Tariff costs are proving manageable across the power and industrial equipment chain -- Cummins at 'immaterial', CAT reducing estimates, and nearly all companies passing through via pricing -- contradicting fears of margin compression

Despite $2-4B in gross tariff exposure across the power and industrial equipment chain, the net EPS impact is approaching zero for most companies. Cummins described tariff impact as 'immaterial.' Caterpillar reduced its tariff exposure estimate from $2.6B to $2.2-2.4B. Eaton, Carrier, Vertiv, Hubbell, Honeywell, Rockwell, and Trane are all passing costs through via pricing, supply chain reshoring, and import substitution. The equipment supply chain is relocating manufacturing to mitigate future tariff risk. Advanced Energy (AEIS) is pulling forward Thailand capacity. Ichor (ICHR) is qualifying valves in Mexico. MKS Instruments opened in Malaysia. Amkor is ramping an Arizona fab despite 1-2% near-term margin dilution. The reshoring trend creates near-term cost headwinds but structural risk reduction. The key insight is that demand strength is the enabling factor. When order backlogs are at records and customers are providing 8-quarter rolling forecasts, pricing power is sufficient to absorb tariff costs without margin compression. This is a fundamentally different environment than a cyclical downturn where tariffs would compress already-thin margins. The tariff pass-through ability is itself a signal of the demand supercycle's strength.