Cross-Policy Risk Pricing

Major government policy tools rarely operate in isolation, yet research analysis typically studies each policy as an independent intervention. When one policy increases firms' exposure to risk other fiscal instruments may offset that risk through spending, transfers, or targeted support. This paper studies this question in the context of the 2018-2019 U.S. tariff episode, when tariff increases raised input costs and uncertainty while federal procurement remained a large and ongoing fiscal channel directed to U.S. firms. One hypothesis is that procurement cushioned tariff exposure through government demand; on the other hand, procurement may reflect other budgetary or political priorities. Using transaction-level procurement data linked with firm-specific tariff exposure, the authors test whether procurement partially cushions the financial and real consequences of tariffs, and whether cross-policy interactions are priced into firms' cost of equity capital.