Executive Summary
- Agricultural equipment manufacturer John Deere announced layoffs affecting 238 workers across three facilities in Illinois and Iowa, citing declining sales and a struggling agricultural economy.
- John Deere’s third-quarter net income declined 26% and net sales decreased 9%, primarily due to lower commodity prices and the escalating impact of tariffs.
- The company forecasts nearly $600 million in tariff expenses for the current fiscal year, an increase driven partly by higher tariffs imposed by the Trump administration.
The Story So Far
- John Deere is experiencing declining sales and lower order volumes for its equipment due to a struggling agricultural economy and lower commodity prices.
- The company has been significantly impacted by increased tariff costs, including those imposed by the Trump administration on steel and aluminum, which have escalated to an estimated $600 million for the current fiscal year.
Why This Matters
- The layoffs at John Deere, alongside declining sales and profits, signal a significant downturn in the agricultural equipment sector, directly impacting hundreds of workers in the Midwest and reflecting broader economic pressures on the farming community.
- Increased tariffs are a substantial financial burden for John Deere, with an estimated $600 million in costs for the fiscal year, demonstrating how trade policies can directly affect corporate profitability and lead to job losses in specific industries.
- The challenges faced by John Deere and its competitors highlight a specific vulnerability within the agricultural industry, contrasting with an otherwise positive trend in the broader U.S. economy’s corporate earnings.
Who Thinks What?
- John Deere attributes its layoffs and declining financial performance to decreased demand, lower commodity prices, and escalating tariff costs, including those from the Trump administration.
- John Deere’s U.S.-based competitors, AGCO and CNH Industrial, also reported weakened sales during the same period, similarly pointing to muted industry demand and the adverse effects of tariffs.
- Goldman Sachs strategists indicate that the aggregate second-quarter earnings for companies in the S&P 500 rose, suggesting that the agricultural sector’s challenges are not indicative of the broader U.S. economy.
Agricultural equipment manufacturer John Deere has announced layoffs affecting 238 workers across three Midwestern facilities in Illinois and Iowa, citing declining sales, a struggling agricultural economy, and the impact of increased tariffs. The workforce reductions follow a significant drop in the company’s third-quarter net income and sales, as reported on Friday.
Workforce Reductions
The layoffs will impact 115 workers at the Harvester Works in East Moline, Illinois, with their last day of work set for August 29. An additional 52 workers at the Seeding and Cylinder plant in Moline, Illinois, will be affected, with their last day on September 26. Lastly, 71 employees at the Foundry in Waterloo, Iowa, will have their last day on September 19. John Deere stated that these workforce reductions are a direct result of decreased demand and lower order volumes for its equipment.
Financial Performance
On Friday, John Deere released its third-quarter results, revealing a 26 percent year-over-year decline in net income, falling to $1.3 billion. Net sales and revenues also saw a 9 percent decrease, totaling $12 billion. The company attributed these financial difficulties primarily to lower commodity prices and the escalating effects of tariffs.
Impact of Tariffs
During a subsequent earnings call, Josh Beale, John Deere’s Director of Investor Relations, stated that tariff costs in the third quarter amounted to approximately $200 million, bringing the year-to-date tariff expense to roughly $300 million. Beale further updated the company’s forecast for the pretax effect of tariffs in the current fiscal year to nearly $600 million, an increase from a previous estimate of $500 million.
This increased estimate is largely driven by higher tariff rates imposed on the European Union and India, as well as the steel and aluminum import tariffs that the Trump administration increased to 50 percent on June 4.
Industry Landscape
John Deere’s U.S.-based competitors, AGCO and CNH Industrial, also reported weakened sales during the same period, similarly pointing to muted industry demand and the adverse effects of tariffs. However, these challenges are not indicative of the broader U.S. economy. Recent analysis by Goldman Sachs strategists, cited in Bloomberg, indicates that aggregate second-quarter earnings per share for companies in the S&P 500 rose 11 percent from 2024, surpassing initial expectations.
Company Response and Outlook
Despite the current headwinds, John Deere has outlined plans to mitigate some tariff effects and strengthen its position. Earlier this year, the company announced a significant investment of $20 billion into its domestic manufacturing capabilities over the next decade. John Deere emphasized its commitment to maintaining a strong, viable, and competitive U.S. manufacturing footprint.
Josh Beale noted that while recent agricultural policy legislation has been positive and potential developments in trade agreements and demand for renewable fuels could be supportive, the company anticipates customers will continue a measured approach to capital investment until there is more stability in the industry. Employees affected by the layoffs are eligible for recall to their home factories and will receive employment and healthcare benefits based on their length of service.
