This report does not constitute a rating action. We are updating our assumptions for tariffs and assessing risk to ratings in case higher costs or weaker demand strain earnings and cash flow in 2025 and 2026 for issuers in U.S. capital goods. We see pockets of ?High? risk, mostly among speculative-grade issuers with narrow operating footprints, a reliance on imports, and stretched credit ratios. The 35% of companies we label as ?Medium? risk typically face some mix of earnings pressure or weaker demand, and a lower buffer against our thresholds for a downgrade. We?ve assessed about 50% of the portfolio as ?Low? risk, reflecting a good ratio buffer in case of a profit downturn and generally muted impacts from tariffs.
