Caterpillar, Deere Face Tariff Costs Amid Soft Demand

Caterpillar and Deere are facing costs from tariffs, which are limiting their pricing power amid soft demand. Deere's net sales are mainly from agricultural and forestry equipment, with the US accounting for the majority of sales. The companies are struggling with declining sales and revenue due to trade tensions and economic uncertainty.

Caterpillar and Deere, two of the world's leading machinery manufacturers, are facing significant challenges due to the impact of tariffs on their pricing power and overall sales performance. Both companies reported substantial financial setbacks in the second quarter of 2025, with tariffs cited as a major contributing factor.

Caterpillar, a global leader in heavy machinery, reported a $622 million drop in operating profit for the second quarter of 2025, primarily due to tariff-related manufacturing costs [2]. The company expects tariffs to cost it between $1.3 billion and $1.5 billion in 2025, which will likely impact its full-year adjusted operating profit margin [2]. Despite a 1% decrease in revenues compared to the same period last year, Caterpillar's sales volume increased by $237 million, driven by higher sales of equipment to end users.

Deere & Company, known for its agricultural and forestry equipment, also faced headwinds from tariffs and declining sales. The company reported a 9% decline in quarterly sales to $12.02 billion, with production and precision agriculture sales decreasing by 16% [3]. Operating profit slumped 50% to $580 million, primarily due to lower shipment volumes and unfavorable price realization. Deere's net income from financial services increased by 34% to $205 million, driven by a lower provision for credit losses [3].

The companies are grappling with trade tensions and economic uncertainty, which have led to cautious customer demand and a slowdown in sales. Deere's net sales are mainly from agricultural and forestry equipment, with the US accounting for the majority of sales [3]. The persistent headwinds from tariffs have made it challenging for both companies to maintain profitability.

The tariff impact is evident in the machinery manufacturers' pricing power. Caterpillar and Deere are facing increased costs due to tariffs, which are limiting their ability to pass these costs on to consumers. The companies are also struggling with declining sales and revenue, which have been exacerbated by economic uncertainty and cautious customer demand.

The next few months will be crucial for both companies as they navigate the challenges posed by tariffs and declining sales. Investors will be closely watching for any signs of improvement in sales and revenue, as well as any adjustments in tariff policy rhetoric from Washington. The companies' ability to manage costs and maintain pricing power will be key to their success in the coming quarters.

References:
- [1] https://nai500.com/blog/2025/08/ppi-pops-most-since-2022-2y-yields-jump-wmt-cat-in-focus/
- [2] https://www.manufacturing.net/operations/news/22947869/caterpillars-profit-slide-tariffs-impact-machinery-giant
- [3] https://finance.yahoo.com/news/tariffs-bite-deere-profit-demand-142723854.html