The Mechanism
Washington raises tariffs on imported goods. Trading partners retaliate by targeting the most politically painful U.S. exports they can find: agricultural commodities. Soybeans, sorghum, corn — the crops that anchor Midwest farm income — become bargaining chips. When those retaliatory levies land, U.S. crop prices soften, farm receipts fall, and farmers do what they always do when margins compress: they stop buying big iron. That deferred capital spending cascades directly into the order books of the two largest American farm and construction equipment makers, Deere and Caterpillar. This is not a hypothetical. China slapped a 10% retaliatory tariff on American farm equipment in February 2025 alongside broader agricultural retaliation. The collateral-damage trade was already in motion before the ink dried.