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. 

The outlook on our ratings in U.S. capital goods is about 90% stable, owing to several years of steady earnings and moderate debt usage. The negative outlook bias in this portfolio is concentrated among the lowest-rated issuers, as maturities for 2020- and 2021-vintage leveraged buyouts (LBOs) in 2026 could coincide with higher interest rates, some profit misses, and economic uncertainty.

Tariffs push up costs and prices in 2025. Our analysis of the U.S. capital goods sector reflects U.S. tariff announcements from the first two weeks in April, which imply an average effective tariff rate on imported goods of about 24% (compared to 2.3% in 2024). Under this refreshed scenario, we estimate a total cost increase of about 8%-10% for U.S. capital goods companies, with more than half of this impact driven by higher tariff rates on China (see chart 1). The cost increase would translate to a break-even price increase of about 6%-8% to hold profits steady across the sector. In other words, without price mitigation, the total hit to EBITDA could approach 35% by early 2026. Most at risk are firms with lower ratings, which could face hurdles in passing through price increases amid the current climate of cautious capital spending and demand.

Chart 1

Larger U.S. capital goods issuers rated 'BB' and above have several key supports to credit quality. From a business perspective, we see low direct exposure to imports overall, and a repositioning of sourcing away from China that's been ongoing since the first round of tariffs in 2018.  Most capital goods firms in the U.S. stepped up price increases to counter cost inflation and supply chain challenges in 2021-23, driving margin expansion of about 180 basis points during a phase of strong demand. On top of tariffs, tepid industrial activity, cautious capital spending among industrial customers, and downcycles in agriculture and construction could delay investments and weaken demand. 

USMCA still protects some trade. USMCA-compliant products are an important mitigant to tariffs on Mexico and Canada, but some companies have yet to get products certified to manage these unplanned costs. As chart 2 shows, $28 billion of air-conditioning equipment and parts represents a large and growing share of U.S. machinery imports in 2023, much of that from Mexico. The HVAC issuers we rate had cost of goods sold of about $45 billion in 2024, so those imports likely represent a large share of their costs, much of which is USMCA-compliant.

Additionally, U.S. power equipment installers and servicers, as well as utilities, imported almost $24 billion of electrical transformers and static convertors, more than 20% of which from China. Exacerbating tariffs, transformer shortages will likely persist for several years, driven by sustained demand from data centers and clean energy projects (source: S&P Global Market Intelligence's report "Power Planner May 2 2025 Pricing and Purchasing". By comparison, the U.S. imports $20 billion of electric motors, $26 billion of valves and pump, but these items represent a smaller share of this heterogeneous sector’s $450 billion of cost of goods sold.  

Chart 2

In our preliminary review, we defined the following risk categories: High risk, medium risk, and low risk. These indicators are intended to highlight issuers we are monitoring for a potential negative rating action or outlook change due to either exposure to tariffs or economic volatility caused by tariffs, and not a certain likelihood that a rating action will be taken in the next 6-12 months. 

High risk indicates the possibility for a negative rating action or outlook revision in the next six to 12 months if we believe there is limited ability to offset the direct or indirect impact of proposed tariffs on a sustained basis. These companies may have high exposure to tariffs and/or lower cushion on their downgrade triggers (even before tariff consideration), to absorb large incremental margin or cash flow shortfalls.

