Agricultural Tractors
Sourcing Guide & Market Intelligence

Tariffs to negatively impact the commercial vehicles and components sector

• In June, the Trump Administration implemented 25.0% tariffs on all automobile and automobile parts imported into the United States, except for those imported from the United Kingdom, which face a reduced 10.0% tariff rate. Additionally, the administration raised tariffs on the import of aluminum, copper, and steel to 50.0%, all vital inputs for automotive manufacturing, and raised the tariffs on heavy trucks made outside the United States to 25.0%.
• In 2024, the value of automotive imports totaled $388.9 billion, which accounted for over a quarter of the total US automotive market revenue that year. Thus, these tariffs are likely to significantly increase the cost of motor vehicles, parts, and maintenance services, as both foreign manufacturers and domestic manufacturers with foreign sub-suppliers face higher import costs.
• According to the US International Trade Commission, Mexico and Canada account for 47.4% of motor vehicle imports to the United States, and 54.1% of motor vehicles bodies and parts. According to Anderson Economic Group (AEG), a Michigan-based economic consultancy, the broad-based 25.0% tariff could raise new car prices by $1,000 to $4,000, and up to $10,000 if manufacturers are unable to mitigate the tariff’s impact.
• Germany is a major exporter of crane trucks, vehicles, vehicle seating and interior trim, and other components in the sector. The higher automotive and metals tariffs will mean that many German companies, even those operating in the United States, will face higher costs to import subcomponents to their facilities in the United States.
• According to Telemetry Insights, many auto parts suppliers will be unable to absorb the tariffs or adjust to mitigate the tariff impact (e.g., relocating their facilities or splitting efforts across three countries). The introduction of 50.0% metals tariffs could drive up production costs further.

Fed lowers rates for the first time in 2025

• On September 17, the Federal Reserve’s Federal Open Market Committee (FOMC) voted to lower interest rates to a target range of 4.0% to 4.25%, down 0.25% from the rate it had been holding since November of last year.
• Despite indications at the start of the year that steady reductions to the relatively high 4.25% to 4.5% rate were on the horizon, the Fed held off on rate cuts for much of the year due to concerns that the combination of higher tariffs and a reduction in borrowing costs could cause rebounding inflation.
• The September cut to Fed interest rates signals a shift in this strategy, indicating that the Fed now considers weakening employment figures a greater threat than inflation. As a result, FOMC officials have also signaled that two additional rate cuts are likely before the end of the year in an effort to fight unemployment and stimulate the economy.
• Declining Fed funds rates will provide relief to borrowers by lowering the market interest rates for consumer and business loans. This reduction in the cost of borrowing will reduce the cost of many banking and financial services, and may spur increases in demand across the economy.

United States announces new tariffs on all imported steel

• In February 2025, the United States announced 25.0% tariffs on all imported steel with no exemptions or exceptions. The tariffs took effect on March 12, 2025. On June 4th, these tariffs were increased further to 50%. These tariffs were not impacted by a recent court decision that temporarily suspended duties on certain goods as they were implemented under Section 232 of the Trade Expansion Act.
• Previously, countries such as Canada, Mexico, and Brazil, the top exporters of steel to the United States, had exemptions from tariffs. These have now been removed and all imported steel, regardless of origin, will be subject to the 50.0% tariff. However, on May 8th, the US announced an agreement with the United Kingdom to remove all levies on steel exported from the UK.
• Due to these tariff increases, the Yale Budget Lab forecasts a 32.9% increase in US metals prices, translating to an estimated 12.7% increase in average tractor prices.