Just hours after new U.S. tariffs on Mexico and Canada came into effect, Matt Sattelberg, co-owner of an agricultural equipment distribution company, was already thinking about how to avoid new costs for products in transit and bracing for difficult conversations with a Canadian supplier.
Sattelberg, co-owner of Bay Shore Sales, a family-owned agricultural distributor in Michigan, had a liquid storage tank from a Canadian manufacturer scheduled to cross the border into Michigan on Tuesday. Sattelberg said that the delivery suffered a delay, and he now plans to push delivery further out to avoid new duties.
“I found out today that it wasn't coming,” Sattelberg told Agri-Pulse Tuesday. “I'm going to suggest that it stays in Canada."
Sattelberg’s customer, he said, doesn’t need the tank right away. So, Sattelberg said he would see if he could secure a “better deal in the future months.”
A better deal, as Sattelberg sees it, would involve both Bay Shore and the Canadian manufacturer splitting the costs of the new tariffs. He has already negotiated a price with the customer and Sattelberg said he wouldn’t feel comfortable breaking the agreement to pass the new costs along.
But Sattelberg is not under any illusions. He knows that the manufacturer may not agree to eat some of the tariff costs.
“If we can't come to an agreement,” he said, “I might have to find the customer a different product that I can get without a tariff.”
For a liquid storage tank, that might not be a problem. But Sattelberg said that for many of the other products he distributes, finding alternate suppliers in the U.S. simply will not be possible.
President Donald Trump has suggested new tariffs on the European Union could be coming soon. Bay Shore is the only U.S. distributor of Hatzenbichler, an Austrian tillage, planter and harrowing equipment maker. If those EU tariffs materialize, Sattelberg said, sourcing the equipment to the same specifications and at the same high quality from elsewhere will be difficult.
Multiple ag input manufacturers told Agri-Pulse that the new tariffs are going to force difficult pricing and supply chain decisions that will only become of greater consequence the longer the tariffs remain in place.
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“I'm really afraid that they won't come off, and that it’ll just turn into a trade war,” said Greg Petras, president at Kuhn North America.
The president ostensibly imposed the new 25% duties in response to Mexico and Canada’s inaction to stem the flow of fentanyl and illegal migrants. Both governments highlighted actions they have taken to strengthen border security in recent weeks, yet Trump was not persuaded to drop or postpone the new duties.
On Tuesday, after Canadian Prime Minister Justin Trudeau held a press conference to discuss Canada’s response, Trump hinted at further tariff escalation in a post to Truth Social.
“Right now there's mega-uncertainty out there,” Petras said, creating a difficult environment for businesses making long-term supply chain decisions to ensure future profitability.
Uncertainty “is bad for business” and the impact will show up in “higher input costs for American manufacturers,” he added. The end result will be higher prices for U.S. consumers, Petras and others said.
Price hikes could come swiftly. Petras estimated that Kuhn would have to make pricing decisions in the next 30 days, given the high duty rates. Adding 25% duties to critical input costs from Canada and Mexico and 10% higher duties on components from China, Petras said, could add $25,000 to the price tag of a large piece of tilling equipment.
“That's going to have a big impact on margins,” Petras said. “There'll definitely be impact to the farmer in the end – and pretty darn quick.”
Art Graves (LinkedIn photo)Other input providers are also set to assess how much of the added costs they pass along to consumers. Vive Crop Protection, a startup producing pesticides, has processing facilities in the U.S. but relies on active ingredients imported from Canada. Their prices are already set for this season, but if tariffs endure, agronomist Art Graves told Agri-Pulse that the company would need to think carefully about how to proceed.“We have to be able to compete at the farm level, so our products can't be exorbitantly priced,” Graves said. But he added that as a startup, Vive may not have the profit margins to absorb the full costs of the new tariffs.
The goal is to scale, Graves said. “We need to have profits to do so.”
Canadian manufacturers that can retain their U.S. market share without lowering prices are unlikely to be in a conciliatory mood. Mark MacDonald is the sales manager at Cleanfix, a Canadian company that produces engine cooling fans for agricultural equipment. He told Agri-Pulse on Tuesday that his company has been telling U.S. buyers that they will be paying the costs of the new duties.
“The biggest challenge we've had is dealing with our U.S. customer base and trying to help them understand where the tariff actually gets paid,” MacDonald said. “Which is in their pocket, not ours.”
It won’t just be manufacturers and input producers that will have to re-evaluate business practices because of the new trade environment. Farmers and ranchers will also have to weigh how to proceed and make ends meet amid rising input costs.
Analysts and lawmakers have raised concerns over the impact of the tariffs on U.S. fertilizer prices. Canada provides almost all of the U.S.’ potash imports and the U.S. lacks significant domestic production. Accordingly, The Fertilizer Institute and the Agricultural Retailers Association warned in a statement Tuesday that fertilizer prices are set to increase and “ripple throughout the agriculture community.”
Steve Kuiper, a corn farmer in Iowa who sits on the board of the Iowa Corn Growers, told Agri-Pulse that if the tariffs continue, he would consider dialing back fertilizer use next year to save on costs.
“I think fertilizer demand will diminish a little bit, because folks will be like, ‘well, it's too high. I’ve got to, essentially, balance my budget, and so where do we make some adjustments?'”
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