Tariff Turmoil Opens Door to Insider Trading Suspicion, Lawsuits

Tariff-related announcements have sent the stock market on a wild ride, setting the stage for securities lawsuits over corporate insiders’ trades and company disclosures.

A suit alleging that a 1-800-Flowers insider conducted short-swing trading has already been filed, and attorneys see the potential for a trend to take shape.

“Tariffs are having such a big and immediate impact on equities on a daily basis in both directions, that the environment is ripe for really significant insider trading,” John Rizio-Hamilton of Bernstein Litowitz Berger & Grossmann LLP said.

President Donald Trump‘s tariff rollout has spurred market-wide volatility as the administration has shifted how much, when, and what its policy targets. It’s included a tit-for-tat with China, with the US announcing a 145% tariff on Chinese imports and China raising its tariff to 125% on US goods, as of Tuesday.

Classic securities fraud suits alleging that misrepresentations or omissions propped up a company’s stock price will almost surely follow Trump’s announcements, but will be hard to prove, Dean Conway of Carlton Fields PA said.

“Similar to the global financial crisis, anytime there is a significant market dislocation, lawsuits will follow to recover investor losses,” Conway said.

“Nonetheless, proving that a company intentionally misled investors about the impact of the Trump administration’s evolving tariff policies will likely prove to be a difficult job,” he said.

Insiders Under Microscope

Insider trading lawsuits can involve the deliberate use of material nonpublic information—or simply profitable trading within a six-month span.

One of the first suits to focus on 2025’s stock volatility targeted a fund with a stake in 1-800-Flowers.com—an insider because it owns more than 10% of the company’s stock. The suit alleges the fund profited by selling high and buying low within a six-month span ending in late March, just as talk of possible tariffs rattled Wall Street.

Section 16(b) of the Securities Exchange Act aims to prevent corporate insiders from profiting from short-swing trading, or trading in their company’s stock within a six-month period.

When there’s volatility, and someone who qualifies as an insider, plaintiffs’ firms may file suits, Susan Hurd of Alston & Bird LLP said. “And they will argue that they should get fees if they’re successful, because they have created a benefit to the corporation,” she said. “That doesn’t require a plaintiff’s firm to take on a huge class action on a contingency basis.”

‘In the Know’

Allegations that individuals or companies traded on the basis of nonpublic knowledge about upcoming tariff announcements could fuel a trend, said Rizio-Hamilton, who represents investors. That knowledge could be information that had “spread to them” from the administration, he said.

“There’s a lot of discussion about who knows what pronouncements are going to come out of the White House, in advance, on these tariff issues,” Hurd said. “Who’s in the know? Who might know that there’s going to be an announcement that tariffs are going to be stayed or they’re going to be modified in a favorable way?”

“If somebody knows that information and trades on it, then you have classic market manipulation or insider trading claims, potentially,” she said.

Trump’s comments and social media posts themselves have sparked questions about profiting from stock volatility.

On April 11, Democratic Senate leaders asked state attorneys general to investigate “whether President Trump, his family, members of his administration, or members of Congress engaged in insider trading, market manipulation, or any violations of the laws of your states in order to profit from recent changes to tariff policy.”

Insider trading suits could be based on volatility in either direction, Rizio-Hamilton said.

‘Whipsawing’ Market Defense

There is the potential for vast damages if plaintiffs’ attorneys can craft a securities claim, said John Bielema of Bryan Cave Leighton Paisner LLP. He hypothesized an allegation that statements were “misleading about the extent of their reliance on foreign parts or imports/exports, thus misleading the market about how devastating the effect of tariffs would actually be once implemented.”

But it’ll be difficult for them to plead “how a disclosure ‘revealed the truth’ that caused the loss,” Bielema said.

Some suits could allege misstatements or omissions about the tariffs’ impact on overall business, pricing, sales, or the supply chain, Rizio-Hamilton said.

“I’m sure that you’ll see defenses mounted along the lines that the situation was changing so quickly and whipsawing so fast, that it’s impossible to plead that the statements were false when made, and it’s impossible to plead any level of intent associated with them,” the plaintiffs’ attorney said.

Companies relying on trade with China could be particularly targeted, Roger Cooper of Cleary Gottlieb Steen & Hamilton LLP said.

It’s hard to win securities fraud claims on stock drops amid tariff turbulence given the whole market was falling, Cooper said.

And Trump hasn’t exactly been shy about “telling anyone who would listen that he believed in some sort of tariff system,” Bielema said, “so it was at some level public information.”

Cooper likened the difficulty for plaintiffs to get past a motion to dismiss to pandemic-related allegations, after the market dropped across the board and investors filed numerous securities suits over supply chain issues or shifts in demand. Cooper expects a delayed reaction to potential tariff-related securities suits, maybe being filed toward the end of this year or early next.

“You’re starting to see a lot of companies talk about tariffs,” plaintiffs’ attorney Thomas Laughlin of Scott & Scott Attorneys at Law LLP said. “What should they say? What is going to be sufficient?”

“And sometimes, are they blaming tariffs when, in reality, they have a different problem?” he said. They could just be trying “to use the tariff issue as cover.”