President Donald Trump’s plan for 200% tariffs on the agriculture equipment manufacturer John Deere would disrupt the supply chain and ultimately hit consumers’ wallets, a Mexico trade expert said.
“Tariffs cause the cost of goods to rise and demand to drop, and it’s just going to cause the cost to rise, the pocketbook of the consumer is what gets slammed,” Jorge Canavati, principal at logistics provider J. Canavati & Co., told FreightWaves in an interview.
On Monday, Republican presidential candidate Trump said he would impose a 200% tariff on imports of John Deere tractors and equipment into the U.S. if the company moved jobs from a plant in Iowa to Mexico. Trump discussed the tariffs at an agricultural policy event in Smithton, Pennsylvania.
“As you know, [John Deere] announced a few days ago that they are going to move a lot of their manufacturing business to Mexico,” Trump said at the event. “I am just notifying John Deere right now that if you do that, we are putting a 200% tariff on everything that you want to sell into the United States.”
Moline, Illinois-based John Deere (NYSE: DE) is a global farm and construction equipment manufacturer. The company has more than 100 factories around the world in 30 countries.
“[John Deere] thinks they’re going to make products cheaper in Mexico and then sell it for the same price as they did before, to make a lot of money by getting rid of our labor and our jobs,” Trump said.
John Deere has four factories in Mexico, including the cities of Monterrey, Ramos Arizpe, Saltillo and Torreon. The company inaugurated its first facility in Mexico in Saltillo in 1984. In June, the company said that production of some of its industrial agricultural equipment would be moved from Waterloo, Iowa, to a plant in Ramos Arizpe.
The decision to move operations was driven by labor market costs, John Deere officials said.
“John Deere’s plan to bring new product programs to our operations in Waterloo, Iowa, makes it necessary to consolidate the manufacturing of cabs from [Waterloo] to [Ramos Arizpe]. The decision to move cab production ensures the company can balance workforce needs within the tight labor market, while also ensuring Waterloo can open up floor space to manufacture new products,” the company said in a statement emailed to media.
The Waterloo plant employed about 1,500 people before the announcement to move production to Mexico, including 1,100 production workers. The company has eliminated 950 jobs from Waterloo since June, according to KCRG.
When one country imposes tariffs on another country, that country often retaliates by imposing its own tariffs in response, Canavati said.
“Case in point is when China countered us for the initial round of the Trump tariffs,” Canavati said. “When Trump levied tariffs against goods from China (in 2017 and 2018], China then slammed U.S. agricultural exports with tariffs. China is one of the most important buyers of U.S. agricultural goods. The losses to the U.S. farmers were just mind boggling. The U.S. government came in and told the farmers, we’ll subsidize your losses. We as taxpayers got a double hit, with import tariffs and then out of our tax dollars we have to pay the subsidies to U.S. agriculture exporters.”
Trump has also talked about levying tariffs of more than 60% on China-made goods if he wins November’s election.
“I’m not looking to hurt China. I want to get along with China. I think it’s great. But they’ve really taken advantage of our country,” Trump said in February in an interview with Fox News.
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