Firm-specific trade policy effect uncertainty and the bullwhip effect

Purpose In an era of increasingly volatile trade policies, firms confront heightened uncertainty in demand forecasting and production planning, raising the potential for amplification of the bullwhip effect (BWE). Drawing on the BWE literature and on regulatory focus theory, which distinguishes between a promotion focus oriented toward gains and a prevention focus oriented toward loss avoidance, this paper investigates how firm-specific trade policy effect uncertainty (TPEU) influences the BWE, and how managerial regulatory focus moderates this effect. Design/methodology/approach Based on a sample of 37,017 firm-year observations from 4,104 publicly listed Chinese firms between 2002 and 2022, we employ ordinary least squares (OLS) regressions to test the proposed hypotheses. Findings We find that TPEU significantly amplifies the BWE. This effect is exacerbated in firms led by promotion-focused top management teams (TMTs) and attenuated in firms led by prevention-focused TMTs. Mechanism analyses reveal that TPEU affects the BWE primarily through firms' operational adjustments on both the demand and production, as well as through broader supply chain restructuring. These results are robust to a series of empirical strategies designed to address potential endogeneity concerns. Research limitations/implications The study focuses on publicly listed Chinese firms and relies partly on textual measures derived from corporate disclosures. Accordingly, the findings may not fully generalize to firms operating in other institutional and trade policy environments, and the measures may partly reflect managerial disclosure choices. Future research could test and extend the proposed relationships through cross-country comparisons, alternative measures of trade policy effect uncertainty and managerial regulatory focus, and more granular operational data. Practical implications The findings suggest that firms should treat TPEU as an important source of operational instability. Managers should strengthen demand forecasting and policy monitoring, avoid excessive ordering and inventory adjustments, and manage customer and supplier restructuring carefully. Firms should also consider how TMT regulatory focus shapes operational responses to uncertainty and balance opportunity-seeking with risk-avoidance in supply chain decision-making. Social implications The study shows that trade policy uncertainty can generate operational consequences that extend beyond individual firms by amplifying demand and production variability and disrupting customer and supplier relationships. Such amplification can propagate through interconnected supply chains, potentially weakening overall supply chain stability during periods of trade policy change. The findings therefore highlight the broader social and economic value of improving firms’ ability to absorb policy-related uncertainty, maintain stable supply chain relationships and avoid unnecessary operational overreaction, thereby supporting more resilient supply chains in an increasingly uncertain global trade environment. Originality/value We contribute to the emerging literature on the intersection of operations and supply chain management and trade policy uncertainty by documenting the operational consequences of trade policy-induced uncertainty, and by underscoring the critical role of managerial regulatory focus in shaping operational responses to TPEU.