Since the outset of President Trump’s efforts to conduct trade policy through an active use of tariffs, I have been concerned about the possibility of tariff-related corporate and securities litigation. Inevitably, I have been concerned, investors will say that companies tried to soft-pedal the likely impact of tariffs on the companies’ financial results. But while I have worried about the prospects for this type of litigation, I have not been able to provide an example of what I was concerned about – that is, until now. Late last week, a plaintiff shareholder filed a securities class action against industrial materials company Dow, Inc., alleging that the company made misleading statements about the impact the Trump tariffs would have on the company. A copy of the new complaint against Dow can be found here.

Background

Dow is an industrial materials company located in Michigan. According to the complaint, the company has historically touted its “industry-leading dividend.” The complaint alleges that during the class period, the company made statements reassuring that a number of adverse factors, including the impact of the Trump tariffs, would not affect the company’s financial results nor would it affect the company’s dividend.

For example, the complaint alleges that during the class period, the company said in various statement that it “was well positioned to weather macroeconomic and tariff-related headwinds while maintaining sufficient levels of financial flexibility to support the Company’s lucrative dividend.” The company also allegedly referred to its “industry-leading flexibility to navigate global trade dynamics.”

On July 24, 2025, the company when the company released its 2Q25 earnings, it announced disappointing financial results. In a call with analysts, the company’s CEO blamed the poor results on “the lower-for-longer earnings environment that our industry is facing, amplified by recent trade and tariff uncertainties.” The company also announced that same day that it was lowering its dividend. According to the complaint, the company’s share price declined nearly 18% on the news.

The Lawsuit

On August 29, 2025, a plaintiff shareholder filed a securities class action lawsuit in the Eastern District of Michigan against Dow and certain of its executives. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between January 30, 2025, and July 23, 2025.

The complaint alleges that during the class period the defendants failed to disclose that “(i) Dow’s ability to mitigate macroeconomic and tariff-related headwinds, as well as to maintain the financial flexibility needed to support its lucrative dividend, was overstated; (ii) the true scope and severity of the foregoing headwinds’ negative impacts on Dow’s business and financial condition was understated, particularly with respect to competitive and pricing pressures, softening global sales and demand for the Company’s products, and an oversupply of products in the Company’s global markets; and (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times.”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The plaintiffs seek to recover damages on behalf of the plaintiff class.

Discussion

As far as I know, this lawsuit is the first securities suit to be filed related to the Trump tariffs. I suspect strongly it will not be the last. I think there will be more to follow, perhaps many more.

My concern is that when companies announce disappointing results, with the disappointment in whole or in part due to the adverse global trade conditions resulting from the impact of the tariffs, plaintiffs’ lawyers armed with hindsight will comb through prior company statements looking for optimistic comments about the company’s ability to weather the tariffs. The kinds of statements the plaintiffs’ lawyers will be looking for will touch on the company’s supply chain resilience, or its ability to source materials from lower-tariff countries, or its ability to have its suppliers or customers absorb the tariff-related costs. One particularly complicating factor has been the Trump administration’s variable and changing approach to tariffs, with increase tariffs or trade deals arising unpredictably.

The unpredictability may prove to be particularly challenging to many companies, and not just to the extent it increases the uncertainty of future results. Many companies may find the unpredictability challenging to planning and setting strategy. Some companies may find it expedient to refrain from strategic investments, in light of the uncertainty, which could in and of itself weigh on financial results. All of these conditions could be exacerbated to the extent rising prices contribute to lower consumer sentiment, as well as to lowered business expenditure. Companies reporting disappointing financial results in the months ahead may face heightened scrutiny for their prior statements about their ability to weather the global trade disarray.

The possibility of future tariff-related securities suits and other corporate litigation is definitely something to watch for in the months ahead.