NEW YORK, NY — President Trump’s announcement of sweeping global tariffs on “Liberation Day” in April fueled a growing understanding that economic coercion has replaced free trade as the order of the day. A new Columbia Business School study documents occurrences of governments wielding tools such as tariffs, sanctions, and export controls to pressure rivals — a practice known as geoeconomic pressure — and the responses from companies around the world. Using advanced AI to analyze more than 800,000 corporate documents, the study sheds light on how businesses are adapting to this new trade environment.
In the working paper Geoeconomic Pressure, Columbia Business School Professor Jesse Schreger and his collaborators from the Global Capital Allocation Project, Chris Clayton, Antonio Coppola, and Matteo Maggiori, identify how governments are applying economic coercion and how firms are responding. Their analysis shows that most companies react negatively to such coercion, in particular those that experience higher prices for the materials and parts they need and major disruptions to their supply chains. But in some cases, competitors less exposed to foreign suppliers find opportunities to gain market share.
“Our research shows that geoeconomic pressure reshapes corporate behavior in predictable ways — tariffs raise prices, sanctions reroute trade, and export controls spark costly innovation,” said Jesse Schreger, Associate Professor of Business at Columbia Business School. “These aren’t abstract forces; they’re concrete shifts businesses confront every day.”
To conduct the study, the researchers deployed open-source large language models — Meta’s Llama 3.3, Google’s Gemma 3, and Alibaba’s Qwen 2.5 – to classify the content of more than 800,000 earnings calls and analyst reports between 2008 and 2025. Sources included global transcripts from Capital IQ/WRDS, Chinese A-share earnings calls from Orbit, and sell-side analyst research from J.P. Morgan and Fitch. The team ran the analysis on their own secure servers and checked results across different models and prompts to ensure the findings were consistent and reliable.
This methodology systematically identifies which governments are applying pressure, which sectors and firms are targeted, and how companies adjust. Notable cases include the U.S. government pressuring Dutch firm ASML to halt sales of advanced lithography machinery to China, Chinese firms like Huawei and SMIC investing heavily in domestic research, and Indian refiners profiting from discounted Russian crude oil in response to Western sanctions tied to the invasion of Ukraine. Together, these examples illustrate how economic pressure can simultaneously create vulnerabilities, drive costly innovation, and create opportunities depending on where companies sit in the global system.
The study provides one of the clearest pictures yet of how companies respond to economic pressure in real-time. Measuring geoeconomic pressure is inherently challenging because many threats never materialize, leaving little visible evidence, and traditional data may be delayed. By pairing AI-driven text analysis with a global dataset of corporate communications, the research identifies strategic shifts that immediately follow governments exerting geoeconomics pressure. Looking ahead, the authors plan to track longer-term effects in sectors like semiconductors, rare earths, and energy to determine whether these measures are short-term shocks or indications of a lasting shift in global trade.
Key findings from the research include:
- Companies pass tariffs to consumers — Companies facing tariffs typically respond by increasing the prices of their goods to cover the higher input costs.
- Export controls force domestic innovation—businesses cut off from critical technologies or supplies, particularly in semiconductors, pour money into developing domestic alternatives.
- Winners emerge—while most companies report negative impacts from geoeconomic pressure, some benefit when their rivals are more dependent on foreign inputs.
“Policymakers and business leaders should recognize that economic tools like tariffs, sanctions, and export controls are no longer rare events. They are shaping the competitive environment today. Our research shows that companies need to adapt strategically, whether by diversifying supply chains, investing in research, or rethinking market exposure,” Schreger said.
