Heavy equipment manufacturers Caterpillar and Deere are feeling the sting of global import tariffs, with Deere bracing for a half-billion dollars in tariff expenses in 2025, according to the companies' latest quarterly earnings results.
Although both US-based high-and-heavy manufacturers produce and source much of their equipment domestically, they also rely on imports for goods and components. The companies are considered bellwether roll-on/roll-off cargo providers and breakbulk shippers.
Illinois-based Deere & Company estimates it will incur $500 million in tariff costs for the fiscal year, even after factoring in a 90-day reduction announced by the Trump administration for reciprocal and retaliatory tariffs between the US and China beginning May 14.
“This quarter was marked by historic levels of volatility and significant uncertainty across our end markets given the dynamic global trade backdrop,”Deere Chairman and CEO John May said in the earnings call.
Deere sources over three-fourths of its complete goods and components in the United States, but global imports — mostly from Mexico and Europe — account for the remainder.
“The trade environment is certainly fluid, evidenced by trade agreements and adjustments to tariff levels announced in this past week,”Josh Beal, Deere's investor relations director, said in the company's second-quarter earnings call on May 15.
Deere reported $100 million in tariff expenses in the second quarter, while the company adjusted its profit outlook downward for the full fiscal year.
Overall net sales and revenue fell 16% to $12.8 billion in the second quarter and dropped 22% to $21.3 billion for the first half of the year. Equipment sales in all of Deere's sectors continued to slide, with the sharpest declines in construction and forestry (23% to $2.5 billion) and in production and precision agriculture (21% to $5.2 billion).
Caterpillar looks to tariff relief
Tariff reductions for China could soften the $250 million to $350 million blow Texas-based Caterpillar is preparing to endure in the upcoming quarter because of these duties, according to the company's first-quarter earnings results, released April 30.
Half of those costs are expected to cut into the company's construction equipment segment. Another 25% would affect Deere's mining equipment business, while energy and transportation equipment would account for the remaining quarter of the tariff expenses.
In his remarks in the company's April 30 earnings call, Caterpillar COO Joseph Creed said the tariff situation remains in flux but that Caterpillar is closely monitoring developments and evaluating various long-term mitigation strategies.
“Many of these actions require more time to implement and are more difficult to reverse, and therefore require more clarity and certainty on the long-term environment around tariffs,”Creed said during the earnings call.
Imports from China would create about half of Caterpillar's tariff expenses. Speaking ahead of the Trump administration's announcement to temporarily lower its maximum tariff rate on Chinese imports from 145% to 30%, CFO Andrew Bonfield said easing up on tariffs could bring about a“significant reduction”in its estimated costs.
The tariff cost projections came as Caterpillar reported a 10% decline in sales to $14.2 billion in the first quarter, with the company citing changes in dealer inventories.
Sales fell across all of Caterpillar's machinery, energy and transportation segments, with the steepest drop being in construction equipment, which fell 19% to $5.2 billion.
The company is projecting that revenue should be flat for the remainder of 2025.