Heavy equipment manufacturer John Deere expects US import tariffs to cost the company $500mn in the fiscal year that ends in October.
The Illinois-based company paid roughly $100mn in tariffs in its fiscal second quarter, which ended 27 April. It expects to pay the US government another $400mn in tariffs during the second half of its fiscal year, executives said Thursday on an earnings call.
Deere plans to recoup its tariff costs through a combination of charging higher prices and reducing its costs, chief financial officer Joshua Jepsen said.
Tariffs also are expected to contribute to lower demand for tractors and other farm equipment produced by Deere. Large agricultural equipment sales across the industry are projected to fall by 30pc in the US and Canada in 2025 due to trade uncertainty and high interest rates, Deere said.
Deere domestically produces 79pc of the completed goods it sells in the US, and 76pc of the components used at its domestic facilities are sourced from US-based suppliers. The company is prepared to invest $20bn to expand its domestic manufacturing over the next decade, chief executive John May said.
The company imports 10pc of the components used in its US plants from Mexico and has begun qualifying its products for exemptions under the US-Mexico-Canada free trade agreement (USMCA) to mitigate the impact of tariffs.
US sales of the company's roadbuilding machinery are subject to the US' 10pc global import tariff rate, as the equipment is predominantly made in Germany.
The company reduced the low end of its profit forecast for the fiscal year to $4.75bn-$5.5bn, down from $5bn-$5.5bn.
John Deere's second-quarter profit fell to $1.8bn, down by 24pc compared with the year-prior period.
