The US President’s tariffs are forcing financiers, manufacturers, and end-users to rethink cost structures, sourcing strategies, and risk management. Picture Credit: Shutterstock.com

The Donald Trump administration’s expanded 2025 tariffs have pushed the global machinery and equipment industry into a new era of cost inflation, supply chain reconfiguration, and financial recalibration. For the capital-intensive mining equipment finance sector, the stakes are particularly high.

Dubbed the “Great Equipment Squeeze” by industry insiders, these tariffs are forcing financiers, manufacturers, and end-users to rethink cost structures, sourcing strategies, and risk management in a landscape shaped by rising trade barriers and supply chain uncertainty.

Tariffs that bite deep

The tariff regime introduced in 2025 imposes levies ranging from 10% to as high as 34% on a broad range of machinery components and finished products crucial to mining and heavy industries.

As detailed by Ketaki Bhosale in her April 2025 Cognitive Market Research report, the heaviest burden falls on construction and earthmoving equipment components — hydraulic cylinders, transmission systems, and steel frames — which now face a 25% tariff, primarily impacting imports from China.

Industry data from the Association of Equipment Manufacturers (AEM), a major North American trade association, cited by Bhosale, shows average cost increases of 18% to 26% for imported components. That squeeze is being felt by global giants like US-based Caterpillar Inc. and Italian-American company CNH Industrial, both of which depend on intricate supply chains with Chinese-sourced subsystems.

Caterpillar, the world’s largest mining equipment maker, sits at the heart of the sector’s tariff-driven turbulence, with its deep global footprint making it especially vulnerable to component price hikes and supply chain delays. CNH Industrial, while more peripheral, supplies versatile construction machinery — like excavators and wheel loaders — that often support surface mining and quarrying, positioning it as a quiet but essential player also feeling the squeeze.

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Caterpillar’s $1.5bn warning

Caterpillar’s latest earnings underscore just how costly the tariff environment has become. According to Reuters, the company warned it could face up to $1.5 billion in extra costs this year due to tariffs, with $400–500 million already hitting margins in Q3. CEO Jim Umpleby told investors that tariffs remain “a significant obstacle” to profitability in the second half of 2025, especially as they raise costs on key components such as sensors and control systems used in mining trucks and excavators.

This scale of exposure is a bellwether for the wider sector: when an industry leader must absorb nine-figure quarterly impacts, financiers take notice. Higher equipment costs flow directly into more cautious underwriting, increased collateral demands, and extended loan repayment terms.

Financing in the crosshairs

Bhosale’s research estimates tariffs on high-value mining subcomponents — hydraulic drive units, advanced sensing systems, and gear assemblies — have added 15–30% to costs in some cases. China’s restrictions on rare-earth exports have compounded the problem, raising prices for magnet-based systems critical in both mining and renewable energy equipment.

With asset prices surging and delivery timelines stretching, lenders are recalibrating deal structures. In practical terms, that means higher down payments, shorter financing terms for certain categories, and stricter project risk assessments. Bloomberg’s trade coverage notes that companies are delaying purchases or restructuring procurement contracts to adapt.

Supply chains on the move

To mitigate costs, manufacturers are rethinking sourcing strategies. As Bhosale notes, procurement teams are increasingly turning to suppliers in India, Turkey, and Latin America. Others are blending domestic assembly with imports from lower-tariff markets such as Poland, Thailand, and South Korea.

Bloomberg has reported that companies like Komatsu stand to save hundreds of millions in tariff exposure if trade conditions with China improve — a clear sign of how central sourcing decisions have become to bottom-line performance.

The project cost ripple

Mid-sized manufacturers surveyed by Cognitive Market Research estimate per-unit cost hikes of 15–22% since the tariffs took effect. Mining operators, especially those reliant on imported heavy machinery, report delays and budget overruns that ripple through project timelines.

These pressures ultimately feed back into financing. With returns on investment harder to project, leasing activity is slowing in both mining and agricultural equipment segments, as buyers weigh whether to commit capital under such uncertainty.

A new financing reality?

Industry reporting and trade analysis from sources such as Reuters and Bloomberg underscore a broader shift toward diversified supply chains and increased localisation as companies seek to reduce exposure to ongoing geopolitical and tariff-related shocks. For the mining equipment finance sector, the message is clear: risk models must now routinely incorporate tariff volatility, raw material supply constraints, and transportation disruptions as key factors.

The Great Equipment Squeeze is more than a temporary disruption — it represents a structural transformation of how machinery procurement and financing operate. Success will favour financiers who can manage volatility without freezing capital flows, and manufacturers agile enough to redesign supply chains for resilience and cost stability. In this reshaped landscape, flexibility is no longer optional — it is essential.

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