Home 5 Ag Stories Tariffs drive North American farm machinery prices higher

Tariffs drive North American farm machinery prices higher

Source: Wikimedia Commons

Farm Machinery Prices have gone up 3 to 4 percent directly due to tariff disruptions. That is the view of North American machinery manufacturers.

From Canada to Mexico, and especially in the middle lands of the U.S of A, trade tariffs are raising manufacturing costs and ultimately, consumer prices. The industry wants them gone and to regain the tariff-free environment initiated in the 1990s.

Audio: Money Matters Program 

Industry analysts say the North American farm equipment supply chain has had to increase its product pricing by at least three to four percent – directly due to tariff disruptions.

Another result of tariffs is a larger-than-normal inventory of new equipment sitting on lots. Steve McCabe, executive director of AMC, the Agricultural Manufacturers of Canada, says the industry is happy to see the tariffs lifted because many of his organization’s members had continued to build equipment after deciding against laying off employees.

“A lot of our members have manufacturing facilities in the US as well. In most cases, they’re the big employer in their small communities. So, there’s a lot of iron sitting out in a lot of our members’ yards, waiting to be sold. It is sitting there as inventory, and now that the tariffs have been lifted, I think we’re going to see a lot more movement of product.”

Fraser Johnson is a professor of economic supply chains at the Ivey Business School at the University of Western Ontario. Professor Johnson finds the entire Tariff-driven business climate ironic, as it’s being waged at a time when large scale trade agreements have been so successful over the past few decades.

“Organizations have, since the development of the free trade agreement back in the 1990s, set up supply chains that are fully integrated based on a tariff-free environment. The uncertainty created by the constant changes in policies by the US government makes it difficult for companies to be able to establish long term plans.”

Tariffs may benefit involved government coffers in the short-term, but the money itself is borne by the marketplace. Steve McCabe of AMC explains.

“It’s a trickle-down system. There’s a lot of suppliers that supply wire, supply the paint, supply the steel that goes into the final products. They had given their customer pricing a year out before the tariff hit. You can’t go back ‘Oh, by the way, we need to increase that by 25% because now we have this huge tariff’.”

While Canada, Mexico, and other countries continued by the tariff specter the US is the largest consumer marketplace and has as much, if not more to lose from tariff disruptions.  Professor Fraser Johnson adds:

“Tariffs are a tax on the consumers. So as the US government puts tariffs on goods coming into the US, that’s really a cost that the American consumer is going to have to pay. Some of the decisions that are being made in the US right now, I think, are overall going to end up hurting the consumer and, I think, the economic performance of Mexico, Canada, and the US.”

Tariffs imposed on steel, as an example, raise the cost, either by paying it directly or seeking other sources of supply which are higher than the previous price.