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Editorial: The trade wars weigh on an important Illinois manufacturer

The Editorial Board, Chicago Tribune on

Published in Op Eds

In the fields around the Quad Cities in northwest Illinois, the state’s biggest cash crops look amazing these days. The corn stands tall, and the soybeans are green and lush. But nearby, at the headquarters of Deere & Co. in Moline, a bumper harvest can’t make up for hostile policies from Washington, D.C.

Tariffs will cost the farm equipment maker $600 million this year, and the company just announced 238 layoffs at plants in Moline, East Moline and Waterloo, Iowa. No one can say for sure what the tariff rules will be in a month, a year or beyond, and that uncertainty is creating havoc in a farm sector that can’t function efficiently without advance planning.

While nobody would wish for a bad crop, the healthy harvest expected in the weeks ahead brings its own issues. Abundant supplies typically translate into low commodity prices, which in turn put financial pressure on American farmers who are Deere’s No. 1 customers.

A taxpayer-funded bailout approved just before President Donald Trump took office is sending $42.4 billion in public money directly to farmers, ranchers and landowners. Yet even with that generous giveaway, cash receipts on farms are in decline and Deere is seeing overall demand drop this year.

Meantime, up-to-date Farm Bill legislation that sets policy for U.S. agriculture and food-relief programs has stalled in Congress. The country is still working off the obsolete 2018 Farm Bill that expired two years ago, a failure of political leadership that could continue indefinitely.

This is no way to run a farm economy. And it’s especially no way to support a leading manufacturing company such as Deere.

Given an opportunity to compete in open markets, Midwest agriculture is a world-beater. But the Trump administration has put the industry at a terrible disadvantage, pushing China and other big foreign buyers to look elsewhere for food, equipment and other farm inputs.

Much of the country’s manufacturing sector is feeling similar pain, including companies important to Illinois such as heavy-equipment maker Caterpillar (which expects up to $1.5 billion in tariff costs this year). The top three automakers are badly losing a race for the future to BYD and other Chinese electric vehicle companies — their big investments in EVs having been sandbagged by this year’s about-face from supportive government policies to deliberately destructive ones.

Like those companies, Deere is coping with what Chairman and CEO John May describes in understated language as “challenging times” and “near-term uncertainty.” He’s evidently too diplomatic and/or worried about Trumpian backlash to spell out that his otherwise well-run company is taking a beating.

On a conference call with investors this month to discuss their most recent earnings report, Deere executives outlined how the chaotic trade war has forced them to play defense. It’s surprising the financial results weren’t worse.

 

The company’s sales and profits have been under pressure all year, as it scrambled to adjust inventories, tinker with prices and work around supply-chain disruptions. The curve balls keep coming, including increased tariff rates on Europe, a surprise trade attack on India and tariffs on most imported steel going from 25% to 50%. In its critical North American market, Deere expects sales of large equipment such as tractors, combines and planters to plunge 30% this year.

Like other manufacturers hammered by tariff costs, Deere needs to raise prices. But between fulfilling long-term contracts and competing in a global market, the company has been stuck with much of the bill from the trade wars so far.

That won’t last, and prices already are rising. Nationally, producer prices were up 3.3% in July from a year ago, foreshadowing higher inflation at the consumer level. Deere is embedding higher prices in some of its early-order programs for 2026, but that’s mostly based on guesswork as policies keep changing.

“We need some stability,” Josh Jepsen, Deere’s chief financial officer, told investors. “We need to settle, and we need to know where we are from a tariff perspective before (we) can take some other actions.”

Come on, Congress. Put a stop to the nonsense.

This page has long championed the pro-free market approach of the Chicago School of Economics, mainly because the facts and data back up the Nobel-Prize-winning theories: Sabotaging trade will make this nation poorer. You can bank on it.

Further, there’s no excuse for Congress to continue dawdling on farm policy. Lawmakers have extended the expired 2018 Farm Bill through the end of this year, so there’s no incentive to take up a new Farm Bill until at least 2026. With the midterm elections looming, it would be no surprise if nothing got done except another giveaway of taxpayer money to shore up the Grain Belt vote for incumbents who haven’t earned it.

Midwest farmers are doing their part to feed the world: One glance at the thriving fields around the Quad Cities proves it. They deserve better than elected representatives, from the president on down, who choose to undermine their future at every turn.

_____


©2025 Chicago Tribune. Visit chicagotribune.com. Distributed by Tribune Content Agency, LLC.

 

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