If I told you corporate profit margins were likely to hold up better than feared next year in the face of what, even in an optimistic scenario, will be an average US tariff rate roughly quintuple the rate that prevailed before Donald Trump took office for a second time in January, you’d probably believe me.

After all, most things in “Trump 2.0” have turned out better than feared unless you count an accelerated pace of institutional erosion in America, democratic backsliding on a scale unseen in the history of the republic, the repudiation of the rule of law, the flouting of the courts and Congress’s complete abdication of the powers granted it by the Constitution.

Ok, so now that I think about it, maybe it’s better to say most things related to tariffs have turned out better than feared, at least if you define the worst case by reference to “Liberation Day.” A testament to just how much better the operating environment turned out to be following April’s brush with economic oblivion was Q2 reporting season in the US, when corporate management teams hurdled a lowered bar on the way to the best EPS beat rate on record outside of recession recoveries.

Seen in that light, at least, it’s not far-fetched to expect corporates will prove themselves generally adept at navigating the choppy waters around the tariffs next year, and at passing along enough of the costs to preserve margin, but no so much as to sacrifice volumes. That said, it probably is far-fetched to expect the C-Suite to prove so adept in that regard that margins expand by 100bps. Have a look at this table, from Goldman:

Consensus expects 96bps of margin expansion for the index in 2026. Incredibly, profitability’s seen expanding more for mid- and small-caps than for the Mag7.

Color David Kostin skeptical. “[A]nalyst 2026 margin forecasts appear overly optimistic, reinforcing our expectation for gradual downward revisions to 2026 EPS estimates in coming months,” he wrote, in his latest, casting a wary eye at expectations for “dramatic” margin expansion next year.

“While companies remain confident in their ability to mitigate the cost pressures imposed by tariffs, and arithmetically the superior margins of the largest technology companies should continue to boost margins for the aggregate index, we see little reason to expect a large increase in profit margins next year,” he went on, calling mid- and small-cap margin estimates “even more vulnerable.”