Pause and Play: Deciphering the Credit Impact of Tariff Uncertainty on Specific Corporate and Asset Finance Sectors

In this commentary, we analyzed the impact of tariffs on imported goods and products imposed by the U.S. Administration on Specific Corporate and Asset Finance sectors rated by Morningstar DBRS.

Key highlights include the following:

-- The Trump administration's imposition of a series of sweeping and significant tariffs pose a downside risk to the U.S. economy as well as to other major economies.

-- The U.S. tariffs, even in consideration of a 90-day pause (except for China) for the planned significant reciprocal tariffs, could cause the average U.S. tariff rate to jump toward 13%-14% from an average of 1.7% in the 2000-2004 period.

-- The magnitude and duration of tariffs are likely to continue to weigh on consumer and corporate spending.

Our team of credit analysts have assessed the direct and indirect impact of tariffs on the credit profiles of corporate and asset finance sectors we rate. The direct impact is our assessment of the impact of tariffs on these sectors, and the indirect impact is a measure of the impact on these sectors due to a weaker macroeconomic environment that likely will be triggered by the tariffs. Sectors with a high direct impact include automotive, capital goods, infrastructure under construction, railways & trucking plus retailers & consumer discretionary products.