As companies prepare their Form 10-Q disclosures, it's worth bearing in mind a number of special considerations amid the current economic and political environment.

Trade Issues and Tariffs: On April 2, the Trump administration announced a 10% tariff on all countries and an individualized reciprocal higher tariff on certain countries with large trade deficits. On April 9, the Trump administration paused the individualized reciprocal tariffs on all countries except China for 90 days, but it kept the 10% base tariff in place. With respect to China, the Trump administration has implemented a total tariff of 145% on Chinese imports, and China has raised its tariff on U.S. imports to 125% in response. The Trump administration has also suggested tariffs on pharmaceutical products may be coming. 

Trade issues and tariffs can have a direct impact on a company based on its industry and the extent of its international operations and supply chain, while these trade issues and tariffs may indirectly affect other companies through the downstream impacts of upstream tariffs and the impact of trade tensions on the economy, such as increasing uncertainty and volatility (which can reduce underlying customer demand), inflation or the unavailability of certain components. While reviewing their Form 10-Qs, companies should consider how their specific businesses may be impacted by trade tensions and tariffs on any components from, or their business with, these countries or secondary effects domestically and internationally.  

In addition, companies should consider whether any of their supply chain disclosure should be updated to reflect new risks, such as increasing prices, reduced availability, new disruptions, the risk of holding excess inventory, or any other developments. 

Market Volatility and Economic Slowdown: In light of ongoing market volatility and a potential economic slowdown spurred by the recent shift in global trade policy and other recent or rapid policy shifts, companies should consider how their specific businesses may be impacted by a decrease in their stock prices, significant changes in the valuation of the U.S. dollar and other currencies, a significant decline in consumer and investor confidence, decreased demand, higher interest rates or reduced access to credit, and reduced access to capital through equity and debt offerings, among other things.  

Uncertainty Regarding Regulatory Environment: Earlier this year, President Trump issued an executive order requiring that “whenever an agency promulgates a new rule, regulation, or guidance, it must identify at least 10 existing rules, regulations, or guidance documents to be repealed.” In addition, the executive order requires that “the total incremental cost of all new regulations, including repealed regulations, be significantly less than zero” for fiscal year 2025. This executive order and recent Supreme Court decisions have introduced significant uncertainty into the regulatory environment, which may create risks for highly regulated companies. Further, with the Trump administration’s focus on reducing costs and personnel within agencies, companies may want to also consider referencing longer review periods for any applicable regulatory approvals or delays in responsiveness. Companies in highly regulated industries, particularly life science companies, should consider such FDA and other regulatory risks carefully and discuss whether new risk factor disclosure is appropriate. 

ESG, Including Diversity Programs: The Trump administration’s executive order calling for potential federal investigations into corporate diversity practices has resulted in some companies adding new risk factor disclosure that their environmental, social, and governance (ESG) programs, particularly any diversity, equity, and inclusion (DEI) initiatives, could pose business risks. However, other companies are scaling back their ESG risk factor in response to the EU Corporate Sustainability Reporting Directive (CSRD) compliance deadlines being delayed and the SEC’s climate disclosure rules likely being repealed. While reviewing their Form 10-Qs, companies should consider how their specific businesses may be impacted by uncertainty regarding ESG and DEI; the current federal and state legal, regulatory, and political environments; and recent changes in market perceptions and demands. For example, please see JPMorgan (pg. 34), Advanced Micro Devices (pg. 33), Eli Lilly (pg. 36), Pinterest (pg. 26), and Snowflake (pg. 44).  

EU AI Act: Bloomberg Law previously reported that at least 70 other public companies have disclosed risks related to the EU AI Act in their 10-K filings, including potential financial penalties, increased compliance costs, inconsistencies among AI regulations, potential increases in civil claims, adverse impact on business, and impact on AI commercialization. 

Executive/Office Safety: A few S&P 500 companies have added disclosure about the potential risk of a physical attack on their senior leadership or offices in the general risk factor section of their Form 10-K. For example, see Nasdaq (pg. 30) and Halozyme Therapeutics (pg. 41).  

Hypothetical Risks: Companies should carefully review any hypothetical risks described in their risk factors and update the disclosure if the risk has actually occurred.  

This article is part of a Fenwick "Securities Law Update" authored by David A. Bell, Ran Ben-Tzur, Amanda Rose, Wendy Grasso, and Merritt Steele.