Even with a 30-day pause on the implementation of 25% tariffs on goods from Canada and Mexico, the equipment sector is feeling at risk from new tariffs on China — and the potential for tariffs on Canada and Mexico.
President Donald Trump and Canadian Prime Minister Justin Trudeau agreed to a 30-day tariff pause Monday afternoon, according to social media posts from both. That followed a morning agreement between Trump and Mexican President Claudia Sheinbaum agreeing to a one-month delay on tariffs between the two countries.
Association of Equipment Distributors (AED) President and Chief Executive Brian McGuire praised the agreements.
“AED commends President Trump for allowing continued dialogue before implementing draconian tariffs,” he said in a release. “AED looks forward to working with the Trump and Trudeau Administrations to come to a mutually beneficial resolution without placing undue obstacles to trade.”
The release follows a Monday webinar hosted by the AED in which McGuire affirmed the organization’s opposition to tariffs.
“We don’t agree with tariffs and certainly we’re partnering with or looking to and speaking with our sister and brother associations that have a common goal, and we’ll see as time marches on and who’s willing to speak,” he said. “As more come out in opposition, you tend to see others come out here, but certainly, AED is reaching out to our OEM partners. We will be over the next week to do so.”
Direct, indirect tariff concerns
Equipment companies must look at both the direct and indirect impacts of tariffs, with supply chains being directly affected, Kristen Owen, executive director of equity research at Oppenheimer told Equipment Finance News.
“Many companies have shifted their supply chains closer to home since 2019, which means rather than China being the biggest potential risk, it’s now Mexico,” she said. “While we got a little bit of reprieve with the month-long delay, it is certain to cause some renewed concern about the fragility of the global supply chain.”
As far as indirect impact goes, the potential inflationary impact placed on tariffed goods is difficult to measure, Owen said.
“For example, in agriculture, what does a 25% tariff on potash mean for the U.S. farmer, and how will this impact farm equipment manufacturers? This is coming at a time when there were perhaps some early signs of relief as we look toward the latter part of the year for those manufacturers,” she said. “So there is now this question of how the threat of tariffs impacts the potential for machinery demand recovery.”
While the supply chain, agriculture, construction, steel and machinery could all face inflationary pressures under tariffs, the uncertainty can significantly impact the equipment and equipment finance market, Owen said.
“For a capital-intensive industry like heavy equipment, uncertainty is likely to result in everyone taking a hard looking at their capital spending and equipment needs and determining what is essential and what can wait,” she said.
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