By Mark Maurer

Deere & Co. is considering a reshuffle of its production among existing factories globally and weighing price increases as it aims to offset more than $500 million in expected costs from the Trump administration's new tariffs.

The Moline, Ill.-based farm equipment manufacturer on May 15 said it incurred about $100 million in tariff expenses in the latest quarter and expects more than $400 million in additional expenses through the end of its fiscal year in October. The company booked $7.1 billion in net income for the year ended last October, down 30% from a year earlier, and roughly $45 billion in net sales, down 19%.

At the same time as new tariff costs, Deere and other manufacturers continue to face weak demand for farm equipment from farmers grappling with lower crop prices and higher production costs.

"There's never a great time for additional cost, but certainly not at a time when the market's depressed," Deere CFO Josh Jepsen said. "It does apply pressure to a more challenging time, not only for Deere but the uncertainty that it drives from a customer base."

The company is evaluating the supply contracts it can renegotiate to find efficiencies and cost savings to offset expected tariff costs, Jepsen said. "We may see some things come from China for example to Mexico and other countries," he said. "I would say, generally speaking, on the margins some tweaking but all within the existing footprint."

Deere, like other companies, is also working to obtain certificates for certain products under the U.S.-Mexico-Canada Agreement that would allow it to claim preferential duty rates on goods exported between the countries. The White House has said Canadian and Mexican goods that comply with the USMCA will still be tariff-free. Many of Deere's products are duty-free under the agreement, but it had never completed some of the certificates for import tariff exemptions, Jepsen said.

Deere said soft demand for equipment and significant past price increases due to inflation have tempered the company's desire to raise prices. The company expects to raise prices in some cases, not necessarily due to tariffs, but also as a result of general inflation, Jepsen said.

Deere has already begun rolling out price increases of 2% to 4% for its early order program for sprayers and planters for the 2026 model year in response to inflation. The company hasn't added tariff surcharges to prices during the year ending in October, Jepsen said.

Deere reserves the right to adjust the price between phases of order programs, but once a customer places an order, the company honors the price, Jepsen said.

"We'll continue evolving as we move to our next products that will come here later in the summer and into the fall, when we begin to build those out," he said.

Farmers who own their land will likely generate profits this year on average, but it is still unclear if they are comfortable pursuing major capital purchases, said Joel Jackson, a managing director at investment bank BMO Capital Markets.

"There was always concern that it would be tough [for Deere] to push up pricing because it's gone up so much in the last years," Jackson said. "But with tariffs, they don't really have a choice. Like, what do you do?"

Deere has said that about 80% of the equipment it sells in the U.S. is manufactured there, and roughly three-fourths of its suppliers are based in the country. Nevertheless, its international operations play a critical role in its supply chain. The company attributes 60% of its estimated $500 million tariff cost to levies on goods from the European Union, Mexico and China.

Deere's calculation also factors in potential retaliatory tariffs on the U.S., which would affect its exports around the world, according to Jepsen. "We have a lot of focus on how we ensure that we stay competitive on those export markets because it is an important part of the volume that we produce in our U.S. factories," he said.

A little-known U.S. federal court blocked some of Trump's tariffs on Wednesday, a ruling that an appeals court put on hold while the administration appeals. Jepsen said he expects the company would revise its estimate on the tariff impact when it next reports earnings in August if there are changes, given the uncertainty of President Trump's stop-start trade campaign in recent months.

Many of Deere's midsize tractors are produced in Germany, meaning that shipping them to the U.S. would trigger potential tariffs. The company has the resources to relocate that work to the U.S. if it chooses, said Stephen Volkmann, a managing director at Jefferies.

"If you're going to have tariffs in both directions, they're going to have to deal with that," Volkmann said.

Write to Mark Maurer at mark.maurer@wsj.com

(END) Dow Jones Newswires

May 30, 2025 06:00 ET (10:00 GMT)

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