, especially those engaged in ongoing trades with US counterparts.
Amidst this uncertainty, an important question arises: Can these “reciprocal tariffs” amount to a valid force majeure event under Malaysian law, thereby excusing affected businesses from their contractual obligations?
Application of Force Majeure Clause in Malaysia
A force majeure clause is a contractual provision that excuses a party from performance of the contract, whether in whole or in part, upon the occurrence of a specified event beyond that party’s control.[3]
In determining whether a force majeure clause is applicable, the Malaysian Courts will generally be guided by the following key principles:
While the imposition of the tariffs may present real and immediate practical challenges for Malaysian exporters, they may not amount to force majeure event unless it is expressly stated so in the contract.
Practical Considerations for Malaysian Businesses
Against this backdrop, it is crucial for Malaysian businesses affected by the potential implementation of the tariffs to take the following steps:
1. Review Your Contractual Terms
Firstly, conduct a thorough review of your contractual terms. It is essential to examine whether your contract includes a force majeure clause and, if so, whether its scope explicitly covers events such as “tariffs,” “trade barriers,” “governmental action,” or “changes in law.” A clear reference to such events in the contract will enhance your chances of successfully invoking force majeure.
Additionally, assess whether the contract includes provisions for price adjustments or alternative methods of performance in response to the imposition of tariffs or price fluctuations. The presence of such mechanisms may indicate that the parties contemplated the risk, thereby weakening your reliance on the force majeure argument.
2. Explore Alternative Solutions
Force majeure clauses typically require parties to show they have taken reasonable steps to overcome the event before invoking the clause. This includes exploring options such as alternative delivery routes, supply chain diversification, and re-negotiating commercial terms. Failure to do so may weaken your ability to rely on force majeure, particularly if the other party is able to demonstrate that reasonable alternatives were available to maintain performance.[6]
3. Beyond Parties’ Control
To successfully invoke a force majeure clause, you must show that the disruptive event was truly beyond your control. Malaysian Courts will closely examine whether the event was foreseeable when the contract was signed[7]. If the risk of new tariffs was already known or reasonably anticipated, it will be difficult to argue that the event qualifies as unforeseeable and beyond control. Furthermore, as noted earlier, if your contract already provides for tariff adjustments or allocates the risk of tariff changes, it will weaken any reliance on a force majeure provision.
4. Monitor Ongoing Developments
You should also pay close attention to political and regulatory developments relating to the reciprocal tariffs. At present, the Malaysian government is engaged in negotiations with the US government concerning the newly imposed tariffs[8]. The outcome of these negotiations will materially affect whether you are entitled to invoke force majeure to excuse yourself from performing your contractual obligations.
If you have any queries, please contact Chia Oh Sheng (cos@lh-ag.com), Lim Jun Xian (ljx@lh-ag.com) or Athena Chan Yat Mun (ymc@lh-ag.com).
REFERENCES
[1] See https://edition.cnn.com/2025/04/02/economy/key-takeaways-from-trumps-liberation-day-tariffs/index.html
[2] See https://www.malaymail.com/news/malaysia/2025/04/30/us-trade-talks-positive-as-miti-begins-tariff-negotiations-with-cabinet-green-light-fahmi-says/175066; https://theedgemalaysia.com/node/754491
[3] Chitty on Contracts, Volume 1, General Principles London Sweet & Maxwell 1999, p 722; Magenta Resources (S) Pte Ltd v China Resources (S) Pte Ltd [1996] 3 SLR 62, HC (SG); RHB Capital Bhd v Carta Bintang [2012] 10 MLJ 469, HC
[4] Intan Payong Sdn Bhd v Goh Saw Chan Sdn Bhg [2004] 1 LNS 537, HC; Malaysia Land Properties Sdn. Bhd. v. Tan Peng Foo [2013] 3 CLJ 663, CA
[5] Gogung Fusion Restaurant (KLCC) Sdn Bhd & Ors v Suria KLCC Sdn Bhd [2021] MLJU 2345, HC; Muhammad Radhieddeen Abdul Khalid v Saujana Triangle Sdn Bhd [2017] 1 LNS 841, HC
[6] Sunway Quarry Industries Sdn Bhd v Pearl Island Vista Sdn Bhd & Anor [2019] MLJU 400, HC
[7] Glory Pearl Sdn Bhd v Crest Worldwide Resources Sdn Bhd and another suit [2024] MLJU 3587, HC
[8] See https://www.malaymail.com/news/malaysia/2025/04/30/us-trade-talks-positive-as-miti-begins-tariff-negotiations-with-cabinet-green-light-fahmi-says/175066; https://theedgemalaysia.com/node/754491
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