In a move that the Wall Street Journal described as having the effect of “bringing down the curtain on U.S. support for the turbocharged globalization that powered the world economy for decades,” on April 2, 2025, President Trump announced the imposition of massive new tariff duties on what the Journal described as “trillions of dollars in imports.” The U.S.’s imposition of these tariffs has huge implications for international trade; the U.S. economy; the economies of other countries around the world; and the fortunes and prospects of individual companies seeking to operate in an increasingly fraught global economy. These developments also have significant implications for the potential liabilities of companies and their directors and officers, as discussed below.

The White House’s April 2, 2025, Executive Order with respect to the imposition of the tariffs can be found here. An April 2, 2025, White House Fact Sheet that accompanied the tariffs can be found here.

The April 2, 2025, Imposition of New Tariffs

President Trump’s April 2, 2025, tariff-related actions were of course not the first tariff moves of his second administration. His earlier tariff moves targeted specific countries and goods. This latest round of tariffs sweeps much more broadly, applies across the board, imposing tariffs on allies and foes alike, and imposes even higher tariffs on countries the White House considers bad actors.

The fundamental basis for President’s Trump’s imposition of the tariffs is his declaration that foreign trade and economic practices has created a national emergency, triggering the Presidential powers under the International Emergency Economic Powers Act of 1977 (IEEPA).

In reliance on his authority under the IEEPA, President Trump has imposed a 10% tariff on all countries that will take effect on Saturday, April 5, 2025. Some countries –including Australia, the United Kingdom, Turkey, and Saudi Arabia, for example — will face “only” this base 10% rate.

In addition to countries facing these baseline tariffs, other countries, those with whom the U.S. has the highest trade deficits, will face what the White House calls “reciprocal tariffs,” in addition to the 10% baseline tariff. These additional, supposedly reciprocal tariffs will go into effect on Wednesday, April 9, 2025.

The countries subject to these additional tariffs include some of the U.S.’s most important trading partners, including the European Union (subject to total additional tariffs of 20%); Vietnam (46%); South Korea (25%) Japan (24%); South Africa (30%); and Taiwan (32%); and India (26%). Goods from China are to be subject to tariffs of 54% (inclusive of earlier tariffs).

Under the provisions of the White House’s Executive Order, the tariffs are to remain in effect until such time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated. Under the Order, the President also has the authority to modify the tariffs if a country retaliates or takes significant steps to remedy non-reciprocal trade arrangements.

Certain goods are exempted from the reciprocal tariffs including steel, aluminum and auto parts already subject to tariffs; copper, pharmaceuticals, semiconductors, and lumber articles; and energy and other minerals not readily available in the U.S. President Trump’s “emergency” tariffs also exclude items excluded from IEEPA authority under 50 U.S.C. Section 1702(b).

What’s Next?

The risk for everyone everywhere is that President Trump’s imposition of these new tariffs proves to be only the first step in a protracted, multi-step process. As has been the case with the President’s past tariff impositions, these latest actions could (and probably will) trigger retaliatory tariffs and other actions by other countries. The global economy seems poised for an trade war the likes of which the world arguably has not seen since the U.S’s imposition of the Smoot-Hawley Tariff Act of 1930, which is generally viewed as having triggered a significant reduction in international trade and exacerbated the global economic downturn then in effect.

For companies participating in the global economy (which is to say, just about every firm except the very smallest enterprises), these developments can only have a significant impact on their operations and financial results.

In almost every case, the short-term impact will be disruptive. The long-term impact at this point can only be conjectured, as much depends on the responsive actions of countries subject to the tariffs, as well as the extent to which President Trump uses his authority under the Executive Order to alter the tariffs in response to other countries’ reactions. (The possibility that that this entire exercise is a nothing more than a form of political theater designed to motivate various countries to negotiate new bilateral trade deals cannot be overlooked. By the same token, the possibility that the Trump Administration’s tariff policies could shove the U.S economy into recession cannot be overlooked, either.)

The Potential Implications for D&O Liability

As Dave Lynn point out in his April 3, 2025 post on The CorporateCounsel.net Blog  about the new tariffs (here), all of this arises at a time when U.S. reporting companies are middle of finalizing their annual reports on Form 10-K for the year ended December 31, 2024 and as the companies are beginning to prepare their earnings reports and quarterly reports on Form 10-Q for the first quarter.

