Morgan Stanley's latest report highlights the potential economic impacts of newly announced U.S. tariffs on imports from Mexico, Canada, and China, which could significantly affect U.S. Treasury yields (TNX). The report outlines three scenarios, with the most severe predicting a 0.7 to 1.1 percentage point reduction in U.S. GDP growth and a 0.3 to 0.6 percentage point increase in inflation over the next 3-4 quarters. "A full implementation scenario does not appear in the price of key markets," Morgan Stanley analysts note, suggesting that the market has yet to fully account for these potential economic disruptions. The report advises investors to consider buying U.S. Treasuries as a safe haven, as tariffs could drive investment into the Treasury market, seen as a "deep, liquid, risk-free alternative." This strategy is based on the expectation that tariffs will create downside risks to nominal GDP, potentially leading to a flattening of the yield curve as financial conditions tighten.