Corporate Disclosures Reveal the True Cost of Tariffs

On April 2, 2025, President Donald Trump released a sweeping package of tariffs that were meant to correct trade imbalances and curb the United States' reliance on foreign goods. "Liberation Day," as the president declared it, was a shock to the world's economic system-and to companies everywhere. Tariffs took center stage in the global forum, applied so broadly that the stock market temporarily crashed.

A New Way of Looking at Tariffs

Economists who study the effects of trade uncertainty tend to render market reactions in broad terms: aggregates, statistical indices, and macroeconomic scenarios. But Yue Han, PhD, associate professor of decision sciences and marketing at Adelphi, wanted to take a deeper dive. "Not all firms are affected by tariffs in the same way, even if they operate in the same country or industry," she said.

In classical trade theory, tariffs are tools to protect and promote domestic industry. They affsssect a country's balance of trade, the competition among its producers, and its overall welfare. Today, however, tariffs are also a form of risk, sparking changes to asset prices, credit conditions, and investor sentiment.

Along with Heng Emily Wang, PhD, of Elon University and Wenyao Hu, PhD, of the New York Institute of Technology, Dr. Han co-authored "Tariff exposure and liberation day reactions: Initial evidence from corporate filings" (Economics Letters, January 2026), a study proposing a new way to measure, as Dr. Han puts it, "how exposed a firm is to future tariff changes."

Compiling Data to Measure Tariff Exposure

To develop their measurement, Dr. Han and her colleagues turned to corporate filings. They reviewed 10-Ks-a mandatory annual report filed with the SEC-from more than 3,000 companies nationwide, mining information about business activities and risk factors. For each firm, they identified any mentions of a foreign country, then weighted it by the "Liberation Day" tariff rate imposed on that country. This became the "tariff exposure index." Next, the team merged the 10-K content with publicly available data on each firm's accounting practices and daily stock returns. After running a series of regressions, they confirmed that firms with greater exposure to tariffs were, in fact, hit harder by "Liberation Day."

Dr. Han explained, "Our study successfully illustrates that investors recognize tariff risk and price it into stocks. Firms with higher tariff exposure saw larger stock price drops after the announcement." That relationship stayed strong even after controlling for a range of firm characteristics, such as size, valuation, or corporate event (think merger or IPO).

But why might one firm be more vulnerable to tariffs than another? Dr. Han says "financially fragile, future-oriented, or dependent on intangible assets" are the main factors. In other words, small firms with growth plans are more likely to be hurt by tariffs. So are firms that rely on debt or equity to operate.

Calculating Certainty in an Uncertain Global Economy

Dr. Han believes her work can add certainty to an otherwise risky economic landscape. Corporate filings have long been used to forecast risk and outcomes, and her team's model may be able to predict how firms will weather future shocks as tariff uncertainty persists. Their model also demonstrates that markets have eyes and ears. In times of global trade turbulence, a firm's returns will likely drop if it has telegraphed excessive tariff exposure.

This research stream is a fertile one, according to Dr. Han and her colleagues. Future studies could track the long-term impacts of tariff exposure, incorporating reactions from creditors, employees, customers, and other stakeholders. "Such extensions," they note in the study, "would deepen our understanding of how protectionist policies shape firm behavior, market efficiency and the allocation of capital."

Anyone with a basic grasp of economics could see how "Liberation Day" upended the global trade order. But as one of the first systematic examinations of market reactions to the announcement, Dr. Han's study shows the true cost of tariff shock. Now, as shifting tariff policies rock the markets at home and abroad, firms should be aware of what information might signify their tariff exposure-and who knows it. "Trade policy uncertainty has become a firm-level financial risk," Dr. Han said, "and markets respond to it fast, using information previously provided by firms."