Table 1
U.S. Capital Goods High Rating Downside Risk
Issuer	Rating	Outlook	Analyst	Rating downside risk	Comments
A-AG Midco Ltd.	B	Negative	Ezekiel Thiessen, CFA	High	Tariffs could affect earnings in the next few quarters, with little ratio buffer to withstand a downturn. Demand for the company's products will be hurt by Chinese tariffs on U.S. agricultural products, and it's unclear how much of an offset South American sales could provide.
American Trailer World Corp.	B-	Stable	Brian L Jones	High	Credit ratios are weak and a further softening of demand or elevated input prices could accelerate reduction of the company's liquidity. Customers have previously demonstrated sensitivity to macro uncertainty and high interest rates, and tariffs could further weaken demand given the discretionary nature of recreational and some professional-grade trailers. We believe the company has some supply chain and raw materials exposure to China. Given the potential for a weakened consumer, we believe the ability for ATW to pass on those costs may be challenging.
ASP Unifrax Holdings Inc.	CCC+	Negative	Dipak Chaudhari, CFA	High	Direct and indirect tariff effects could pressure earnings in the next few quarters, and a prolonged contraction in industrial activity and demand could strain credit metrics into late-2026, when the company faces an increase in cash interest costs under its current capitals structure. Sizable presence in China via Luyang business, which primarily serves the Chinese end-market.
C&D Technologies Inc.	B-	Developing	Paul Crane	High	Tariffs could exacerbate already elevated refinancing risk, with the company facing a debt maturity in Dec. 2026. A key driver of uncertainty is around Inflation Reduction Act and expected dynamics under the current administration, specifically related to 45x credit payments.
DexKo Global Inc.	B-	Stable	Brian L Jones	High	Tariffs could affect earnings in the next few quarters, driving a further weakening of credit metrics and a deterioration in liquidity.
FGI Acquisition Corp.	B-	Stable	Ezekiel Thiessen, CFA	High	Tariffs could affect earnings in the next few quarters. Flexitallic's foreign manufacturing does serve the U.S., but geographic diversity and solid gross margins partially offset this. However, its capital structure matures in 2026.
Fortna Group Inc.	CCC+	Negative	Nicole Foote, CFA	High	Direct or indirect tariff effects could exacerbate an already challenging operating environment, and uncertain economic conditions may translate into customers pushing out or rescoping projects. Also the company may be vulnerable to large EBITDA declines given its already low S&P Global Ratings-adjusted EBITDA margin and further cash flow deficits.
Heico Companies LLC (The)	BBB-	Stable	Nicole Foote, CFA	High	Tariffs could affect earnings in the next few quarters, given the company's exposure to steel processing in Canada, which was hit with tariffs in 2018. The company's debt leverage is already above our downside threshold and could worsen if earnings from steel or other cyclical or tariff-exposed businesses, like heavy equipment or autos, are weaker than expected.
Hillenbrand Inc.	BB+	Negative	Ariel Silverberg, CFA	High	Tariffs contributed to reduced demand in the most recent quarter and will likely affect earnings in the next few quarters. This could impair the company's ability to reduce S&P Global Ratings-adjusted leverage from levels that are already above our 4x downside threshold.
JSG I Inc.	B-	Stable	Brian L Jones	High	Tariffs could exacerbate already high refinancing risk of the company's $35 million revolver due March 2026 and approximately $616 million first-lien term loans due June 2026.
Novae LLC	B	Stable	Brian L Jones	High	Tariffs could affect earnings in the next few quarters, with little ratio buffer to withstand a downturn. Demand is sensitive to interest rates and the macro environment, and increasing prices to consumers to offset tariffs may be challenging. Heightened macro uncertainty could make it more difficult to refinance the company's revolver before it matures at the end of 2026.
OT Merger Corp.	CCC+	Negative	Tyrone Daniel	High	We expect OT Merger will attempt to pass on incremental costs from increased tariffs to its customers. Increased cost of sales if not fully offset could affect the company’s already weak earnings. Additionally, further dampening in demand for the company’s products driven by knock-on effect to the U.S. economy as a result of shifting trade policies can erode the slim credit buffer under the current rating in the coming quarters.
Peacock Intermediate Holding II L.P.	CCC+	Negative	Ezekiel Thiessen, CFA	High	Tariffs could affect earnings in the next few quarters. Though the direct exposure will be modest and we anticipate the company will mitigate some of this, weaker consumer confidence and business investment could challenge its growth strategy and ability to extend its revolving credit facility, which matures in December 2026 and which we forecast will be drawn at the time.
Plaskolite PPC Intermediate II LLC	CCC	CreditWatch Dev	Tyrone Daniel	High	Our expectation of continued weak credit metrics across 2025, including our adjusted debt leverage, interest coverage, and cashflows, provides little cushion below our current rating for underperformance if knock-on effects from tariffs weaken economic activity in the U.S. With significant debt maturities in 2025, depressed credit metrics and increasing economic uncertainty can hinder a timely and successful refinancing.
Robertshaw Parent LLC	CCC+	Positive	Paul Crane	High	Indirect and direct tariff effects would pressure earnings. Given its customers--primarily large appliance OEMs--have sizable operational and cost exposure to China, we believe its pricing power is limited, and consumer demand for appliances is sensitive to economic conditions.
Sensience Inc.	CCC	Negative	Paul Crane	High	Tight liquidity even before any tariff risks, with direct and indirect tariff effects likely to exacerbate strain on liquidity. Sizable exposure to HVAC end-market which can fluctuate with economic conditions.
Vector WP MidCo Inc.	B	Stable	Nicole Foote, CFA	High	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Weak lumber markets and lower lumber production are having a negative effect on the company's parts and consumables segment, potentially increasing debt leverage ahead of a debt maturity in 2026.

Medium risk indicates a lower likelihood of a negative rating action or outlook revision over the next 12 months due to a reasonable cushion on credit metrics and liquidity, and/or lesser exposure to direct or indirect impact of proposed tariffs, or some ability to mitigate the impact through cost management or greater financial flexibility given solid liquidity and free cash flows.

