Original Source: Farm Equipment

TRADE TROUBLES: The on-off approach to tariffs has caused trepidation among ag machinery brands, which rely on international shipping lanes to source components.

While the big ag machinery brands have a prominent manufacturing footprint in the United States, especially in the Midwest, they build equipment in factories throughout the Americas, Europe, Asia and Oceania.

Supply chains are integrated globally and have operated for decades within a mostly free-trade environment. Thus, even machines assembled domestically source components internationally. The Trump administration’s tariffs, including a 25% tax on steel and aluminum, will impact equipment hard. Because of that, ag machinery costs are expected to rise across the board.

“It will affect the overall price because OEMS will pass that cost on to the end consumer,” says James Mertz, director of dealer and government relations at Iowa-Nebraska Equipment Dealers Association. “And if dealers raise prices on equipment, there will be less sales.”

So far, the on-off approach to tariffs has caused trepidation among ag machinery brands, which rely on international shipping lanes to source components. CNH Industrial and Agco, for example, have both temporarily paused some parts shipments in April.

“I would not be surprised to see other OEMs do the same thing,” says Brian McGuire, president and CEO of the Association of Equipment Distributors.

What’s affected so far?

Tariffs are being announced so quickly that it’s difficult to keep up. Here’s a general rundown of notable tariffs that will impact ag, which have been enacted so far:

A 25% import tax has been set on all steel and aluminum, and automobiles.

Most Canadian and Mexican goods are tariffed at 25% except those covered in the U.S.-Mexico-Canada Agreement, and potash, which is tariffed at 10%. Canada has responded in kind and Mexico hasn’t yet announced its response but previously vowed to do likewise.

President Donald Trump most recently announced 125% tariffs on Chinese imports. China responded with its own 125% tax.

The previously announced 10% baseline tariff on all imports has been suspended until July.

Market impact of tariffs

With uncertainty around tariffs roiling supply chains and prices, the U.S. ag equipment marketplace has slumped. Combine sales were down 37.4% in March, while ag tractor sales declined by 13.6%, according to the Association of Equipment Manufacturers’ latest report.

“The drop in agricultural tractors and combines in the U.S. reflect the complex challenges facing the market,” says Curt Blades, AEM senior vice president, about the data. “There is uncertainty due to tariffs and the overall ag economy.”

But Blades says he holds an optimistic view on agricultural equipment’s long-term outlook. However, in the short term, it’s difficult to predict what will come next.