US-China Trade War: Re-negotiation strategies and danger zones under Singapore law

By Sandra Seah, Eef G Van Emmerik


In our previous article published here in March 2019 on the US-China Trade War and its implications for contracts which cannot be performed due to the imposition of tariffs or quotas, we focused on how force majeure clauses may be used to escape potential liability for non-performance.

Since our article was published, tensions between the two largest economies have re-escalated. US hiked tariffs on more than US$200 billion in goods from China in what was said to be the "most dramatic step" yet of President Donald Trump' push to extract trade concessions. China immediately announced that it will retaliate and there appears to be little hope of a reconciliatory breakthrough. Telecoms giant Huawei has also suffered being subject to a sweeping ban on US national security grounds. Asian stocks are in turmoil and the global trading conditions look set to head towards gloomy uncertainties.

However, some, such as this article by Bloomberg, also expresses the view that for some companies, the spectre of the US-China Trade War also provides coverage for downsizing or exiting the China market due to weak fundamentals and rising costs, which have been broader trends underpinning the China market besides the tariff situation.

As such, companies may be taking the trade war and general uncertain economic outlook as a signal to reconsider existing relationships with business partners both in China and elsewhere. Perhaps those relationships have turned out to become a drain on resources, or this might be an opportune moment to revisit an arrangement to better an existing bargain.

In this legal update, we will explore some re-negotiation strategies and highlight the danger zones under Singapore law which companies may consider when revisiting existing arrangements – be it due to the risks associated with a trade war or a general desire to re-position and to limit exposure during this fraught period.

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