Table 2
U.S. Capital Goods Medium Rating Downside Risk
Issuer	Rating	Outlook	Analyst	Rating downside risk	Comments
AGCO Corp.	BBB-	Stable	Ezekiel Thiessen, CFA	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Tariffs on U.S. agricultural products will hurt U.S. demand for agricultural equipment and pressure AGCO's credit metrics during 2025, though we anticipate deleveraging in 2026.
Alta Equipment Group Inc.	B	Stable	Dipak Chaudhari, CFA	Medium	Some cushion to withstand lags on earnings and cash flow, with levers to preserve cash in the event of deeper downturn, e.g., scaling back the rental fleet and increasing sale of rental equipment. Indirect tariff effects could drive weakness in smaller, regional non-residential construction activity in the US.
Amsted Industries Inc.	BB	Stable	Dipak Chaudhari, CFA	Medium	Direct and indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Some exposure to Mexico-centric supply chains for heavy duty trucks and light vehicles.
Array Technologies Inc.	B+	Stable	Brian L Jones	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. The company has experienced large swings in EBITDA due in part to prior supply chain issues, and more recently to uncertainty around tariffs and tax credits, and higher interest rates have impacted demand and delayed customers' solar projects. A large drop in EBITDA could cause coverage of interest to fall close to our 2x downside threshold or pressure cash flow.
BCP VI Summit Parent LP	B	Stable	Brian L Jones	Medium	Direct or indirect tariff effects could pressure earnings, resulting in S&P Global Ratings-adjusted leverage remaining above our 6.5x downside threshold for longer than we previously assumed.
Carrier Global Corp.	BBB+	Stable	Ariel Silverberg, CFA	Medium	Potential demand impact over time. Carrier has manufacturing exposure to Mexico but noted that nearly all of their imports from there are USMCA compliant, with remaining tariff exposure largely to China. The company noted that through supply chain and productivity actions it has mitigated all but $300 million of tariff impacts, which it believes it can offset with price. We forecast Carrier will have minimal cushion relative to our 3x adjusted leverage downside in 2025, but could reduce discretionary spending to maintain leverage below this level.
Columbus McKinnon Corp.	B+	CW Neg	Paul Crane	Medium	Direct and indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. The company has moderate cost exposure to China and could face additional declines in its end-markets if manufacturers continue to cut back on capital spending.
CPM Holdings Inc.	B-	Stable	Dipak Chaudhari, CFA	Medium	Indirect tariff effects could pressure orders, earnings, and cash flow given high sensitivity of demand for new agro-processing equipment to investment cycle. We believe there is moderate operational and cost exposure to China, somewhat mitigated by ability to shift production between regions in the near-term and favorable cost-positioning in U.S. markets vs. international players.
Cube Intermediate 2 LLC	B	Stable	Paul Crane	Medium	Direct and indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months, especially in the event of a downturn in the energy end-markets. Highly dispersed manufacturing footprint that could allow for shifting production in response to potential tariffs.
Custom Truck One Source Inc.	B	Stable	Nicole Foote, CFA	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Approximately 30% of the company's total purchases come from Mexico and Canada, primarily for chassis and key attachments. Also, the company consumes steel and aluminum. With increasing costs it will require higher prices to hold profits and ratios.
Discovery Energy Holdings IV LP	B	Stable	Brian L Jones	Medium	The company has good cushion in credit metrics relative to downside thresholds, and its products are used in mission-critical applications, so the impact of tariffs on demand may be modest. That said, the company has relatively low S&P Global Ratings-adjusted EBITDA margins, so tariff-related cost increases could cause swings in EBITDA generation and deterioration in credit metrics towards downside thresholds.
DiversiTech Holdings Inc.	B-	Stable	Brian L Jones	Medium	We believe the company has some supply chain exposure to China, and that direct or indirect tariff effects could pressure earnings in the next few quarters. Relatively stable repair and replacement-driven demand, which is about 85% of sales, should help mitigate the potential impact to revenue of a weakened consumer.
EMRLD Borrower LP	BB-	Stable	Brian L Jones	Medium	S&P Global Ratings-adjusted leverage remains close to our 7x downside threshold and we believe tariffs could affect earnings in the next few quarters, particularly if demand declines in the residential HVAC market due to a weakened consumer. We believe, however, that the company should have a good ability to pass tariff related costs to its customers given its leading market position and high switching costs for customers.
Enviri Corp.	B+	Negative	Paul Crane	Medium	Indirect tariff effect of contracting GDP could pressure earnings, given sizable exposure to steel production levels, potentially consuming ratio buffer within the next 12 months. Partly offsetting this are potential benefits from higher U.S. steel production due to steel tariffs.
FCG Acquisitions Inc.	B-	Stable	Svetlana Olsha, CFA	Medium	Direct and indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months, especially given its highly acquisitive strategy.
Form Technologies LLC	B-	Stable	Brian L Jones	Medium	Direct or indirect tariff effects could pressure earnings, particularly since some of the company's end markets (like autos and consumer electronics) have greater exposures to tariffs or pull-backs from a weakened consumer.
Gates Industrial Corporation PLC	BB-	Positive	Dipak Chaudhari, CFA	Medium	Some cushion in credit metrics, with potential earnings impact from lagging tariff pass-through and softer demand, especially in end-markets for new equipment in agricultural and construction, which are already experiencing softness. Automotive exposure is largely via aftermarket sales to car parc, with low exposure to new vehicle sales.
Hyster-Yale Inc.	B	Stable	Brian L Jones	Medium	Tariffs could affect earnings in the next few quarters, with a weakened consumer and increased competition potentially limiting the company's ability to offset higher costs through price increases. This could consume the company's good ratio buffer within the next 12 months.
J.B. Poindexter & Co. Inc.	B+	Stable	Andrew Manuel, CFA	Medium	Substantial cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow, slightly offset by exposure to the highly cyclical commercial trucking end market, with large dependencies on semiconductor production and chassis deliveries, and high customer concentration.
JBT Marel Corp.	BB	Stable	Tyrone Daniel	Medium	Increased tariffs on steel and aluminum have increased the company’s cost of sales. While we expect it will pass on at least some of these incremental costs through increased prices, this can weaken the demand for new equipment. To the extent price increases weigh on an already late recovery in new equipment sales, the company’s deleveraging efforts could be delayed. This will erode the credit buffer under the current rating. Additionally, the U.S. is a major revenue region for the legacy Marel business, which historically manufactures its products outside of the U.S. This has the potential to increase the company’s costs.
Johnson Controls International Public Limited Co.	BBB+	Stable	Ariel Silverberg, CFA	Medium	Potential demand impact over time, and some cost impact given some manufacturing exposure to Mexico and Canada. Nevertheless, the company benefits from a large backlog that in many cases has contractual provisions to pass through increased costs. We forecast S&P Global Ratings-adjusted leverage to be close to our 3x downside threshold, but believe the company could reduce discretionary spending to maintain leverage below this level.
Kennametal Inc.	BBB	Stable	Tyrone Daniel	Medium	Kennametal’s operations are directly exposed to changes in U.S. trade policies. The company imports a significant portion of its raw materials and generates about 60% of its revenues outside of the U.S. We expect it will attempt to pass incremental costs from increased tariffs to customers and leverage its global footprint to mitigate the impact of tariffs on its business. While there is some cushion under the current rating, lagging tariff pass-throughs or weaker demand for the company’s products as a result of price increases could potentially consume credit buffer.
