Deere & Co. is used to being a political symbol, with its iconic yellow and green tractors and lawn-mowers serving as powerful emblems of America’s heartland and how the country likes to see itself.
But it’s not accustomed to having this role in a campaign. Two weeks ago, Republican presidential candidate Donald Trump slammed Deere for its plans to move a portion of its production to Mexico to reduce costs, and he threatened to pile hefty tariffs on some of its goods if it follows through.
“I’m just notifying John Deere right now, if you do that, we’re putting a 200% tariff on everything that you want to sell into the United States,” Trump said at a Sept. 23 event with farmers in rural western Pennsylvania, where the backdrop literally featured Deere vehicles.
This is fairly familiar territory for equity traders, who experienced four year of back-and-forth tariff talk during Trump’s previous presidency. What has changed, however, is how the stock market responded — or more accurately, didn’t respond — to the threats. There was no panic, no knee-jerk selling of Deere shares. Instead, the stock continued on its upward trajectory, ending that week at a 52-week high.
It has since retreated from those levels due to a series of unrelated issues facing Deere: sluggish industry-wide demand, falling values of large farm equipment, the dockworkers’ strike and the storms hitting the South. But looking more broadly, it appears investors are looking past the tariff bluster and trying to separate political rhetoric from what will actually happen.
“It is very hard for a tariff that never happened to hurt the market,” said David Bahnsen, chief investment officer at The Bahnsen Group, which has about $6 billion in assets under management. “Trump himself has said that those things are negotiating tactics.”
This may explain why despite tariffs being among Wall Street’s biggest concerns this election season, stocks and sectors that typically struggle when trade tensions rise haven’t flinched. A basket of shares created by UBS to monitor companies expected to lose from Trump’s tariff plans has actually risen 7.8% over the past three months, more than double the S&P 500 Index’s 3% gain. Caterpillar Inc., which like Deere is often a casualty of these fights, has seen its stock price climbing for a month and it hit a record high on Monday.
Broad Risks
Still, the risks are real, with the impact of tariffs being felt in numerous industries, from automobile makers to metals producers to apparel manufacturers. But the concerns are particularly acute for big agricultural machinery companies, like Deere, AGCO Corp. and CNH Industrial NV. China is the biggest buyer of US agriculture products, particularly corn and soybeans, and if demand from there is reduced farmers will have less cash to buy equipment.
Trump is proposing a 10% to 20% levy on all imported goods and 60% on Chinese products. He also has floated the idea of giant new tariffs on cars from Mexico and goods from any country that abandons the US dollar. This could have a devastating impact on the stock market.
“Implementation of universal tariffs could lead to a 10% pullback in US equities,” UBS economists and strategists wrote in a note last month. They estimated a cumulative drag of 1% to 1.5% on America’s economic output, leading to a mid-single digit decline in the S&P 500 profits, which in turn would send the stock prices falling.
Regardless of whether Trump or Democrat Kamala Harris wins the election, there’s a 70% chance tariffs will be imposed, according to an analysis by Bloomberg Intelligence. That isn’t surprising since the Biden Administration maintained Trump’s original tariffs and placed additional levies on goods from China, and Harris hasn’t signaled a shift from Biden on trade policy.
The Harris campaign declined to comment for this story.
The Trump campaign said in a statement, “President Trump successfully imposed tariffs and negotiated new trade deals that leveled the playing field for American agriculture and manufacturing – allowing U.S. industries to send more made-in-America goods across the world.”
Increased Costs
Deere pointed out that less than 5% of its sales were manufactured in Mexico in fiscal years 2023 and 2024, but did not comment on the China tariffs. AGCO deferred to the Association of Equipment Manufacturers for comment on trade issues, which estimates that the Trump administration’s levies increased manufacturing costs by 6% to 7%.
“Not only did the tariffs drive up the cost of domestic manufacturing, but the Chinese — a big buyer of soybeans, in particular — put retaliatory tariffs on,” said Kip Eideberg, senior vice president of the AEM. “So that hit farmers twice, both on the cost of the equipment, but also on the ability to sell their their produce.”
If Trump wins next month’s election, US farmers may take a “wait-and-see approach” when it comes to making decisions about buying farm equipment until there’s a clearer sense of how trade relations with China will work, prolonging the agriculture equipment industry’s demand issues, said Christopher Ciolino, senior analyst at Bloomberg Intelligence.
“A potential Trump presidency could revive a trade war and incite a more hostile relationship with China, posting a risk to US agricultural exports and equipment purchases,” he added.
Ultimately, Wall Street pros say the smartest approach for investors trying to navigate through all the tariff headlines is to hold off on any bold bets until more concrete details emerge. Looking at positioning data from options markets and hedge fund activities, the so-called smart money appears reluctant to make any definitive election-related wagers and instead is focusing on the broader macro issues driving the economy.
“Based upon John Deere’s stock performance since Trump’s threats to that company, it seems like investors are considering that as empty rhetoric,” said Eric Sterner, chief investment officer at Apollon Wealth. “More serious investors are focusing on the bullish signals to the market including a resilient economy, a moderating yet still very healthy labor market, and a consumer that remains in good financial shape.”
