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US construction equipment manufacturer Caterpillar posted a drop in earnings and warned of a hit of up to $1.5bn from Donald Trump’s tariffs, in a sign of how trade tensions are impacting the global companies it makes machinery for.
The Texas-headquartered company on Tuesday said it expected a net hit from tariffs of around $1.3bn to $1.5bn for the full year.
The US government’s tariffs have hurt companies across sectors, and sales of products from cars and trucks to construction equipment have been impacted by trade policy uncertainty.
Caterpillar, a bellwether for industrial activity, said its sales fell slightly in the second quarter, and that the tariffs had also contributed to lower-than-expected profits, after its manufacturing costs rose.
Adjusted earnings per share dropped 21 per cent year-on-year to $4.72 from $5.99. Analysts polled by LSEG had expected $4.90.
Operating profit fell 18 per cent to $2.9bn, which the company blamed on “unfavourable manufacturing costs [which] largely reflected the impact of higher tariffs”.
Sales fell 1 per cent year-on-year to $16.6bn from $16.7bn in the second quarter, due to pricing pressures, which were not entirely offset by an uptick in sales volumes.
The impact on Caterpillar shows how its customers’ industries — which include construction, mining and oil and gas — are feeling the effects of Trump’s trade war.
Still, chief executive Joe Creed said demand for Caterpillar’s products “remains resilient . . . supported by infrastructure spending and growing energy needs”.
Shares in Caterpillar were down more than 2 per cent in pre-market trading.
