The Cost of Heavy Equipment is Soaring Under Trump’s Tariffs

Written by SK Ashby

It remains to be seen what will happen if Trump never meets or signs a trade deal with Chinese President Xi Jinping but, even if they sign a deal, and even if China resumed purchases of American agriculture the next day, there's still plenty of pain in store for American companies.

There's still a long year ahead for many American companies because the tariffs that are causing them the most pain are not even up for negotiation at the moment.

Trump's tariffs on foreign steel and aluminum -- tariffs he is not currently considering lifting -- are expected to increase the cost of manufacturing heavy equipment by 7 percent overall and nearly 26 percent in some cases according to the Association of Equipment Manufacturers.

[Economic] analysis conducted on behalf the Association of Equipment Manufacturers and set to be released on Monday by IHS Markit, notes that increased costs and the disruption of supply chains will slowly filter through the overall economy, gradually raising prices for finished goods and curbing employment over the next decade.

Scott Hazelton, a co-author of the report, said tariffs will increase the cost of producing off-road equipment in the U.S. between 6 percent to 7 percent over the period. [...]

The study notes heavy equipment makers are particularly exposed to higher steel prices. Accounting for all steel used - both directly by these manufacturers and the parts they buy from others - the material represents 18.5 percent of the cost of a farm machine and 25.8 percent for mining machines.

Trump's tariffs on foreign metal apply to most countries in the world including our closest trading partners in Mexico and Canada, not just China, and we've seen no sign at all that Trump is considering lifting those tariffs.

The reason Trump imposed the tariffs to begin with, and the reason he will not lift them now, is because he wants the support of metal industry executives and predominately-white, Midwestern labor unions who voted for him in 2016.

I personally don't believe their support will be enough to keep Trump in office for a second term, but he does and that's all that matters to him. There was never an economic reason for starting a trade war. Trump doesn't even know the economics; he only knows that the industry asked for a tariff and he gave it to them.

Trump's tariffs on foreign metal have not translated to substantially higher wages or jobs, but they have been relatively good for you if you're a wealthy metal industry shareholder.