As the Trump administration has launched, postponed, reinstated, and negotiated its evolving tariff policies, companies have been forced to deal with a changing and unpredictable business environment. As I have previously discussed, these changing circumstances not only have implications for companies’ business operations and financial results, they also have implications for companies’ potential liability exposures as well. One important area of tariff-related potential liability has to do with companies’ disclosures – that is, what the companies are saying about the impact of the tariffs on their operations and financial results.
In an interesting June 5, 2025, Law360 article, entitled “Public Cos. Must Heed Disclosure Risks Amid Trade Chaos” (here), Jennifer Lee of Jenner & Block and Edward Westerman of Secretariat Advisors take a closer look at the disclosure challenges companies face from the Trump administrations changing tariff policies. As the authors note, the Trump tariffs and related sanctions and export controls have created “significant market instability in international trade,” which has “exponentially escalated financial reporting pressures on public companies.”
President Trump has, as the article observes, imposed, and in some cases paused, reversed, and again reinstated, a wave of tariffs on imports from over 50 U.S. trading partners. To be sure, on May 28, 2025, a panel of judges of the U.S. Court of International Trade declared many of Trump’s tariffs to be illegal and “exceeding any authority granted” to the President. However, a day later, the U.S. Court of Appeals for the Federal Circuit entered an order staying the Court of International Trade’s order, temporarily reinstating President Trump’s tariffs pending the government’s appeal of the Court of International Trade’s order. For now, at least, the tariffs remain in place.
In the face of this changing and uncertain trade environment, a wide variety of companies have cut their financial forecasts, including companies in retail, consumer product, transportation, and manufacturing. These companies are responding not only to direct cost increases from tariffs but also to broader uncertainty in consumer behavior and global supply chains.
In addition to the potential impact from the tariffs on corporate business results, companies also face increased tariff-related enforcement and regulatory risks. For example, a May 12, 2025, memo stating the U.S. Department of Justice’s policies on white collar crime identified as a key threat to U.S. national security from “trade and customs fraudsters, including those who commit tariff evasion,” who may seek “to circumvent the rules and regulations that protect American consumers and undermine the Administration’s efforts to create jobs and increase investment in the United States.”
In addition, as the memo’s authors note, the SEC will likely “continue to investigate companies that misrepresent identities of suppliers and customers to avoid the impact of sanctions and tariffs, falsely improve their profit margins by not recording costs associated with sanctions and tariffs, intentionally conceal disappointing financial performance in key parts of their business, or otherwise engage in accounting fraud to mislead investors.”
The possibility that the SEC might pursue enforcement actions based on alleged misrepresentation of the country of origin of goods or materials is not merely conjectural. For example, in September 2019, the SEC brought an enforcement action against the digital and print marketing company Quad/Graphics in part based on allegations that the company’s Peruvian unit had falsified its business records in order to conceal transactions with a state-controlled Cuban telecom company, which was subject to U.S. sanctions and export control restrictions.
The possibility that companies might be alleged to have failed to record tariff-associated costs by manipulating or misrepresenting their supply chain, or misrepresenting the country of origin as a low-tariff country, not only creates the risk of SEC enforcement actions. As I noted in a recent post (here), these circumstances could also lead to False Claims Act claims, particularly as whistleblowers or competitors come forward to press allegations of the alleged misrepresentations. As I detailed in that prior post, there have been numerous cases in the past where companies have been subject to FCA actions based on allegations that the companies misrepresented the country of origin of goods or materials.
Another challenge companies face given the Trump administration’s changing tariff policies is the difficulty of being accurate in how they described this risks of the trade war, including potential or actual tariffs. As the memo’s authors note, the SEC “has brought numerous cases penalizing issuers for downplaying such risks for treating them as hypothetical when the actual risk has already transpired.”
As the authors note in conclusion, the current trade war presents “multilayered risks” associated with companies’ “ability to manage the impact of tariff and sanctions while providing truthful earnings guidance and protecting their profit margins,” adding that the SEC is likely to scrutinize “any public company deemed to be evading U.S. export and controls laws, or manipulating its financial statements, in order to conceal the impact of tariffs or sanctions.”