With crops in the ground, Kinze Manufacturing’s Iowa facility has shifted from building planters to grain carts. But the stamped steel flowing through production lines now costs much more than it did two years ago.
Farm equipment prices, both new and used, keep climbing despite plummeting demand — a paradox squeezing farmers already reluctant to spend amid a pressured farm economy.
The main culprit? Tariffs that have cost manufacturers billions and fundamentally reshaped the agricultural machinery market.
In its latest report for May, the Association of Equipment Manufacturers documented a 56% decline in U.S. combine sales, while tractor sales dropped 21%.
Used inventory is shrinking across categories — down 28% for utility tractors, more than 16% year over year for high-horsepower tractors, 10% for combines, 19% for sprayers and about 26% for planters, according to Sandhills Global’s market report for May.
“If you look at a number of these [machinery] companies, there’s no question that they’re hurting over the last few years with sales and everything because farmers are reluctant to spend,” said Joseph W. Glauber, former chief economist at USDA.
It’s been one year since President Donald Trump’s Liberation Day, when he announced a baseline 10% import tax on all countries while doubling Section 232 steel tariffs from 25% to 50%. Manufacturers have absorbed some of those added costs, while passing others on to farmers.
In its latest earnings call, CNH Industrial reported that ag machinery-related tariffs have cost the company $120 million. Caterpillar, meanwhile, anticipates spending more than $2 billion on tariffs this year.
Easing equipment burden
With farmers facing increasing input costs amid an unpredictable commodity market, further aggravated by trade disputes, rising equipment prices seem untenable. In response, the Trump administration recently reduced its 25% tariff on imported farm equipment to 15%. Manufacturers that source 85% of steel domestically qualify for a 10% rate.
But that’s a difficult mark to hit. Today’s farm equipment is constructed via a globalized capitalistic system. No one country does everything, which makes it difficult for companies to source so much domestically. Components are built and shipped from everywhere, crossing many borders before final assembly.
“If you make it more expensive to do business in the United States, to manufacture in the United States, then you could actually have a counterproductive result, where the incentive is for companies to produce elsewhere so they can get raw materials and get the parts more affordably,” said Bryan Riley, director of the National Taxpayers Union’s Free Trade Initiative.
Claas, for example, moved production of its Lexion 8000 Series combine from Omaha, Neb., to Germany last fall, citing high import costs.
Experts say reducing tariffs on farm machinery is a positive step toward a healthier manufacturing environment — and lower equipment costs for farmers.
“I don’t think the story is done yet in terms of where the final tariffs will be on farm machinery,” Glauber said.
Perhaps not. But not everyone has the luxury of waiting to find out if they’re further reduced because machinery investments can’t always be planned. Old machines can only be pushed so far.
For those who need to buy now, it might be as good of a time as ever. Used equipment prices are stabilizing, if not softening somewhat. The Trump administration’s 10% tariff cut — good through the end of next year — will assuredly provide a little more breathing room within tight financial margins.