FSS-DECO seminar: Trade Policy Uncertainty and Supply Chain Adjustments: Firm-Level Evidence from “Liberation Day” Tariff Threats

Speaker: Prof. Haishi LI, Assistant Professor in Economics, HKU Business School, University of Hong Kong

Date: 12 Nov 2025 (Wednesday)

Time: 14:00-15:15

Language: English

Venue: E21B-G002

Abstract: On April 2, 2025, U.S. President Donald Trump announced the “Liberation Day” tariffs, imposing additional tariffs on almost all countries with a minimum increase of 10%. However, only the 10% baseline was applied in April, while portions above 10% were deferred until August, pending negotiations between each country and the U.S. This policy created an unexpected, precisely timed, and country-heterogeneous episode of trade policy uncertainty (TPU): countries facing higher announced rates experienced greater TPU, while those facing the lowest announced rate of 10% (“10% countries”) faced limited TPU from the threat. Using transaction-level U.S. import data from S&P Panjiva, we show that between April and August 2025, firms substantially reallocated imports from high-TPU to low-TPU (“10%”) countries, with no significant change in total imports but at the cost of higher import prices. The reallocation was concentrated among firms reliant on trade finance, suggesting that they preemptively adjusted supply chains to avoid even greater adjustment costs had tariffs been implemented.