These companies, Lynn notes, will have to consider a number of factors in updating their disclosures with respect to the tariffs. Among other things, the companies will have to disclose the extent to which the new tariffs will be imposed on the companies goods or on the goods the company uses in its production of its goods; how the tariffs will impact that price charged for its goods and the company’s own costs for the materials it uses in producing its goods; the impact the tariffs will have on the availability of its production inputs; whether the tariffs will impact the demand for its goods; what the impact will be on the company from inflation that may result from the tariffs; and mitigation strategies the company may deploy to offset these various effects.

As Lynn further notes, as earnings season plays out over the next few weeks, “we are likely to see the impact on companies of the initial round of tariffs, which could offer insights on how these latest tariff actions could impact a broader range of companies in the second quarter and beyond.”

While it will certainly be interesting to hear what companies have to say in the next few weeks, and it will of course be interesting (to say the least) to watch as events unfold in coming months in response to the U.S.’s imposition of trade duties, the longer run impact is far more uncertain. The tariffs may take effect as scheduled in the next few days, but the impact on prices (and therefore on inflation) may take longer to unfold. The impact on global investment may only be measurable in terms of years, as companies and countries await developments or modify their investment strategies to account for the new global trade order that President Trump seeks to create.

As Lynn correctly notes, what companies themselves say about the tariffs could prove to be critically important. Among the things I will be watching are company statements about how the tariffs will affect their operations and financial results. I will be particularly watchful for companies making statements asserting that they can avoid significant impact from the tariffs, for example by sourcing component parts or materials from alternative non-tariffed countries, or that they can pass increased costs along to their customers. Broadly reassuring statements could later look overly optimistic when viewed with the benefit of hindsight.

Perhaps more to the point, companies now will have to make a series of unaccustomed decisions, about where, how, and when to invest in an uncertain and undoubtedly changing economic environment. Strategies that may have worked in the prior relatively free international trade environment may no longer be viable in a world of trade barriers and retaliatory duties.

How all of this plays out remains to be seen. There are also of course many risks. Among the risks is that companies’ strategies and corporate disclosures may later prove to have been ill-founded or inappropriately optimistic and subject to hindsight challenges by aggressive plaintiffs’ lawyers. There is no way to know for sure now whether there will be D&O claims connected directly to the new tariff world we all now inhabit, but we are entering an era of geopolitical risk and uncertainty, which means a complex and unpredictable environment for companies to conduct their business. This could lead to liability risk and exposure and could lead to D&O claims.

Afterword

It is beyond this blog’s remit to discuss the policy merits of President Trump’s latest tariff moves. However, for those who are interested in these questions, I recommend the Wall Street Journal’s April 2, 2025, editorial entitled “Trump’s New Protectionist Age” (here). The Journal editorial is subtitled “Blowing up the world trading system has consequences that the President isn’t advertising.”  The Journal editorial first notes that the overall economic impact of Mr. Trump’s “tariff barrage” is unknowable—not least because we don’t know how countries will react. The editorial then goes on to note that certain consequences are already emerging from “this new protectionist age.”

Among other things, the editorial notes that “There will certainly be higher costs for American consumers and businesses.” Longer term, the tariffs are likely to mean “the gradual erosion of U.S. competitiveness” and “the end of U.S. economic leadership.” At the same time, the tariffs create “a major opportunity for China.” The editorial ends by observing that “remaking the world economy has large consequences, and they may not all add up to what Mr. Trump advertises as a new ‘golden age.’”

It is probably worth noting that just six months ago, in October 2024, The Economist magazine ran a cover article entitled “The U.S. Economy: The Envy of the World.”

In case you are interested to know, the cover for the current issue of The Economist, just six months after the same magazine said America’s economy is the envy of the world, is entitled “Ruination Day” (an obvious allusion to President’s Trump’s reference to his April 2 announcement of the tariffs as “Liberation Day”), with the lead article in the issue entitled “President Trump’s Mindless Tariffs Will Cause Economic Havoc.”  The first paragraph of the lead article is a doozy:

If you failed to spot America being “looted, pillaged, raped and plundered by nations near and far” or it being cruelly denied a “turn to prosper”, then congratulations: you have a firmer grip on reality than the president of the United States. It’s hard to know which is more unsettling: that the leader of the free world could spout complete drivel about its most successful and admired economy. Or the fact that on April 2nd, spurred on by his delusions, Donald Trump announced the biggest break in America’s trade policy in over a century—and committed the most profound, harmful and unnecessary economic error in the modern era.

There is much more in the article in the same vein, only worse – much worse.