Thoughts on the Market
2026-04-24 · Hosted by Mike Wilson · Morgan Stanley
Executive Summary
Morgan Stanley’s Global Chief Economist Seth Carpenter and economist Mayank Phadke examine whether tariffs have achieved their stated goal of reshoring US manufacturing. Their conclusion: the data shows very little net effect. While energy markets have dominated client conversations recently, tariffs remain significant for CapEx, domestic production, and Federal Reserve policy. The effective tariff rate has declined to 8.5% but is expected to stabilize around 10% as new Section 301 and 232 authorities replace expiring IEEPA tariffs.
Key Stories & Changes
1. Effective Tariff Rate Declining but Not Disappearing
US effective tariff rate has fallen to 8.5% as of February
Decline accelerated after Supreme Court ruling on IEEPA
Country-level IEEPA tariffs temporarily reconstituted under Section 122, expiring July 24
Expected aggregate effective rate of approximately 10% after transition to new authorities
Two sets of Section 301 investigations announced in March covering virtually all major trading partners
2. Reshoring Evidence Is Limited
Domestic steel production has risen as imports fell — consistent with reshoring narrative on the surface
However, total supply of steel to the domestic economy hasn’t risen
US steel prices have materially diverged from global peers
Across industries broadly, increase in domestic production has come largely in nominal terms (price increases, not volume)
Evidence for meaningful reshoring is “quite limited”
3. Tariff Timeline and Legal Framework Shift
Section 122 tariffs expire July 24, 2026
New Section 301 and Section 232 tariffs expected to replace them
Comments requested by April 15, hearings scheduled for early May
Section 301 investigations expected to complete over the summer
Section 232 tariffs to arrive in waves as sector-based investigations proceed
Trends Identified
1. Tariffs Raising Costs Without Boosting Output
The central finding from Morgan Stanley’s analysis is that tariffs are raising domestic prices without meaningfully increasing real output or productive capacity. When separating nominal from real effects across industries, the data shows price increases rather than genuine production gains. This confirms the traditional economic view that tariffs reduce productive capacity while raising costs.
2. Legal Framework Transition Creating Uncertainty
The shift from IEEPA-based tariffs (struck down by the Supreme Court) to more durable Section 301 and 232 authorities creates a period of policy uncertainty through the summer. While the aggregate level may end up similar (~10%), the industry-specific impacts could differ meaningfully, keeping businesses uncertain about CapEx and supply chain decisions.
3. Non-AI CapEx Weakness Persists
The conversation highlights that non-AI capital expenditure remains soft, a consequence of tariff uncertainty and the lack of genuine reshoring momentum. The stated motivation for tariffs was to boost reshoring and domestic production, but with limited evidence of success, the case for tariff-driven CapEx remains weak. —-
Sentiment Analysis
Overall Market Sentiment: Cautiously Skeptical
The hosts present a data-driven, skeptical view of tariff effectiveness while acknowledging tariffs are here to stay at roughly current levels.
Risk Factors Highlighted
Tariff-driven price increases without output gains: Higher domestic prices across industries without corresponding volume increases reduce US economic competitiveness
Section 122 tariff expiration on July 24: Creates uncertainty as authorities transition to Section 301 and 232
Non-AI CapEx weakness: Soft capital spending outside of AI suggests limited private sector confidence in reshoring
Steel price divergence from global peers: Higher US steel prices signal cost disadvantage for domestic manufacturers using steel as an input
Accelerated Section 301 investigations: Faster-than-historical timelines for trade investigations could produce abrupt policy changes
This episode was covered in today’s The Market Signal — 2026-04-24, a cross-source synthesis of multiple podcast reports.