It Doesn’t Matter What Kevin Warsh Has to Say

The first-order read is slower global growth, but the more tradable consequence is a regime shift from “soft-landing” positioning to a higher-frequency earnings downgrade cycle. Tariffs act like a broad-based input tax: they compress margins first for import-heavy retailers, industrials, autos, and hardware, then feed into capex deferment and weaker freight volumes with a lag of 1-2 quarters. The market is likely underestimating how quickly guidance resets once procurement teams start repricing landed costs and inventory turns slow.

The second-order winner set is narrower than usual. Domestic substitutes and firms with local supply chains can gain share, but the bigger beneficiary is quality balance sheets with pricing power and low inventory exposure, not generic “onshoring” plays. By contrast, EM export baskets, semiconductor supply chains with cross-border assembly, and small/mid-cap industrials with limited procurement flexibility should see the sharpest estimate cuts because they have less ability to renegotiate supplier terms or offset with FX.

Risk skew is asymmetric over the next several months: the catalyst path is earnings season, management commentary on order books, and any escalation in tariff rates or retaliation. A de-escalation headline could reverse the initial macro selloff quickly, but it would not fully unwind margin damage if companies have already reconfigured sourcing or passed through price increases. The bigger tail risk is that tariffs become embedded in inflation expectations, forcing the market to price a slower nominal growth path and a stickier policy backdrop.

Consensus may be too focused on headline GDP damage and not enough on dispersion. This setup is usually better expressed as long defensives/quality and short cyclicals/importers than as a broad index short, because the cross-sectional spread in earnings revisions is likely to widen faster than index EPS itself. If the market treats this as a one-off policy shock, the overreaction may create a short-term bounce; but if supply chains start to reprice structurally, the drawdown in cyclicals can persist for quarters.