When tariffs rise, where do firms absorb the pressure? This paper studies how trade-policy exposure maps into corporate tax-base outcomes, and how that relationship changes when the institutional environment changes.
Trade shocks can affect sourcing, pricing, production, and other operating decisions. Firms may also have internal margins through which they reallocate part of that pressure. The paper asks whether tariff exposure is associated with corporate tax-base outcomes, whether geographic scope shapes that association, and whether the relationship changes after the 2017 Tax Cuts and Jobs Act (TCJA).
Before the TCJA, greater tariff exposure was associated with a wider corporate tax gap. The estimated pre-TCJA association is +2.008. After 2018, the estimated attenuation is −1.995, leaving a net post-TCJA association of roughly 0.013.
The pattern is also stronger among firms with broader geographic operations, consistent with organizational scope being related to the set of adjustment margins available to the firm.
The interpretation is deliberately mechanism-focused rather than causal: the evidence is consistent with firms allocating policy pressure across multiple margins, while the post-TCJA institutional environment narrowed the internal tax-base margin associated with tariff exposure.
Trade policy and corporate tax policy are usually studied as separate instruments. At the firm level, they can meet inside the same decision problem. A tariff shock changes operating incentives; tax rules can change the margins through which firms respond. This creates a cross-policy incidence problem that matters for managers, researchers, and policy design.
Trade-Policy Exposure and Managerial Adjustment Margins: Regime-Dependent Evidence from Corporate Tax-Base Outcomes
Garros Gong and Stanko Dimitrov
Managerial and Decision Economics
Accepted 14 August 2026
DOI: 10.1002/mde.70150
If this research is useful for your work, please cite the paper:
Gong, Garros, and Stanko Dimitrov. 2026. “Trade-Policy Exposure and Managerial Adjustment Margins: Regime-Dependent Evidence from Corporate Tax-Base Outcomes.” Managerial and Decision Economics. https://doi.org/10.1002/mde.70150.
@article{gong2026tradepolicy,
author = {Gong, Garros and Dimitrov, Stanko},
title = {Trade-Policy Exposure and Managerial Adjustment Margins: Regime-Dependent Evidence from Corporate Tax-Base Outcomes},
journal = {Managerial and Decision Economics},
year = {2026},
doi = {10.1002/mde.70150}
}The accompanying microsite presents the main empirical pattern, geographic heterogeneity, specification diagnostics, mechanism interpretation, and policy implications in a compact visual format:
https://garroshub.github.io/trade_policy_adjustment_margins/