Retaliatory tariffs (trade war)
Tariffs raised by one state in response to another. As a general trade policy measure, they generally fall outside political risk policies.
March 2018: the United States imposed tariffs of 25% on steel and 10% on aluminum under Section 232, on national security grounds. The European Union answered in June 2018 with duties on bourbon, motorcycles and other U.S. goods. On April 2, 2025, the White House announced so-called reciprocal tariffs on most of its trading partners, with a 10% floor. Retaliatory tariffs are that tit-for-tat mechanism: one state raises its duties in response to a measure it views as hostile, and the other responds in turn. For an exporter the effect is blunt, a margin that disappears overnight across an entire market. For insurance, it almost always falls through the gaps. Political risk policies cover acts aimed at the insured's investment or contract: expropriation, breach of contract, embargo, revocation of an export license. They generally exclude general measures of trade, tariff or tax policy that apply to everyone without discrimination. A tariff hits a whole sector; it does not target the insured. The exposure shows up elsewhere, through trade credit insurance: the foreign buyer whose business model depended on an input now taxed at 25% defaults, and the default is what is covered, never the tariff itself. Credit insurers then cut limits on exposed sectors, which tightens trade credit right when companies need it. One qualification: some wordings cover embargo or import bans, and a prohibitive tariff can come close, an argument settled clause by clause. Not to be confused with sanctions, which prohibit a transaction, where a tariff makes it more expensive.
Textbook case: a European maker of aluminum extrusions sells to a U.S. distributor, with a trade credit policy and a political risk policy. In 2018 the Section 232 tariffs raise the cost of its product by 10% and the distributor cuts orders: neither policy responds, since lost market share is not a loss under either. Eighteen months later the distributor files for bankruptcy with $2 million in unpaid invoices: the credit insurer pays, up to the approved limit.
- Presidential Proclamations 9704 and 9705 of 8 March 2018 (Section 232, aluminum and steel)
retaliatory tariffs, trade war, reciprocal tariffs, tariff retaliation, section 232 tariffs
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