Agco plans to spread tariff costs across its full product line, not just the most affected units.
Agriculture equipment manufacturers had hoped to see sales volumes start to recover this year from the current slump, but those high expectations have been lowered by the negative yo-yo impact of U.S. tariff rates — and those tariffs will end up costing farmers in North America more for new machinery and parts, even here in Canada.
Among the many changing justifications for those tariffs proffered by U.S. officials was the desire to re-shore manufacturing across all industries back to that country. But the widespread market uncertainty caused by the tariff war initiated by the U.S. president means that isn’t likely to be very successful in the near term.
Agco, for one, revealed it will not make any immediate major changes to its global manufacturing footprint despite — or, ironically, because of — the U.S. tariffs.
During a quarterly earnings call in early May, Agco CEO Eric Hansotia said the company regularly evaluates where best to manufacture equipment. But it’s holding off making any significant changes for now.
“We’ve looked at that even before the tariffs. We actually look at it every year for our overall footprint, to understand what market demand is looking like and where is the best place to produce. It’s a natural thing we do annually.
To make such a footprint decision, the company needs to be able to rely on a sustainable set of long-term assumptions, he says. “Right now that environment doesn’t exist… we’re waiting until things stabilize. We don’t anticipate making any real changes in manufacturing locations in the short term.”
The tariffs have added to uncertainty for farmers in the U.S. as well, putting further downward pressure on North American equipment sales.
“Geopolitical uncertainty and trade frictions have dampened U.S. farmers’ sentiment recently,” Hansotia says. “And as a result, demand for machinery was lower in the quarter than we expected.”
Agco has seen sales of tractors across all horsepower categories fall in North America during the first quarter of 2025, sinking 14 per cent on average. But recent months have seen the higher-horsepower models take an even deeper dive. Combines have been hit much harder, with sales falling a whopping 46 per cent.
Those reduced sales numbers have cut into the brand’s profit margins. But it still expects sales will begin to improve toward the end of this year.
Tariffs have added to Agco’s production costs, so the brand expects to increase prices on new equipment about one per cent this year. It has already raised parts prices due to the tariff.
“We’ve already assumed some modest price increases,” says Agco’s chief financial officer Damon Audia. “We already have some in effect for our parts products.
“We’re looking to mitigate some of these costs where possible. For some of the products we’ve brought in from Europe, we’re looking at things like bonded warehouses to minimize the price effects of what would happen in Canada.”
While the tariffs will add significantly more to the production costs of some machines than others, Hansotia says the brand will spread those extra costs across its overall machinery range rather than raise the price of just those machines directly affected.
“Just because one product from one country gets a tariff, that doesn’t mean you can put all of that load on that one product. It gets that machine out of whack in the marketplace. Instead we’re looking at it more strategically.
“We’re looking at what are the total costs the company is incurring across all components and machines we export to a new market and then evaluate what can we do about that cost. That’s why we’re so aggressive at taking costs out of the core of the company. That allows us a little more breathing room to be able to manage through that.”
“The largest headwind for us currently is the tariffs (on shipments) coming from the EU,” Audia adds. “Secondarily would be the components coming out of China that we source.”
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