Largest construction machinery firm fears Trump tariffs – our business based on free trade

Komatsu is the world’s second-largest construction machinery firm, after Caterpillar ( yes, my headline is incorrect on this point).

• Top Business Risk for Komatsu:

  • Komatsu’s primary concern under Trump’s presidency is potential retaliatory tariffs by Canada on American-made mining machines.
  • Canada’s retaliatory duties could significantly impact Komatsu, as Canada is the largest export destination for its U.S.-made mining equipment.

• Trump’s Trade Policies:

  • Trump’s proposed tariffs on imports from Canada, China, and Mexico may provoke retaliatory trade barriers.
  • Komatsu, a global manufacturer earning over 25% of its sales from North America, sees retaliatory tariffs as a “one-two punch” to its export-focused business model.

• Komatsu’s U.S. Operations:

  • The company employs about 8,000 staff in the U.S. and exports $1 billion more than it imports annually, following its acquisition of Joy Global in 2017.
  • Komatsu relies on free trade for its U.S. operations and views a potential trade war as a major threat.

• Impact of Tariffs on Components:

  • Tariffs on U.S.-bound components like sheet metal from China would have a minor impact and could be mitigated by shifting to alternative suppliers in Southeast Asia within 2-3 months.

• Fossil Fuel and Heavy Machinery Demand:

  • Trump’s pro-fossil fuel stance might offset declining U.S. demand for heavy machinery caused by oversupply in the rental market.

• Komatsu’s Investment Plans:

  • Komatsu plans to invest $80 million in a mining equipment service center in Arizona and $65 million in ABS, a Detroit-based battery maker acquired in 2023.
  • The company remains committed to investing in the U.S., regardless of the political landscape.

• Market Outlook:

  • Komatsu expects a “challenging” business environment in the upcoming fiscal year, with flat global demand, rising fixed costs, and limited opportunities for price increases as supply chains normalize.

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Political meddling is going to weigh into a rocky 2025 for many firms.

This article was written by Eamonn Sheridan at www.forexlive.com.