Front-End Loaders
Sourcing Guide & Market Intelligence

Tariffs to negatively impact the building and construction machinery sector

• The United States implemented a blanket tariff of 10.0% on all US imports of foreign goods, as well as a cumulative 145.0% tariff on China and a 25.0% tariff on goods from Mexico and Canada not compliant with the U.S.-Mexico-Canada Agreement. Other large sources for imports of building and construction machinery, like Japan, South Korea, and Germany, may face higher tariffs; as of April 9, a 90-day pause on reciprocal tariffs is in place.
• The increase in the average tariff rate on building and construction machinery imported from tariff-impacted countries will add to the price of imports, which are typically passed on to buyers in the form of higher prices. According to The Budget Lab at Yale, the additional tariffs on imports will increase overall prices for machinery and equipment from 3.1% to 6.4%.
• According to a survey from Construction Equipment Magazine in April 2025, around half of the respondents reported that the higher tariffs would increase operating costs by up to 15.0%, and more than half said they plan to pass those increases along to buyers. The United States implemented a full 25.0% tariff on steel and raised the aluminum tariff to 25.0%, which will increase the cost of raw materials, leading to higher costs for manufactured building and construction machinery.
• As many building and construction machinery brands source parts and components such as steel, engines, and electronics from foreign countries, higher tariff rates will put upward pressure on prices and lead to higher rental rates as manufacturers and dealers pass on costs. In addition, suppliers that source parts from tariff-affected regions may see supply chain disruptions as they seek alternative suppliers to mitigate tariff impacts.
• Japan, one of the largest sources of building and construction machinery imports, will now face a flat 10.0% tariff, negatively impacting US buyers. As a result, major suppliers in these markets, such as Hitachi, Komatsu, Kubota, Sumitomo, Kawasaki, and Toyota, will face obstacles to competition in the US market.

Canada and Mexico tariffs to negatively impact the vehicles and transportation sector

• On March 4, 2025, the United States imposed a 25.0% tariff on goods imported from Mexico and Canada, which applies in addition to other duties or fees that are in place. President Trump announced a 25.0% tariff on all cars and light-duty trucks imported into the United States from any country in April 2025.
• As of April 3, 2025, US automakers compliant with the United States-Mexico-Canada Agreement (USMCA) will continue to be exempt from Canada-Mexico tariffs.
• According to the United States 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.
• Around half of the vehicles and light trucks exported by Mexico to the United States were manufactured by the largest three Detroit-based automakers (GM, Ford, and Stellantis). Other automakers to be impacted include Honda Motor, which sells 80.0% of its Mexican output in the United States, BMW, where nearly all Mexican output is exported to the United States, and Volkswagen, which exported nearly 350,000 cars to the United States that were manufactured in Mexico.
• According to Telemetry Insights, many auto parts suppliers will be unable to absorb the tariffs or make adjustments to mitigate the tariff impact (e.g., relocating their facilities or splitting efforts across three countries). With the introduction of 25.0% steel and aluminum tariffs for Mexican and Canadian imports, and the interconnected nature of vehicle/automotive supply chains (components may cross the US-Canada and US-Mexico borders up to eight times before final assembly), tariff-related costs could drive up production costs further.

Construction activity slumps as interest rates remain high

• During the last three months, total construction spending inched downward by 0.4%, driven by a more sizable 1.0% decrease in private construction spending. However, public construction spending rose by 1.5% during this period.
• Despite recent federal funds rate cuts, interest rates for consumers and businesses have climbed in the last month as increased economic risk has counteracted the lower borrowing costs faced by banks.
• Elevated interest rates weaken construction demand because they increase construction project financing costs. Thus, high interest rates have continued to reduce private construction activity, which is the segment most exposed to interest rate shifts.
• As a result, demand for products and services related to construction is currently weak. However, increasing public sector construction spending is adding to demand in a few construction markets, such as utilities and infrastructure construction.