An additional 145% tariff on consumer goods imported from China will have the greatest impact on durable and discretionary goods. Even with lower rates that remain above 50%, we believe this could materially impair issuers.

Our bottom-up analysis of each consumer products and retail issuer reveals that effective tariff rates will vary depending on exposure. If tariffs announced April 2, 2025, are implemented as proposed following the 90-day pause, it becomes more difficult to shift sourcing to lower-cost regions and puts more pressure on profit.

Sectors most affected include durable goods, apparel, and potentially consumer staples that rely on other imported inputs such as cocoa and coffee. We point out rating actions on credits highly exposed to tariffs and those we think are susceptible to tariff risk.

Based on current tariff rates on China imports, we could review 10%-15% of consumer products issuers and 5%-10% of retail issuers for negative rating actions, with more after the 90-day pause if implemented rates remain high.