By MICHELE F. MIHALJEVICH

Indiana Correspondent

MILWAUKEE, Wis. — Farm equipment sales were mixed to begin the year, but officials with the Assoc. of Equipment Manufacturers (AEM) are concerned tariffs announced by President Donald Trump might have a negative impact on the industry.

The latest AEM sales report, released in mid-March, showed sales of two-wheel-drive tractors under 40 hp were down 3.6 percent in January and February from the same period in 2017. Two-wheel-drive tractors with 100 hp or more dropped 10.6 percent, while those with 40-100 hp rose less than 1 percent.

Four-wheel-drive tractors were up 15 percent and self-propelled combines increased 22.4 percent.

“I was so enjoying everything from the December and January (sales) reports,” said Curt Blades, AEM senior vice president for agricultural services. “I hate to put too much credence on one month. I was expecting some of the things from tax reform to trickle in. The tariffs got everyone spooked in the equipment market.”

Trump has called for a 25 percent tariff on steel imports and 10 percent on aluminum. The European Union and six countries – Argentina, Australia, Brazil, Canada, Mexico and South Korea – have temporarily been exempted from the tariffs, which were scheduled to go into effect March 23.

The President also announced last week he would impose about $60 billion worth of tariffs on Chinese goods. In response, China said it was considering tariffs on 128 U.S. products, including pork, dried fruits and nuts, fresh fruit and modified ethanol.

United States Steel Corp. said March 7 it plans to hire 500 workers over four months as it reopens a blast furnace and steelmaking facility in Granite City, Ill. The company said the move was a result of the tariffs.

The tariffs will put U.S. equipment manufacturers at a competitive disadvantage and “risk undoing the strides our economy has made due to tax reform,” AEM President Dennis Slater said. “Steel accounts for roughly 10 percent of equipment manufacturers’ direct costs. The price of steel has already risen in anticipation of the administration’s actions and a 25 percent tariff will only further erode the progress our industry has made over the past year.

“President Trump should back away from these tariffs and redouble his efforts instead on policies that will create manufacturing jobs – not put them at risk.”

Blades said the sales numbers for combines and larger tractors are a good indication the industry is in a replacement market. Manufacturers are preparing for sales to be lower than hoped, he added.

“They’re beginning to work on readjusting for not as strong a recovery as we’d like,” he explained. “It’s not all positive but it’s certainly not all negative. We were so excited about tax reform. There are a lot of goodies in there for famers.

“Honestly, this is a wait-and-see situation. I would love to say (sales numbers) are neutral. We’ve got some black swans out there. We’ve got the possibility of a double whammy – increased prices for farm equipment plus a trade war sparked by the tariffs. That could really hurt.

“As optimistic as farmers are and as much faith they have their plants will grow, there are a lot of storm clouds out there shaking that optimism,” he said.

Richard Wilkins, former president of the American Soybean Assoc. and a farmer in Greenwood, Del., owns a small short line equipment dealership.

“Because of the state of the general farm economy, purchases of new equipment have drastically fallen off,” he noted. “For the most part, more farmers are in a wait-and-see mode. They don’t want to endanger any more equity. I don’t think most farmers will think about potential cost increases of goods such as equipment until they go out to buy. It doesn’t hit home until you go to make a purchase.”

Chinese retaliation against the tariffs would be bad for U.S. agriculture because American farmers depend so much on trade, said Wally Tyner, a professor of agricultural economics at Purdue University.

“A good target for China to use would be U.S. soybeans,” he said. “We export about two-thirds of our soybeans and of those exports, 62 percent go to China. If China retaliates, the impact could be pretty severe. If a trade war starts, agriculture is going to be a big loser, especially Midwest agriculture.”

The impact of the tariffs on industries in Indiana may be mixed, Tyner said. The state is one of the largest steel producers in the nation. “The tariffs will raise the prices of steel and aluminum and add jobs. All of this is true, but it’s not the whole story; it’s half the story.”

Indiana is the second-largest automobile producer in the country and also manufactures trucks, tractors, recreational vehicles and engines, he said. “One in four jobs in the state are transportation manufacturing-related. All of those companies are going to get hurt. As their prices go up, their sales go down.”

By implementing the tariffs, Trump is helping a part of his political base he promised to help, Tyner said.

“But rural America backed him,” he pointed out. “Groups fearing the tariffs have to be in play right now. They have to convince him, educate him this is a lose-lose situation.”