As I have noted in previous post on this site (most recently here), the Trump Administration’s tariff and trade policies not only pose potential operating and financial challenges to many businesses, but they may also present companies with corporate liability exposures as well. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, considers the liability risks that companies may face under the current tariff regime. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
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Corporate executives have been in a perpetual state of publicly addressing and revising their earnings outlooks leading up to and after the “Liberation Day” tariffs announcement by President Donald Trump on April 2, 2025. The whiplash caused by the administration’s trade deal announcements and recent converging court decisions that may impact the enforceability of the tariffs creates added uncertainty about the prospective economic impact and, potentially, D&O exposure to executives and companies trying to be proactive.
In particular, the statements or actions taken by corporate executives surrounding downstream effects of tariffs coupled with decreased consumer confidence may lead to stock drops and, potentially, securities class actions (SCA) filings.
The following discusses the current procedural posture of a couple of the lawsuits filed against the administration seeking to block tariff enforcement, executives’ reported thoughts about tariff impact and strategies, and whether the dismissal of the first COVID-19 SCA filed against Norwegian Cruise Line Holdings may provide a road map for any future tariff-related SCAs.
First, a recap of what happened in the last week of May in two cases brought against the United States challenging President Trump’s ability to put in place and enforce a barrage of tariffs.
On Wednesday, May 28, 2025, the U.S. Court of International Trade (CIT) held that President Trump had overstepped his authority by imposing these sweeping tariffs under the International Emergency Economic Powers Act (IEEPA). Small businesses and some states had filed a petition with the CIT seeking to permanently enjoin the administration’s tariffs because they violated the Constitution. The three-judge CIT panel agreed and rejected the administration’s contention that the IEEPA gave the president authority to impose tariffs on goods from almost every country in the world.
On Thursday, May 29, in a separate lawsuit brought by toymakers against the administration, a D.C. federal court issued a preliminary injunction in the plaintiffs’ favor, blocking tariffs Trump had authorized using the IEEPA. By way of brief background, the IEEPA was enacted on October 28, 1977, and “authorizes the president to regulate international commerce after declaring a national emergency in response to any unusual and extraordinary threat to the United States that has its source in whole or substantial part outside the United States.” In the Constitution, oversight of international trade belongs to Congress.
The “Liberation Day” tariffs were authorized by President Trump under the IEEPA purportedly in response to various “national emergencies,” including threats to national security. In the cases challenging tariff enforceability, the administration has argued that the IEEPA allows for the president to set unilateral tariff increases without formal investigations or administrative proceedings. The White House said in a fact sheet that the president’s executive order gives him discretion to increase tariff percentages in cases of retaliation. The constitutional question surrounding the ability for the President to create and enforce his “Liberation Day tariffs has provided standing for the plaintiff states and businesses’ petitions and lawsuits.
However, it is also important to note that on Thursday, May 29, the Federal Circuit granted the Trump administration’s motion for “an immediate administrative stay” on the CIT’s permanent injunction ruling while the court considers motions filed by the parties. The White House had sought an immediate pause on the CIT’s May 28 ruling, indicating it would file a writ with the U.S. Supreme Court on Friday if the appellate court did not reinstate the tariffs while considering the parties’ motions. The Federal Circuit gave the plaintiff businesses and states until June 5 to respond to the government’s request for a longer stay and ordered the government to file a reply by June 9. The CIT petition to permanently prevent tariff enforcement will likely end up in front of the Supreme Court to decide.
With the President’s “Liberation Day” tariffs authorized using the IEEPA pending in front of various judiciaries, even more questions surrounding executive leadership’s response to tariff volatility may arise. Especially considering the President’s advisors publicly stating that with respect to Tariffs, “There’s no Plan B. It’s Plan A.” Public messaging on earnings calls or in response to investor inquiries, may become the basis for alleged fraud or misrepresentation in violation of the Securities Act.
Notably, many company executives are already talking about or acting on tariffs, whether they are enforceable or not. Interestingly, a PwC Pulse Survey, conducted May 1-8, titled “100 days in: What’s next for business,” which included 678 executives across various roles, ranked trade and tariffs among the top three factors influencing strategic decisions. The No. 1 factor prompting strategic change over the next one to two years is US economic policy, which could certainly include international trade.
Approximately 50% of S&P 500 companies that conducted earnings calls between December 15 and February 6 mentioned “tariff” or “tariffs,” the highest since Q2 2019. Out of these, 30 companies excluded the impact of tariffs from their guidance, while 21 included it, often citing uncertainty as a reason for wider or more conservative guidance ranges. The main areas where companies are taking action to address tariffs (either taking initial steps or already beyond initial steps) are renegotiating pricing with suppliers, adjusting financial forecasts and budgets, and passing tariff-related costs to customers or planning to do so.
What if the companies that have enacted or messaged that they will enact financial strategies to address tariffs never needed to do so? What if companies that have not taken any action, waiting for the court cases challenging tariff enforcement, bet on the wrong horse? The potential impact to D&O underwriters may exist in both cases, however, there may be a progeny of informative SCA decisions stemming from Covid-19.
As D&O Diary readers may recall, one of the very first coronavirus-related securities class action lawsuits to be filed at the outset of the pandemic in the U.S was the SCA against Norwegian Cruise Line Holdings. That lawsuit, among other SCAs filed in the wake of COVID-19, alleging fraud and misrepresentations relating to company forecasts, was dismissed. Notably, the Norwegian SCA plaintiffs had alleged, in part, that during the class period, the company filed an 8-K with the SEC, which included a press release with marketing statements surrounding Norwegian’s anticipated handling of the Covid-19 outbreak.
The judge dismissing the Norwegian’s held that, “considering the Defendants’ undisputed acknowledgement of the pandemic’s impact on bookings during the conference call, press release, and Form 10-K, no reasonable investor would believe that a statement regarding a brief window of improvement in bookings during a global pandemic implied that all was well within the company.”
Similarly, now, as tariff whiplash continues, should there be exposure to companies that are acknowledging “Liberation Day” and its impact? Time will tell, however, D&O underwriters may in the meantime want to track executive statements regarding strategy. Just in case.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with her company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.