Leggett & Platt Inc.	BBB-	Negative	Ezekiel Thiessen, CFA	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Though some tariffs could benefit the company, others could weigh on earnings, and prolonged weakness in the housing market would weigh on credit metrics, which currently have very little buffer.
Loparex Midco B.V.	CCC+	Negative	Tyrone Daniel	Medium	Loparex has a global presence but generally pursues an "in-region for region" strategy, with modest raw material imports into the U.S from Europe. Direct negative impacts from tariffs to the company’s business will be limited, but knock-on effects to the global economy can pressure its performance in 2025, especially since its largest and most profitability segments--building and construction and general industrials--are sensitive to economic cycles.
LSF12 Badger Bidco LLC	B-	Stable	Paul Crane	Medium	Direct and indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Given the company's heavy exposure to the agricultural end-market, demand and margins could be pressured further.
LSF12 Crown Intermediate LP	B-	Positive	Brian L Jones	Medium	Direct or indirect tariff effects could compromise the company's ability to improve leverage below 6.5x. While we believe many of the company's products are nondiscretionary, the company may face cost and revenue impacts given roughly 50% of its sales are outside the U.S., including 15% to China.
LTI Holdings Inc.	B-	Stable	Andrew Manuel, CFA	Medium	Highly cyclical business with large exposure to industrial technology and consumer spending. Cushion in credit metrics coupled with increased revenue from datacenters expected in the second half of 2025 partially mitigates the risk of a large drop in performance rapidly reducing the company's current liquidity position.
Madison IAQ LLC	B	Stable	Ariel Silverberg, CFA	Medium	Direct or indirect tariff effects could pressure earnings over the next few quarters. This could compromise the company's ability to improve its S&P Global Ratings-adjusted leverage below our 7x downside threshold over the next year.
Magnera Corp.	B+	Stable	Tyrone Daniel	Medium	Magnera has limited headroom under our ratings threshold for underperformance. While we view the direct impact of increased tariffs on the company’s business as largely muted given its mostly "in-region for region" strategy, knock-on effects to the U.S. economy as a result of shifting U.S. trade policy can delay the company’s deleveraging efforts and erode credit buffer from under the current rating within the next 12 months.
Mativ Holdings Inc.	B	Negative	Tyrone Daniel	Medium	While Mativ maintains a global presence with sales and manufacturing facilities outside of the U.S., we do not believe the company’s operations will be materially impacted by recent changes to U.S. trade policy. Our view is that the company’s strategy of buy, make, and sell in-region somewhat insulates its business. However, a slowdown in consumption and a pullback in investments caused by knock-on effects of shifting trade policies can cause the company’s credit metrics to further weaken, pressuring the current rating.
Maxim Crane Works Holdings Capital LLC	B-	Stable	Paul Crane	Medium	The company has some cushion to withstand any lags in earnings or cash flow resulting from tariff-driven increase in cost of new rental equipment, and an ability to responsively scale back fleet investment in response to a potential weakening of economic conditions. However, there is lower availability under the asset-backed lending facility (ABL) to support Maxim's ongoing fleet refresh.
Merlin Buyer Inc.	B-	Stable	Nicole Foote, CFA	Medium	Direct or indirect tariff effects could pressure earnings and exacerbate refinancing risk. A weaker consumer may drive lower consumption of pork, poultry, and beef, which may affect the company's demand.
Mueller Water Products Inc.	BB	Positive	Andrew Manuel, CFA	Medium	Substantial cushion in credit metrics, but direct or indirect tariff effects could pressure earnings to align with the current 'BB' rating rather than a 'BB+' rating.
Nordson Corp.	BBB	Stable	Nicole Foote, CFA	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. Revenue may weaken given exposure to the automotive and electronic end markets, and customer uncertainty around projects. The company's smaller scale relative to similarly rated peers may translate into greater earnings volatility.
Park-Ohio Industries Inc.	B	Stable	Andrew Manuel, CFA	Medium	Solid cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow, partially offset by exposure to volatility in the heavy trucks, automotive, and semiconductor space. The company benefits from a tariff exemption on its USMCA-compliant auto parts, reducing direct tariff effects.
Regal Rexnord Corp.	BB+	Stable	Dipak Chaudhari, CFA	Medium	Direct and indirect tariff effects could pressure earnings, especially in automation end-market, which we view as more sensitive to business cycles. This could erode credit buffer within the next 12 months.
Resideo Technologies Inc.	BB+	Negative	Ariel Silverberg, CFA	Medium	Direct or indirect tariff effects could pressure earnings, which may impair the company's ability to reduce its S&P Global Ratings-adjusted leverage below our 3x downside threshold over the next year.
Sunsource Borrower LLC	B	Stable	Ezekiel Thiessen, CFA	Medium	Good cushion in credit ratios, with some likely earnings impact from lagging tariff pass-through or weaker demand. We believe the company will pass through cost increases to its customers, which, in a softer demand environment, will weigh on demand and credit metrics. But we view the company's ability to generate cash in this scenario by liquidating working capital as a partial offset.
Terex Corp.	BB	Stable	Nicole Foote, CFA	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. The company has previously seen large swings in EBITDA, in part given its exposure to the heavy equipment end market .
The Manitowoc Company Inc.	B	Positive	Svetlana Olsha, CFA	Medium	Direct and indirect tariffs could pressure earnings and our positive outlook and--in the event of a sharp downturn--the issuer credit rating, given sizable exposure to steel costs and high sensitivity of new equipment demand to economic conditions.
Titan International Inc.	B	Stable	Dipak Chaudhari, CFA	Medium	Moderate cushion in forward-looking credit metrics to withstand direct and indirect tariff effects on demand, earnings, and cash flow. High fixed-cost base results in elevated sensitivity of earnings and cash flow to fluctuations in top-line.
Titan Purchaser Inc.	B	Stable	Nicole Foote, CFA	Medium	Tariffs could affect earnings in the next few quarters, with little ratio buffer to withstand a downturn. The company's exposure to potentially lower auto production in 2025 in its foundry business increases profit pressure. On the other hand, the company's rotors should benefit from tariff protection on competing products from China.
Tosca Services LLC	CCC+	Negative	Andrew Manuel, CFA	Medium	Limited cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Watlow Electric Manufacturing Co.	B	Stable	Nicole Foote, CFA	Medium	Direct or indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months. The roll off in 2025 of restructuring expenses and the wind down of ERP implementation expenses should provide some offset to a potential EBITDA impact from tariffs.
WEC US Holdings Ltd	B+	Stable	Paul Crane	Medium	Direct and indirect tariff effects could pressure earnings, potentially consuming ratio buffer within the next 12 months, given the more limited cushion in its credit metrics. This is partially offset by the company's strong market position in the global nuclear markets with long-dated contracts and good revenue visibility.
WireCo WorldGroup Inc.	B	Negative	Dipak Chaudhari, CFA	Medium	Prevailing softness in end markets for industrial, energy, and mining is already reflected in our negative outlook. Direct and indirect tariff effects could pressure earnings further, with weakening demand, earnings, and cash flow. Potential for favorable cost position in U.S. markets on steel product lines relative to international players that are importing from Europe and China.

