We expect U.S.-based discount tool and equipment retailer Harbor Freight Tools USA Inc. ?s profitability and cash flow to weaken in fiscal 2026 (ending July 2026) because of its substantial supply chain exposure to China and other parts of Southeast Asia. We believe the impact of tariffs on the company?s profitability is highly uncertain, but if enacted, could deteriorate its performance. Harbor Freight?s low-cost and low-price model is a competitive advantage. A structural shift in its cost base could undermine this strategy. Therefore, we placed all our ratings on Harbor Freight on CreditWatch with negative implications. We could affirm or lower the ratings over the next few to several months, depending on effective tariff rates and their duration. A downgrade
