It appears we are soon going to have tariffs of 20% and more on anything imported from anywhere.
What does this mean for us here at TBN?
Unless tractors, accessories, attachments and parts get an exemption ("necessary services" or something), prices of imported tractors are going to go up by at least 20%. If we finance, payments will go up, since the tractors cost more, insurance (if applicable) will also go up.
Prices for used tractors will also go up (as if they aren't high enough already), just like the prices of used cars rose almost in lock-step with the increased prices and limited availability (from Covid) did on new cars.
As tractors become more and more expensive, we will either keep what we have longer or if we are in a business that relies on tractors, we will have to raise our prices when tractors and parts become significantly more expensive. Fewer tractors will be sold, because WE don't get a 20% raise to compensate for the 20% price increase from the tariffs.
Anyone who uses a tractor as a service (land clearing, mowing, etc.) will also have to raise their prices because their costs just increased.
This all means higher prices for lots of people, many of whom don't even realize there is a tractor somewhere in the "food chain" of goods and services they buy.
This affects Kubota, Kioti, Mahindra, some John Deere, and others. Deere moved part of their production to Mexico to keep the retail price down, and if they decide to come back, their prices will have to go up.
The issues with across the board tariffs are that they increase the cost of anything imported and WE pay these tariffs, not the manufacturers. Tariffs are a tax on US, and they are intended to discourage us from buying imported things, whether or not those things are even produced or available domestically.
A further problem is that when a domestic manufacturer is protected by arbitrary tariffs, they have ZERO incentive to improve their products (because there is no competition) and their prices can rise (again, because there is no competition). You may recall the "invasion" of Japanese cars in the 80s - Detroit had become totally complacent, and protected by tariffs, continued making and selling the same crappy cars they had been making for years. Eventually, they all went broke and had to be bailed out by the government, using OUR tax dollars to do it. (Yes, they eventually paid back most of the loans, and lots of jobs were saved. We may have to do it again because the current crop of Chinese electric cars are very good indeed, and amazingly inexpensive because they often are subsidized by their government.)
Arbitrary tariffs are a mistake. There is, however a rationale for targeted tariffs. If an overseas company is "dumping" their product at or below cost to put a domestic competitor out of business, that is a legitimate reason for a tariff. Interestingly, if it two domestic companies engage in a price war, there is no law against that, and in fact, it happens all the time.
After WW2, the US was the only real market for anything, nobody else had any money and they were busy rebuilding from the war. Now, however, there are lots of countries that can afford to buy imported stuff, and it might be very tempting to a tractor manufacturer (and not just to tractor manufacturers) to abandon what they see as a "hostile" market and sell to customers around the world instead.
Some of them MAY establish factories here, as Honda and Toyota have done, but some of them are simply going to say the US market just isn't worth the trouble and sell elsewhere. Establishing a local factory isn't done overnight, either.
In the interim, we'll have higher prices (new and used) and a narrower selection.
There is an old Chinese curse - "May you live in interesting times." We do.
(Kevlar and fireproof suit on!)
Best Regards,
Mike/Florida
www.theatlantic.com
www.aarp.org
