Construction equipment manufacturers and dealers were dealt a blow last week with the introduction of a 50% duty rate on “derivative” steel and aluminum products covered by Section 232 sectoral tariffs.
The additional 407 product categories announced by the Department of Commerce on August 19 included mobile cranes, bulldozers and other heavy equipment, compressors and pumps, and hundreds of other products.
The action comes as the result of aninvestigation into steel and aluminum imports and whether the quantity or circumstances of those imports threaten U.S. national security, with the American Iron and Steel Institute saying, “Section 232 recognizes that steel is essential for military equipment, critical infrastructure and emergency response needs. Keeping these tariffs in place helps ensure that America is not reliant on foreign imports in times of national security threats and crises.”
Unfortunately, American companies and workers will endure the consequences of these actions.The result will be unnecessarily higher costs for machinery essential to building and maintaining infrastructure—such as roads, bridges, water systems, and pipelines—as well as equipment needed for mining critical minerals and tractors that farmers rely on to feed America."
Caterpillar CEO Joe Creed said during an earnings call earlier this month that tariffs are expected to cost the company between $400 million and $500 million in the third quarter and between $1.3 billion and $1.5 billion for the full year.Construction industry sales came in at $6.2 billion in the second quarter, down 7% year-over-year.
Deere reported during its third-quarter earnings call August 14 that tariff costs have risen to around $300 million for the year so far, and it forecasts itsfull fiscal-year tariff impact to rise to around $600 million.
Construction Equipment Impacted by Section 232 Tariffs
A complete list of the 407 product categories added to the steel and aluminum tariffs is in the annex to a Federal Register notice, available here. Codes related to construction equipment, attachments and components include, but are not limited to:
8407/8408/8409 – Spark-ignition reciprocating or rotary internal combustion piston engines, compression-ignition internal combustion piston engines or parts for use with engines with headings 8407 or 8408
8412– Other engines, motors and their parts
8413 – Fuel, lubricating or cooling medium pumps for internal combustion piston engines, other hydraulic pumps and their parts
8426 - Ship's derricks; cranes; mobile lifting frames, straddle carriers and works trucks fitted with a crane
8427 – Forklift trucks and other work trucks fitted with lifting or handling equipment
8429 – Bulldozers, angle-dozers, graders, leveling machines, scrapers, tampers, road rollers, front-end loaders, mechanical shovels, excavators and shovel loaders
8430 – Other machinery for moving, grading excavating and boring machinery for earth, minerals, ores; pile drivers and pile excavators; snowplows and snowblowers
8431 – Parts suitable for use with the machinery of heading 8425 to 8430
8433 – Harvesting or threshing machinery, including straw or fodder balers; grass or hay mowers for lawns, parks or sports grounds with horizontal rotating cutters; or other mowers, including cutter bars for tractor mounting; and parts
8474 – Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or kneading earth, stone, ores or other mineral substances
8483 - Transmission shafts and cranks; bearing housings, housed bearings etc.; gears and gearing; ball and roller screws; clutches, etc.; and parts
8501 – Electric motors and generators (excluding generating sets)
8503 - Parts for electric motors, generators, generating sets and rotary converters
8701 – Tractors (other than work trucks of heading 8709); track-laying tractors
8705 - Special purpose motor vehicles, including wreckers, mobile cranes, fire fighting vehicles, concrete mixers, mobile workshops, etc.
8708 - Parts and accessories of the motor vehicles of headings 8701 to 8705, including gear boxes, mufflers and exhaust pipes, clutches, etc.
My Thoughts 💭
We are witnessing in real time the destruction of the global economy. Construction is already expensive with razor thin margins and now the Trump administration throws gas on this fire with all these regulations. Rational actors will either pass through the cost to customers or come to USA and produce the products here. Either way it will be worth the watch!