This issue's syllabus · Issue No. 13 · July 26, 2026
Equities.
This week's focus is on equities. There are three things to check on any tariff headline, and once you know them, you can apply this to any tariff headline you read, not just this one.
A tariff headline is one of the most common pieces of macroeconomic news you'll hear about, which is why it's worth understanding how one actually reaches a company you might be invested in. There are three things to check, and once you know them, you can apply this to any tariff headline you read, not just this one.
Does this company bring physical goods across a border to sell them? If yes, they will pay the tariff fee at the port. If the answer is no because it makes things domestically or sells a service, then the company mainly does not pay the fee. That question splits the market into two categories before you have looked at anything else.
Once the company has to pay the tariff cost, they have to make a very important decision. Absorb the cost and take a smaller profit, which shows up in a number called gross margin. Or pass it on and let the consumer cover it. Or depend on the overseas supplier for a discount but know the chances of this happening are limited. Most companies tend to use a mix of the possible decisions, and that mix also tells you how much pricing power the company has. A company that people love, and that they'll pay a premium for without blinking, can raise its prices and barely lose a customer. A company people only tolerate can't get away with the same move, so it ends up absorbing more of the cost itself.
A tariff headline doesn't hit every company the same way. It hits the ones most exposed, typically the import-heavy businesses, hardest, while domestic and service companies barely feel it at all. Same headline, two completely different outcomes, and the difference comes down to the answer to check one.
Now let us make it concrete, because a tariff can stay abstract for some until you put numbers on it.
Imagine a company that imports 100 dollars of goods and prices them to keep a 40% gross margin. Under the old 10% tariff, once you add the tariff cost, the goods actually cost the company 110 dollars by the time they arrive. To hold a 40% gross margin, it needed a sale price of 183.33. Under the new 12.5% rate, that total cost rises to 112.50. If it keeps the price at 183.33, the margin slips from 40% to about 38.6%. If it wants the full 40% back, the price has to rise to 187.50, which is a little over 2% more.
| Under old 10% tariff | Under new 12.5% tariff | |
|---|---|---|
| Cost paid at the border | $10.00 | $12.50 |
| Total cost | $110.00 | $112.50 |
| If the sale price holds at $183.33 | 40% margin | 38.6% margin |
| To hold 40% margin instead | $183.33 price | $187.50 price, up 2.3% |
If the whole story were the jump from 10% to 12.5%, this would barely be a story at all. Under the old arrangement, that $12.50 was a cost with a countdown ticking on it, due to disappear in July unless Congress acted. Now it's a line in the cost of doing business, on every shipment, renewing itself every four years unless someone stops it. The number barely moved. What moved was the horizon.
A tariff headline is never one story that hits everyone the same. It's a tax on imported goods that only some companies pay, and the important thing is telling the exposed businesses apart from the ones barely impacted.