The Farm Equipment manufacturers are hard at work producing the equipment for another harvest season. Despite some concerns about the farm incomes expected in the coming season, there is a lot of uncertainty surrounding the effect of the current administration’s free use of tariffs and trade wars.
An import tariff is essentially a tax on the American consumer. Prices in America of anything made of steel and aluminum will go up in the months following the imposition of tariffs. This forces domestic manufacturers to manufacturer their products with higher cost raw materials. For example, next time you look at your car or your truck- estimate how much steel and aluminum is in your vehicle. Increase the cost of that metal by 10-20% and that will be the amount the domestic auto maker has to raise prices to stay even after the tariff is imposed. Alternatively, manufacturers can use domestic steel and aluminum if the all-in costs get close enough to imported materials. But these costs are still much higher than before the tariff. Result- tariffs are a tax on Americans.
The other impact that is less readily apparent is when our trading partners enter into the trade war by imposing tariffs on American goods – like Agricultural products. Not just the equipment- harvesters, balers, planters, spreaders, etc., but also all of the dairy and agricultural products this country has supplied to the world that has generated so much wealth in the United States. So when our agricultural equipment manufacturer customers are considering their purchases of industrial agriculture products from Mechanical Power like disc harrow and agricultural bearings, worm gears and bevel gears, or engineered-class pintle chains, they have to sharpen their pencils and consider the impact of import tariffs on their production schedules.
Just like any war – a Trade War is costly for all of the combatants and usually someone declares themselves the winner when trade policy needs to be addressed to try to restart the economy after the damage has been done.