Low risk indicates substantial cushion on credit metrics or minimal exposure to the direct or indirect impact of proposed tariffs. These companies also generally have effective mitigating factors that offset a good portion of tariff impacts through a combination of pricing, surcharges, dual sourcing, and less elastic demand.

Table 3
U.S. Capital Goods Low Rating Downside Risk
Issuer	Rating	Outlook	Analyst	Rating downside risk	Comments
3M Co.	BBB+	Stable	Donald Marleau, CFA	Low	Good ratio cushion to withstand any lags in earnings or cash flow because of tariffs. The company highlights about $850 million of total annualized tariff impact mostly from the second half of 2025, potentially accounting for 5%-10% of our 2025 EBITDA forecast before mitigating items like price and productivity.
Acuity Brands Inc.	BBB	Stable	Andrew Manuel, CFA	Low	Substantial cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. Sizable portion of revenues generated from retrofit and replacement markets, which are more stable than new construction markets.
AMETEK Inc.	BBB+	Stable	Nicole Foote, CFA	Low	Good cushion in credit ratios, with some modest earnings impact as the company may switch suppliers because of tariffs on China and will pass along higher costs in prices.
Atkore Inc.	BB+	Stable	Tyrone Daniel	Low	Exposed to cost increases from tariffs on raw material coming into the U.S., particularly steel and aluminum, as well as retaliatory tariffs on products going into the Canadian and potentially European markets. During the run-up in metal prices 2020-2022 the company did pass higher raw material costs to its customers. Similarly, we expect the company will pass a majority of cost increases from tariffs to customers this time around. Additionally, the company’s relatively low S&P Global Ratings-adjusted debt/EBITDA and solid free operating cash flow (FOCF)/debt ratios provide ample cushion under the current rating to withstand weaker-than-anticipated earnings across 2025.
Carlisle Cos. Inc.	BBB	Stable	Nicole Foote, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. The company is experiencing broad market headwinds as it is exposed to residential and commercial construction. The company generates 90% of its revenue in the U.S., and imports only 10% of its raw materials.
Caterpillar Inc.	A	Stable	Dipak Chaudhari, CFA	Low	Robust cushion in credit metrics to withstand direct and indirect tariff effects on demand, earnings, and cash flow.
Chart Industries Inc.	BB-	Stable	Nicole Foote, CFA	Low	Good cushion in credit ratios, with only small earnings impact from tariff costs. A slowdown in large projects could weaken demand, but tariff exposure appears minimal.
Clearwater Paper Corp.	BB-	Stable	Tyrone Daniel	Low	Clearwater is a 100% domestic producer, predominantly servicing the U.S. market. This means the direct impact to the company’s operations from any implemented tariffs on imports into the U.S. or retaliatory tariffs on exports is muted. On the cost side, we view the company’s exposure as minimal since it sources a majority of its pulp needs from domestic U.S. suppliers. The company imports some pulp from Canada, but such exposure is covered under USMCA. Its relatively low balance sheet debt following accelerated debt paydown in 2024 will support credit metrics across 2025.
Concrete Pumping Holdings Inc.	B	Stable	Paul Crane	Low	Ample ratio cushion to withstand any lags in earnings or cash flow resulting from tariff-driven increase in cost of new rental equipment, with ability to responsively scale back fleet investment in response to a potential weakening of economic conditions.
Crown Equipment Corp.	BB-	Stable	Nicole Foote, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. Modest exposure to imports has a minimal impact on costs.
Cummins Inc.	A	Stable	Ezekiel Thiessen CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Limited amount of finished products cross the U.S. border, and the company maintains credit buffer for cyclical demand deterioration that could result from economic uncertainty.
Deere & Co.	A	Stable	Ezekiel Thiessen, CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Tariffs on U.S. agricultural products will hurt U.S. demand for agricultural equipment but not enough to consume Deere's credit ratio buffer.
Dover Corp.	BBB+	Stable	Ezekiel Thiessen CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Supply chains are short, limiting exposure, and the company is onshoring a production line from China. Credit metrics can bear any demand deterioration resulting from passing through the remaining impact to customers.
DS Parent Inc.	B	Stable	Henry Fukuchi	Low	A large portion of the business benefits from an "in-region for region" manufacturing model, which insulates it from tariffs. The small portion outside these parameters would be impacted but that would be mitigated through pricing and surcharges if necessary.
DXP Enterprises Inc.	B	Stable	Ezekiel Thiessen, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. We expect DXP's credit metrics will be highly volatile through the oil and gas commodity cycle, which could turn downward as a result of economic uncertainty.
Eaton Corp PLC	A-	Stable	Svetlana Olsha, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Emerson Electric Co.	A	Stable	Henry Fukuchi	Low	Ample headroom to mitigate tariff related pressures largely through effective pricing measures. Emerson will also have the ability to reduce share repurchases and M&A and reduce debt if necessary to maintain current ratings.
EnerSys	BB+	Stable	Paul Crane	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow, with limited direct exposure to China, and the company is taking steps to shift a portion of production from Mexico back to the U.S.
Engineered Machinery Holdings Inc.	B-	Stable	Andrew Manuel, CFA	Low	Substantial cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Enpro Inc.	BB	Stable	Tyrone Daniel	Low	With some supply chain exposure to China, the company’s costs will increase modestly as a result of tariffs. We expect it to push pricing to cover these increases, which we believe it has an ability to do. Its relatively low S&P Global Ratings-adjusted debt/EBITDA and solid FOCF/debt ratios provide ample cushion under the current rating to withstand weaker-than-anticipated earnings across 2025.
EquipmentShare.com Inc.	B	Stable	Dipak Chaudhari, CFA	Low	Cushion to withstand any lags in earnings or cash flow resulting from tariff-driven increase in cost of new rental equipment, with ability to respond to potentially weaker economic conditions by scaling back fleet investment and ramping up sale of used equipment.
ESAB Corp.	BB+	Stable	Nicole Foote, CFA	Low	Diverse business operations and good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. ESAB makes everything in-region for the region. Consumables are heavy, making long-distance transport prohibitively expensive.
Filtration Group Corp.	B	Stable	Dipak Chaudhari, CFA	Low	Cushion to withstand indirect tariff effects on demand/earnings/cash flow, good pricing power to offset direct tariff effects on costs, and generally stable demand profile--especially in industrial and air quality product lines.
