(Bloomberg) -- News that one of the top U.S. tractor companies is dropping made-in-China products should be music to the Trump administration’s ears -- except for the fact that it’s replacing them with machines made in Brazil.
AGCO Corp. is turning to Brazilian factories for a new line of low-horsepower tractors to avoid the 25 percent tariff put in place by the U.S on Chinese products, Chief Executive Officer Martin Richenhagen told reporters in Sao Paulo Tuesday. He projects tractor exports from Brazil to the U.S. to reach 4,000 to 5,000 units next year.
It’s the latest unintended consequence of a trade war between the two largest economies that’s roiling markets and tempering growth expectations.
Both Duluth, Georgia-based AGCO and its larger rival Deere & Co. have warned about negative impacts from a trade war. AGCO has said that tariffs are putting additional pressure on farmers, while Deere has stressed its support for open markets and free trade.
Still, AGCO’s tractor sales in Brazil may also get a boost as China replaces American soybeans with those grown in the South American farming powerhouse.
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