Farm equipment sales dive as Trump trade war hits rural U.S.

Purchases of farm equipment plunged by an annualized $900 million in the first quarter of the year, the sharpest drop in three years, as U.S. producers struggle with falling commodity prices and the fallout of President Trump’s trade wars.

The Commerce Department cited the drop in agricultural machinery purchases as a contributor to the paltry 0.2% quarterly rise in overall business spending on equipment, also the weakest performance since 2016. The softness in the category came despite promises by Trump and Republican leaders that tax breaks for equipment purchases in the party’s signature tax law would boost investment by farmers and manufacturers.

The reluctance of farmers and other business owners to invest in equipment flashed a cautionary signal in a report on the U.S. economy that overall surprised forecasters with stronger-than-expected results. The Commerce Department reported Friday that U.S. growth accelerated to an annualized 3.2% rate in the first quarter.

The fresh signs of financial pressure on farmers, tractor dealers and the other suppliers that support them underscore the rising political danger the trade war presents to Trump as a negotiating team heads to Beijing next week for another round of trade talks. Lopsided support from rural areas was a key driver for Trump’s narrow 2016 victory over Hillary Clinton.

The economic squeeze on U.S. producers is tightening after six years of decline in U.S. farm profits, which fell last year to $69.4 billion, half of the $136.1 billion in 2013. Prices of key commodities such as corn and soybeans have declined while the Trump administration’s immigration crackdown has cut into migrant labor. Midwestern states were also hit with historic floods this spring.

The trade war struck another blow, as key importers of U.S. agricultural products such as China, Canada and Mexico have retaliated against Trump’s tariffs with duties targeting American farmers.

Brent Norwood, manager of investor relations for Deere & Co., pointed to the trade war in a Feb. 15 call to discuss the Moline, Ill., agricultural machinery manufacturer’s earnings.

“U.S. farmer sentiment remains fluid and continues to erode the longer trade uncertainty persists,” Norwood said. That, he added, “has resulted in some U.S. farmers temporarily pausing equipment investment decisions.”