Flowserve Corp.	BBB-	Stable	Ezekiel Thiessen, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. Manufacturing has been distributed across various regions, including China, India, and Mexico, providing some flexibility, and only 40% of revenue comes from North America. Though a downturn in oil and gas commodity cycle would weigh on revenue, aftermarket and industrial demand should reduce the impact.
Fortive Corp.	BBB	Stable	Henry Fukuchi	Low	Ample cushion in the ratings to withstand impacts from tariffs largely driven by its ability to increase prices and implement tariff related surcharges. Fortive also has a largely "in-region for region" manufacturing model, which should limit the exposure as well.
GE Vernova Inc.	BBB-	Stable	Henry Fukuchi	Low	Sufficient cushion to offset potential impacts from tariffs. We expect the impact to be modest and that the company has the ability to offset most impacts from price increases and surcharges if necessary.
Generac Power Systems Inc.	BB+	Stable	Brian L Jones	Low	Good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Georgia-Pacific LLC	A+	Stable	Ariel Silverberg, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. A weakened consumer may pressure total revenue, but consumer products demand should remain relatively stable.
Grainger (W.W.) Inc.	A+	Stable	Ariel Silverberg, CFA	Low	Good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. We believe the company will look to remain price-competitive but at least partially offset product increases with price actions. Around half of the company's U.S. cost of goods sold (COGS) are sourced in the U.S. with the remainder from China, Canada, Mexico, and the rest of the world.
Greenbrier Companies Inc. (The)	BB-	Stable	Ezekiel Thiessen, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. That said, any delays in moving components or finished railcars across the border may hurt manufacturing efficiency.
H&E Equipment Services Inc.	BB-	CW Pos	Dipak Chaudhari, CFA	Low	Ample cushion to withstand any lags in earnings or cash flow resulting from tariff-driven increases in the cost of new rental equipment, with the ability to respond to potentially weaker economic conditions by scaling back fleet investment and ramping up sale of used equipment.
HERC Holdings Inc.	BB	Negative	Paul Crane	Low	Ability to scale back fleet investment and increase used equipment sales in response to a potential weakening of economic conditions.
Honeywell International Inc.	A	CreditWatch Neg	Ezekiel Thiessen, CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Honeywell does not have significant imports from China, and we believe it has enough operating and pricing flexibility to manage its significant imports from Mexico.
Hubbell Inc.	BBB+	Stable	Tyrone Daniel	Low	Hubbell’s global manufacturing footprint and supply chain network means the cost of products, materials, and components imported into the U.S., its largest revenue region, is subject to increases in tariffs; particularly those shipped from China, Mexico, and Canada. Similar to the 2018 tariff increases, we expect Hubbell to pass on at least some of these additional costs to the customer through price increases. Furthermore, the company’s credit metrics, including its above-average margin profile, provide robust cushion to withstand any potential impact of tariffs on its earnings and cashflows across 2025.
Hyperion Materials & Technologies Inc.	B-	Stable	Paul Crane	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. The company could see potential benefits from an increase in processing hard metals produced by the U.S. steel industry.
IDEX Corp.		Stable	Tyrone Daniel	Low	IDEX is directly exposed to changes in U.S. trade policies given its global supply chain network and its roughly 50% of sales generated outside of the U.S. We expect the company will attempt to pass costs from increased tariffs to customers and leverage its global footprint to further mitigate the impacts of tariffs on its business, and believe it will have some success with this. Nonetheless, its above-average profit margin and relatively low-debt leverage provide ample cushion to support the current rating.
Illinois Tool Works Inc.	A+	Stable	Ezekiel Thiessen, CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Additionally, the company's robust free cash flow could be used to reduce leverage.
Indicor LLC	B	Stable	Paul Crane	Low	Good cushion in credit ratios, with some likely earnings impact from lagging tariff pass-through or weaker demand. However, with a higher cash balance from a recent divestiture the company should be able to withstand a downturn in any of its key end-markets.
Ingersoll Rand Inc.	BBB	Stable	Ezekiel Thiessen, CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Though in a weakening economic environment the demand impact of price increases could pressure credit metrics somewhat, we believe the company has a good buffer.
ITT Inc.	BBB	Stable	Paul Crane	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow. Given the company's diverse end-markets, we believe the tariffs will have a minimal impact.
Johnstone Supply Intermediate LLC	B	Stable	Brian L Jones	Low	A weakened consumer may drive lower demand in the residential HVAC market, but the company has good cushion in credit ratios to withstand some modest underperformance.
Kito Crosby Ltd.	B	CreditWatch Pos	Tyrone Daniel	Low	The company’s cost of sales will increase given its supply chain exposure to China. Similarly, the company’s exposure to the APAC and European regions could result in increased import costs. We expect the company will attempt to pass these increases to customers and believe it will have success with at least some of them. In any event, its above-average profit margin and relatively low debt leverage provide a cushion to support the current rating. The company entered into a definitive agreement to be acquired by Columbus McKinnon Corp.
Koch Companies LLC	AA-	Stable	Donald Marleau, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. The company is exposed to tariffs across its businesses, predominantly from Flint Hills' oil imports from Canada, Molex's connector manufacturing footprint in Asia and Mexico, Koch Solutions’ commodities trading, and Georgia-Pacific's wood products imports from Canada.
Lennox International Inc.	BBB	Stable	Ariel Silverberg, CFA	Low	Good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. We assume volume declines this year and costs are impacted by inflation and tariffs--the company expects its cost base to increase 9% (including inflation and tariffs), with the largest tariff exposure from China and steel/aluminum. We assume Lennox can offset the impact at least partially with pricing, and continue to generate good levels of EBITDA and cash flow.
Madison Safety & Flow Holdings IV LLC	B	Stable	Dipak Chaudhari, CFA	Low	Ample ratio cushion to withstand any lags in earnings or cash flow. Good pricing power if tariffs increase costs. Indirect tariff effects on overall demand are mitigated by sizable share of revenue generated from nondiscretionary safety products that are replaced on a recurring cycles.
