This research examines how firms adjust to stringent environmental regulation, focusing on the strategic and trade responses of Italian manufacturing firms to the European Union’s REACH framework and, specifically, to the progressive restriction of perfluorooctanoic acid (PFOA). PFOA, a persistent and hazardous chemical widely used across industrial value chains, entered the Candidate List in 2013, was subject to Annex XVII restriction in 2017, and became regulated under the EU POPs Regulation in 2020. This regulatory trajectory provides an ideal quasi-natural experiment to study the evolution of firm behavior in response to tightening environmental constraints. Building on the trade-shock literature (Autor et al., 2013; 2014), the study translates a well-established framework into the regulatory domain.