Using large language models, the researchers read more than 364,000 earnings call transcripts between 2008 and 2025, as well as some 200,000 analyst reports from sell-side research firms, and looked at how companies and analysts discussed these geoeconomic pressures and how they responded to them. Here’s what companies and analysts have to say about how tariffs, sanctions and export controls impact key operating variables.
Corporate responses to geoeconomic pressure
Source: Clayton et al. (2025)
As you can see, analysts and companies agree that tariffs significantly increase both input and sales prices, while sanctions and export controls have a smaller impact. Export controls, meanwhile, lead to more domestic investment and investment in research and development. But whatever happens, these geo-economic measures have a negative impact on sales and profit margins.
However, the above diagram lumps companies in countries imposing geoeconomic sanctions together with companies in countries on the receiving end of sanctions, as well as third countries. The chart below breaks down companies by the country in which they are located.
Respond to pressure, per land role
Source: Clayton et al. (2025)
Tariffs are especially devastating for companies in the country that imposes tariffs, and less so for companies in the rest of the world. Meanwhile, the incentive to invest more heavily in domestic facilities and R&D is much greater for countries hit by tariffs, and even more so for countries hit by export controls from other countries. The incentive to bring production home is much smaller for companies in countries that exert geo-economic pressure.
In summary, while tariffs, sanctions and export controls have become much more common in recent years, they are failing to do what is sometimes expected of them, which is to stimulate more domestic investment in backshore production. Instead, they raise prices for domestic consumers and producers and reduce profit margins and sometimes sales. And this isn’t some economist or strategist saying this. These are business leaders saying that.
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