Mirion Technologies Inc.	B+	Stable	Tyrone Daniel	Low	We consider Mirion’s exposure to tariffs on the cost side to be fairly muted because it pursues a buy-local/make-local manufacturing strategy. Its exposure to retaliatory tariffs, particularly from goods going into China from its U.S. facilities, could result in some margin weakening given the level of retaliatory tariffs China has imposed. Nonetheless, Mirion’s credit metrics, particularly its above-average profit margins, provide ample cushion under out current rating to withstand potential margin leakage.
MRC Global (US) Inc.	B	Stable	Ezekiel Thiessen, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. We expect MRC's credit metrics will be highly volatile through the oil & gas commodity cycle, which could turn downward as a result of economic uncertainty.
nVent Electric PLC	BBB-	Stable	Nicole Foote, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. The company is mostly exposed to Canada and Mexico, requiring some pricing actions to hold profits.
Oshkosh Corp.	BBB	Stable	Nicole Foote, CFA	Low	Good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. Revenue may be pressured from reduced government spending. The company may face costs related to sourcing from Europe and China, but we believe it could likely pass price to offset these costs.
Otis Worldwide Corp.	BBB	Stable	Henry Fukuchi	Low	Sufficient cushion in the ratings to offset impacts from tariffs driven largely by minimal exposure and pricing if necessary. A very small portion of its COGS is imported from China, Mexico, Canada and Europe. In addition, Otis has the ability to reduce share repurchases or reduce debt to support the current ratings.
Parker-Hannifin Corp.	BBB+	Stable	Svetlana Olsha, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Pentair PLC	BBB-	Stable	Brian L Jones	Low	Good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Pro Mach Group Inc.	B-	Positive	Tyrone Daniel	Low	Pro Mach manufactures the majority of its finished products in the U.S. and sources raw materials from domestic suppliers. Finished goods imported into the U.S. represent a modest percentage of total revenues. The company’s exposure to China is limited as its operations in the region support the region. That said, domestic suppliers exposed to increased tariffs will attempt to pass these incremental costs to Pro Mach. Nonetheless, Pro Mach has ample credit buffer under the current rating to withstand the potential impacts on its earnings and cashflows across the next 12 months.
Rayonier Advanced Materials Inc.	B	Stable	Tyrone Daniel	Low	The company is exposed to retaliatory tariffs on products it sells into the Chinese market, which represents a more than modest portion of its revenues. On the cost side we believe the impact will be limited since a majority of the company’s raw materials are sourced locally in the U.S., and finished paperboard products entering the U.S. from Canada is covered under the existing USMCA. To the extent knock-on effects of increased tariffs slow economic activity in the U.S., the company’s credit metrics could also weaken; however, there is sufficient cushion in the rating to withstand some underperformance over the next 12 months.
RBC Bearings Inc.	BB	Positive	Brian L Jones	Low	Good cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.
Rockwell Automation Inc.	A-	Stable	Henry Fukuchi	Low	Direct impact from tariffs should be minimal as we expect the company will offset them through effective pricing efforts. Exposure to imports from impacted countries is modest and manageable. The company also has the ability support credit metrics by reducing share repurchases and M&A.
Snap-on Inc.	A-	Stable	Svetlana Olsha, CFA	Low	Robust cushion in credit ratios to withstand indirect tariff effects on earnings and cash flow, with limited direct cost exposure, given tools are largely made and sold in the U.S.
SPX FLOW Inc.	B	Stable	Svetlana Olsha, CFA	Low	Good pricing power if tariffs increase costs, with ample ratio cushion to withstand any lags in earnings or cash flow.
Star UK Midco Ltd. (Sundyne)	B-	CW Pos	Tyrone Daniel	Low	We expect Sundyne will attempt to pass on incremental costs from increased tariffs to its customers and believe it will be successful in at least some cases. In any event, its above-average profit margin and relatively low debt leverage provide ample cushion to support the current rating. Sundyne entered into a definitive agreement to be acquired by Honeywell.
Teledyne Technologies Inc.	BBB	Stable	Paul Crane	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. Given the company's diverse end-markets with a sizable portion of revenues generated directly from the U.S. government, we believe the tariffs will have a minimal impact.
Timken Co. (The)	BBB-	Stable	Andrew Manuel, CFA	Low	Solid cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. Good exposure to replacement-driven sales, which helps combat inherent cyclicality.
Toro Co. (The)	BBB	Stable	Dipak Chaudhari, CFA	Low	Good pricing power if tariffs increase costs--especially in the professional segment, the primary driver of profits--with ample ratio cushion to withstand any lags in earnings or cash flow.
Trane Technologies PLC	BBB+	Positive	Dipak Chaudhari, CFA	Low	Robust cushion in credit metrics to withstand direct and indirect tariff effects on demand, earnings, and cash flow.
United Rentals Inc.	BB+	Stable	Dipak Chaudhari, CFA	Low	Robust cushion to withstand any lags in earnings or cash flow resulting from tariff-driven increase in cost of new rental equipment, with ability to respond to potentially weaker economic conditions by scaling back fleet investment and ramping up sale of used equipment.
Veralto Corp.	BBB	Stable	Ezekiel Thiessen, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. We believe Veralto will effectively mitigate its exposure by adjusting its supply chain, moving its manufacturing footprint, and increasing price.
Vertiv Group Corp.	BB+	Positive	Brian L Jones	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. While input costs may be affected by tariffs, we believe demand for the company's products will not be meaningfully impacted by a weaker macro environment given expectations for continued global investments in IT and data centers.
Victory Buyer LLC	CCC+	Positive	Henry Fukuchi	Low	Improving operating trends provide ample cushion and we expect most of the tariff cost impacts will be offset through price adjustments. In addition, the large U.S. manufacturing and supply base should be a competitive advantage.
Vontier Corp.	BBB-	Stable	Henry Fukuchi	Low	A large portion of tariff costs will likely be passed on through surcharges. Minimal imports from China and Mexico should be manageable. Vontier has also significantly reduced its China exposure over the past several years.
WESCO International Inc.	BB	Stable	Ezekiel Thiessen, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow. WESCO will likely raise prices to offset tariff-related cost increases, and we believe its credit metrics have cushion for any decrease in demand this creates.
Westinghouse Air Brake Technologies Corp.	BBB	Stable	Dipak Chaudhari, CFA	Low	Ample ratio cushion to withstand any lags in earnings or cash flow. Good pricing power if tariffs increase cost exposure, which we believe is primarily concentrated in Mexico and China.
Xylem Inc.	BBB	Stable	Nicole Foote, CFA	Low	Robust cushion in credit ratios to withstand direct or indirect tariff effects on earnings and cash flow.

