Coming Soon: The Tariff Hit on Economic Data

Andrew Sheets, head of corporate credit research at Morgan Stanley, discusses the delayed impact of tariffs on economic data and earnings. He explains that while markets have shown resilience despite tariff headlines since February, the impact is expected to become more pronounced in the third quarter of 2025. This is due to several factors: rapidly increasing tariff rates, rising tariff collections, the ending of pauses and delays in tariff implementation, and the depletion of pre-tariff inventory by companies. Sheets predicts that the retail sector will be particularly affected, leading to a preference for higher-quality credit and caution in the retail credit sector specifically.