Tariffs cause turmoil for US and Canadian farmers' machinery manufacturers

Around a recent Canadian farm show, salespeople of equipment struggled to close deals with farmers who were worried about tariffs.

Some combines can cost more than $800,000. A surprise tariff hike would mean a big hit to most farm budgets.

The Trump administration spared Canada's global tariffs of the Trump Administration on April 2, but it still faces tariffs for steel and aluminum exported to the U.S., as well as autos that are not compliant with United States-Mexico Canada Agreement on Trade.

Farmers in Canada were still unsure as of Friday if agricultural equipment was subject to duties or Canada's retaliatory taxes. It could take several weeks to sort out all the details.

Manufacturers are also pulling back on their plans to produce new combines, tractor and other farm machinery.

Case IH, a Racine-based agricultural equipment manufacturer owned by the global giant CNH Industrial and headquartered in Wisconsin, informed hundreds of employees in North Dakota, Minnesota, and other states of their layoffs in March. The company didn't immediately respond to our request for comment.

Farmers and salespeople interviewed said that the uncertainty scares them away from buying imported equipment from the U.S.

Bill Prybylski of the Agricultural Producers Association of Saskatchewan with tens of thousand members said that farmers in Saskatchewan will be cautious when it comes to capital expenditures. He was pointing at a huge green John Deere combines during the March farm fair.

In the crowded halls of the show, many farmers inspected the tracks and tires of the combine harvesters and seeders. They also viewed the rockpickers.

The manufacturers were also worried about being on the wrong end of a tariff.

Derek Molnar said, "We don't know where we're going with all the balls that are in the air," in front of an exhibit of bright yellow farm tools from Degelman Industries.

The risk of major tariffs being imposed on a product is too high, especially when machinery purchases are often negotiated up to a full year before delivery.

Gunter Jochum is a Manitoban farmer who said, "We personally decided to hold off on purchasing new farm equipment." "We decided that we would keep our combines for longer."

Jochum buys equipment from all over the world, just like many farmers: Claas combine made in Germany and America; AGCO tractors, Case sprayers, and Case sprayers, both American-made; and a Canadian Bourgault seeder.

Kip Eideberg is a senior vice-president at the Association of Equipment Manufacturers. The association represents John Deere, Case IH, and other heavyweights.

Eideberg stated that 30% of U.S. agriculture equipment is exported with Canada being the largest foreign market.

Tariffs will disrupt North American supply chain, increase costs for equipment manufacturers and threaten tens thousands of jobs that support families.

Jamie Pegg said that Honey Bee, a Frontier, Saskatchewan machine manufacturer, would be forced to reduce production in order to avoid a buildup of inventory if tariffs or fears about tariffs affected sales.

He said, "Inventory can kill you."

Uncertainty is "creating an awful environment for business" for Canadian machinery dealers. Nancy Malone, Vice President for Canada of North American Dealers Association whose members purchase machinery, fertilizers, and other large-ticket items for local farmers, said.

Malone says she's lobbying the Canadian Government to prevent any retaliatory duties from Canada against U.S. agricultural equipment.

Malone predicted that paralysis would soon reign.

She said, "We will wait."

(source: Reuters)