How The Tariffs Could Impact Your Machinery Purchases

June 21, 2018 03:33 PM
 
Not only could tariffs cause layoffs and financial uncertainty for equipment manufacturers, but they will increase the price farmers pay for machinery and potentially even halt the manufacturing of some machines.

While there’s been no shortage of discussion, analysis and coverage of the tariff situation the U.S. currently finds itself in, one angle hasn’t been touched on much: machinery. Not only could these potential tariffs cause layoffs and financial uncertainty for equipment manufacturers, but Dennis Slater, president of the Association of Equipment Manufacturers (AEM), says they will increase the price farmers pay for machinery and potentially even halt the manufacturing of some machines. 

“We depend on a worldwide marketplace to have manufacturing work in the United States,” Slater explained to AgriTalk host Chip Flory adding that farm machinery manufacturers sell 40% of their products outside of the U.S. 

According to Slater, the steel and aluminum tariffs increase the cost to manufacture equipment which makes the end product more expensive for the customer. That increased cost can make it very difficult to sell machines to customers overseas, Slater explained. 

“So suddenly the U.S. manufacturer is less competitive and with the increased cost, they also face the fact of how they pass that cost along,” he said. “So, in the end, the consumer or the farmer ends up paying more for the equipment because of the tariffs.” 

What’s more, some manufacturers find themselves in a situation where their suppliers are now too expensive for them, Slater said.

“I've talked to manufacturers that have had their steel prices go up 30-40% and those manufacturers are getting supplies in the U.S. for their steel so you know it really hurts them,” he said. 

Farmers and manufacturing workers will suffer the most. According to Flory when the discussion was about $50 billion in U.S. tariffs, we were talking about tariffs on parts, but if the Trump administration continues to up the ante and we start talking about $200 billion, then we’re talking about tariffs on finished products. 

Slater said manufactures are trying to manage the risk and uncertainty the best they can but inevitably something will have to give. 

“Maybe we aren't going to really be able to build those products right now because it's going to cost us too much to do this and then end up with layoffs. Or maybe I can produce this machine in Europe cheaper because of the tariffs here in the U.S. for steel and again hurting us jobs,” Slater said. 

Either way, once again, farmers will pay the price.

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Comments

 
Spell Check

Tim
Zumbrota, MN
6/24/2018 01:57 AM
 

  Daniel - In reference to your comments about farm labor. When factored for inflation farm labor wages are lower than when I was a kid. I've milked cows, pitched manure , and hand picked pumpkins by the acre. I wouldn't do it now for the wages being offered. If you are unwilling or unable to pay wages equal to , or above other industries in your area how do you expect to get enough help. Operating farm equipment and trucking should pay similar wages to operating construction equipment and trucks. similar skills involved. putting milkers on cows all day long no different than working on an assembly line all day long. I wasn't at the meeting, so I hope I don't misquote him. But I was told a large hog producer in our area stated at a zoning meeting for a new feedlot that there is a word for farm workers - peasants.

 
 
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frankfurt, AE
6/24/2018 05:14 AM
 

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Scott
Menlo Park, CA
6/21/2018 04:27 PM
 

  Farm community voted Trump in and what have they got? No TTP, NAFTA nothing, China tariffs, EU Tariffs,destruction of the markets with corn and beans and hogs trading well below break even (feel for the farmers who went out and bid up land lease rates?), interest rates climbing and equipment costs going up along with the price of steel. Just awesome! Bet there won't be payments for lost profits, just Commodity Credit or other government loans so farmers can go deeper in debt. To quote the president, "it will be wonderful and you will love it".

 
 

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