U.S. capital goods companies could face cost increases of 8% to 10% following recent U.S. tariff announcements, according to a report released Wednesday by S&P Global Ratings.

To maintain profitability, firms would need to raise prices by roughly 6% to 8%, the report said. Without adjustments, earnings before interest, taxes, depreciation and amortization (EBITDA) could fall by up to 35% by early 2026.

S&P estimates the average effective tariff rate on imported goods will jump to 24% in 2025, up from 2.3% last year. Much of the increase stems from higher duties on imports from China.

Despite these pressures, S&P maintains a stable credit outlook for about 90% of the sector, citing steady earnings and moderate debt levels. However, companies with lower credit ratings, especially those that underwent leveraged buyouts in 2020 or 2021, face greater risk due to upcoming debt maturities and potential interest rate hikes.

The report identifies heightened vulnerability among speculative-grade companies with limited operational diversity, dependence on imports, and strained financial ratios. In contrast, firms classified as low risk—roughly half the sector—are seen as better positioned to absorb the impact of higher tariffs.

The findings are detailed in the report “U.S. Capital Goods Companies Price in Tariff Costs to Defend Credit,” available to S&P Global Ratings subscribers.