Related Research

• U.S. Economic Outlook Update: Higher Tariffs And Policy Uncertainty To Weaken Growth, May 1, 2025
• Steel And Aluminum Tariffs Boost Prices For U.S. Metal Producers, Costs For Manufacturers, March 13, 2025
• U.S. Capital Goods Brief: Tariffs Would Test Pricing Power, Feb. 6, 2025
• Industry Credit Outlook 2025: Capital Goods, Jan. 14, 2025

Primary Contacts:	Donald Marleau, CFA, Toronto 1-416-507-2526; donald.marleau@spglobal.com
	Dipak Chaudhari, CFA, Englewood 1-303-204-9280; dipak.chaudhari@spglobal.com
Additional Contacts:	Henry Fukuchi, New York 1-212-438-2023; henry.fukuchi@spglobal.com
	Svetlana Olsha, CFA, New York 1-212-438-1467; svetlana.olsha@spglobal.com
	Ariel Silverberg, San Francisco 1-212-438-1807; ariel.silverberg@spglobal.com
Secondary Contacts:	Paul Crane, Englewood 1-303-721-4343; Paul.Crane@spglobal.com
	Tyrone Daniel, New York 1-2124381101; tyrone.daniel@spglobal.com
	Nicole Foote, CFA, Englewood 1-303-721-4364; nicole.foote@spglobal.com
	Brian L Jones, New York 1-646-984-0937; brian.jones@spglobal.com
	Andrew Manuel, CFA, Boston 617-530-8024; Andrew.Manuel@spglobal.com
	Ezekiel Thiessen, CFA, Englewood 1-303-721-4415; ezekiel.thiessen@spglobal.com