With the CUSMA trade agreement up for review this year and 86% of Canadian exports currently crossing into the US tariff‑free, Canadian boards are facing a disclosure problem that could quickly become a D&O problem.
For publicly traded companies that depend on US access, the possibility that CUSMA is not renewed on current terms – or is weaponised in a trade fight – is now a foreseeable risk. How candidly they describe that exposure in MD&A and investor presentations may be the difference between a rough earnings call and a shareholder class action.
According to Denis Panariti (pictured), who leads Beazley Canada’s financial lines division, the market already has language for this kind of behaviour.
Panariti sees tariff washing as the latest in a family of misrepresentation risks that have migrated into securities litigation over the past decade.
He points to AI‑washing, where companies oversell the impact of artificial intelligence on their business, and greenwashing, where firms “mislead consumers or stakeholders into believing that the product or the service [of theirs] is environmentally friendly, when, in reality, it might not be or marginally so.”
Tariff washing, in its modern form, is the trade‑risk cousin: when a company “overstates its ability to withstand tariff pressures and headwinds, or downplays risks… in public statements,” then later blames tariffs for missed KPIs or profitability targets.
There is also a more old‑fashioned version, rooted in customs fraud rather than disclosure. Panariti cites “double invoicing,” where one invoice reflects the real value of goods and a second, lower‑value invoice is used at the border, and “undeclared assists,” where a product is made more valuable in a third country in order to benefit from a more favourable trade relationship. Regulators, including the US Securities and Exchange Commission, have already pursued cases in sectors like jewellery where the true origin of products is obscured.
But for Canadian issuers, he argues, the emerging risk is disclosure tariff washing – and it is being shaped by CUSMA uncertainty, 24/7 markets and new discovery tools.
Panariti points to two recent cases, one in the US and one in Canada, to illustrate how courts and regulators are scrutinising the way companies talk about external shocks.
In the US, a class action filed against Dow alleges the company misled investors about how resilient it was to tariffs. Dow had told the market it was “well positioned,” Panariti said, but later blamed tariffs for disappointing results. When the stock dropped, plaintiff firms moved in with misrepresentation and disclosure allegations – the classic starting point for a securities class action.
On this side of the border, the Lundin Mining saga turned on timing rather than trade. After a rockslide in one of its mines led to a 20% production cut, Lundin waited four weeks to announce the material change. When it did, the share price fell by about 60%, wiping out more than a billion dollars in market value and triggering regulatory scrutiny.
The case eventually reached the Supreme Court of Canada, which was asked what constitutes a material change and how quickly it must be disclosed. Instead of drawing a bright line, the court effectively said materiality is context‑driven and disclosure should be made as soon as a reasonable investor would see the information as important to the company’s outlook.
For Panariti, the lesson from both files is that “materiality is under scrutiny.” Whether the trigger is tariffs or operational disruption, optimistic messaging “without timely updates” is a common thread.
At its core, non‑disclosure, late disclosure and misrepresentation are D&O territory.
“Non-disclosure, delayed disclosure, or (alleged) misrepresentation is often what triggers a securities claim under D&O insurance,” Panariti said, noting that the allocations in a typical securities suit often revolve around exactly those issues.
What is changing is how easy it has become for plaintiffs to build those cases. AI tools allow firms to mine years of public filings on SEDAR, EDGAR and other repositories in hours rather than weeks, comparing what boards said about tariffs, trade policy or operational risk with how results actually unfolded. “It allows for much more targeted, accurate and quick discovery process” compared to one that used to require in‑person document review, he said.
And if trade shocks or tariff disputes push companies into distress, the exposure does not stop at securities litigation. Insolvency remains one of the classic D&O triggers. Panariti also sees potential spillover into employment practices liability, as mass layoffs follow plant closures; pension trust liability if plans are underfunded; and crime, where disgruntled or fearful employees turn to theft or fraud.
Cyber risk can be pulled into the web as well. In a stressed organization, he warned, disengaged staff may be more likely to click phishing links or ignore scam indicators, leading to incidents that might not have occurred in a healthier culture.
For now, the common thread is that boards operating in a world of contested trade rules, algorithmic discovery and near‑continuous trading are under growing pressure to calibrate how they talk about external risks. Between CUSMA’s review, sectoral tariff disputes and investor sensitivity, tariff washing looks less like a theoretical label and more like the next live exposure D&O underwriters will be asked to price.
