John Deere, the iconic producer of agricultural machinery and equipment, is facing one of its toughest financial times due to President Trump’s tariffs. The tariffs have increased the costs of manufacturing and led to a decline in demand for agricultural machinery. The company has recorded lower profits and is warning that it might be forced to take tough financial measures that will ripple through factories, farmers, and food prices.
Profits Decline as Tariffs Start to Bite
John Deere has reported a 25% decline in profit in the most recent fiscal quarter, with its net income falling to $1.29 billion year-over-year compared to the same period in 2024. Its net sales also dropped by 9% to $10.36 billion. The company’s construction equipment division also saw its profit decline by 47%. These declines are all because of higher production costs caused by the tariffs.
Overall, John Deere expects tariffs to cost the company more than $500 million in 2025. So far, approximately $300 million has been spent on extra expenses such as higher levies on aluminum, steel, and components. The company expects to be hit by a similar amount by the end of the year if the current tariffs remain in place.
However, John May, the company’s Chief Executive, said that the company is trying to stay agile despite the financial distress. “By proactively managing inventory, we’ve matched production to retail demand, enabling our company and dealers to respond swiftly to market shifts and customer needs.”
Layoffs and Restructuring
Due to financial strain, Deere has laid off 238 workers across the Midwest plants in Illinois and Iowa to cut production costs. The company also plans to reshuffle its global manufacturing footprint to reduce its exposure to tariffs.
According to Josh Jepsen, the CFO, the company is also evaluating its supply chains.
“We may see some things come from China, for example, to Mexico and other countries. Generally speaking, on the margins, some tweaking, but all within the existing footprint.”
Only about 20% of Deere’s equipment is imported, yet it makes up 60% of its $500 million tariff costs. The remaining 80% of Deere’s equipment is manufactured locally, and three-quarters of its suppliers are within the U.S. This shows that tariffs are hitting the company hard despite having a large domestic footprint.
Tariffs Deepen Farmers’ Financial Strain
The tariffs have left farmers struggling with a depressed market for their produce. The prices for corn, soybeans, and wheat have fallen over 30% since mid-2022 due to low demand, and now because of retaliatory Chinese tariffs on U.S. soybeans. This has led to lower earnings, forcing many farmers to repair older equipment or rent instead of buying new machines.
Due to the low demand for machinery, John Deere had to slow down production in early 2024 as many of its units remained unsold. Despite introducing more attractive financial offers, sales remain sluggish.
This complicated situation has made it even difficult for Deere to pass on higher costs to farmers since they are also suffering. “There’s never a great time for additional cost, but certainly not at a time when the market’s depressed. It does apply pressure to a more challenging time, not only for Deere but the uncertainty that it drives from a customer base,” said Jepsen.
Due to tariffs and inflation, Joh Deer has no other choice but to roll out 2% to 4% price increases on its 2026 model. This is bad news for farmers who are already struggling with the high costs of machinery.
Uncertain Future Amid Trade Wars
President Trump’s stop-start trade campaign has imposed steep tariffs on aluminum, steel, and other components, causing uncertainty. While some measures have been challenged in federal courts, levies are still in place. Deere therefore has no option other than absorbing the costs or passing them along to customers.
What It Means for Farmers, Jobs, and Prices
For farmers, tariffs mean higher prices for machinery. Unfortunately, this comes at a time when profits from crop revenue are shrinking. Workers are also likely to feel the impact as job cuts are looming following plans to cut production costs.
If farmers decide to pass along their high farming costs to consumers, food prices will also increase. This will see consumers get a share of the pressure.
Deere will be hoping that trade tensions ease in the next few months. If this happens, the company will be able to stabilize and lower the prices of machinery. However, if more tariffs are introduced, the company will face tougher financial times. The impact could be felt in the agricultural sector countrywide.