The equipment maker told investors its tariff expense will climb toward 1 billion dollars next year even as customs refunds from invalidated duties fade, offering one of the clearest corporate readings yet of what the post-IEEPA tariff structure costs American manufacturers
MOLINE, Ill., Aug. 26, 2026
Deere and Company expects its annual tariff bill to rise to roughly 1 billion dollars in fiscal 2027, up from about 750 million dollars this year, as the customs refunds that cushioned 2026 results run out and the remaining duty structure settles into a durable cost of doing business.
The disclosure came on the company’s third quarter earnings call on Aug. 20 and was reported by Supply Chain Dive on Aug. 25. It is one of the most specific corporate quantifications yet of what the reconstructed U.S. tariff regime costs a large American manufacturer, and it is notable precisely because Deere is not a company built on imports.
“Going into next year, we would expect a run rate that is going to be closer to right around 1 billion dollars for the year,” Senior Vice President and Chief Financial Officer Brent Norwood told investors, according to the call transcript. “So there will be a bit of a step-up in our tariff expense next year as we compare it to this year.”
The refund story, and why it ends
The 750 million dollar figure for fiscal 2026 is a net number, and understanding the gross and the offset explains most of what happens next.
Deere expects approximately 1.1 billion dollars in gross tariff costs for the full fiscal year, which ends Nov. 1, according to Christopher Seibert, director of investor relations. Against that sits 382 million dollars in cumulative refunds from U.S. Customs and Border Protection for duties the company paid under tariff programs that were subsequently invalidated. The company recognized 110 million dollars of those refunds in the third quarter, following 272 million dollars in the second quarter. Executives told investors they do not expect additional refunds before the fiscal year closes.
Those refunds trace back to the Supreme Court’s February 2026 decision holding that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. The ruling invalidated the country-specific emergency tariffs the administration had imposed during 2025, and Customs and Border Protection has since been reimbursing importers who paid them. Deere’s recovery closely tracks that of its principal competitor. Caterpillar has reported 392 million dollars in refunds from the same source.
The arithmetic of the step-up is therefore straightforward. Fiscal 2026 net expense benefits from 382 million dollars of one-time recoveries. Fiscal 2027 does not. Even holding the gross duty burden flat, the net figure rises materially. Deere’s guidance of roughly 1 billion dollars implies gross exposure close to this year’s level, with the refund cushion removed.
The Section 232 adjustment that helped
One piece of good news lowered the gross figure. Deere reduced its full year gross tariff estimate to 1.1 billion dollars from a previous 1.2 billion, a 100 million dollar improvement Seibert attributed to adjustments in sectoral tariffs that cut the applicable rate on the company’s European imports from roughly 25 percent to 15 percent.
That change reflects the June 2026 proclamation adjusting Section 232 duties on steel, aluminum, copper and their derivative articles. The proclamation cut the rate on certain agricultural and industrial equipment categories, including combines and harvesters, from the 25 percent set in April to 15 percent, and applied the lower rate to certain heating, ventilation and air conditioning systems and components as well.
For Deere the benefit will be larger in fiscal 2027 than in 2026, because the lower rate applied for only part of the current year. That partially offsets the loss of the refund cushion, though not enough to prevent the step-up.
The episode illustrates a feature of the current system that is easy to overlook. The Section 232 derivative product lists have been revised repeatedly through 2026, with rates differentiated by product category, end use and in some cases country of origin and manufacturing method. In April the administration imposed 50 percent duties on articles made almost entirely of aluminum, steel or copper, with 25 percent on derivative articles substantially made of those metals. In June it cut selected agricultural and industrial categories to 15 percent. On Aug. 6 the Commerce Department proposed adding 14 further derivative categories, ranging from brass wind instruments and floor safes to tanker trailers and semi-trailers, with a 25 percent rate on most, 15 percent on self-loading and self-unloading agricultural trailers, 50 percent on certain steel containers and variable rates on self-propelled cranes, mobile lifting frames and straddle carriers depending on origin and manufacture. The public comment period on that proposal closed Aug. 27.
A company’s tariff exposure under this system is therefore not a single rate applied to a single import figure. It is the sum of dozens of product-specific determinations, each subject to revision on a Federal Register timeline.
Why a domestic manufacturer pays this much
Deere manufactures approximately 80 percent of its products at U.S. facilities, and roughly 75 percent of the components used in those plants come from U.S. suppliers, according to Norwood’s remarks in May. On its face, that is close to the profile the tariff program is designed to reward.
The company still expects to pay about 1 billion dollars in duties next year. Understanding why is instructive for any American manufacturer assessing its own exposure.
Part of the answer is the residual 20 to 25 percent of production and components that do cross a border. In heavy equipment, that residual is not marginal content. It includes specialized castings, hydraulic components, electronic control units, precision bearings and grades of steel and aluminum that either have no domestic source at scale or have domestic sources operating at capacity.
The larger part of the answer is pass-through. Seibert put it directly on the call: “And also from a tariff perspective, suppliers experiencing tariffs too; they pass that on to us and negotiate with us around these.”
That sentence describes the mechanism by which a tariff on imported inputs becomes a cost for a company that imports very little. A domestic supplier paying 50 percent on imported steel, or 25 percent on an imported derivative component, does not absorb that cost indefinitely. It appears in the next contract negotiation. The duty is paid at the port by someone else, and the cost arrives at Deere as a price increase with no line item labelled tariff.
Seibert described the combination of tariffs and higher oil prices as producing a dynamic inflationary environment, language that points to the same conclusion. The measurable duty expense on the income statement understates the total cost, because an unknown portion of supplier price increases is tariff-driven and is not separately identified.
What the disclosure does not say
Deere’s guidance is unusually specific by the standards of corporate tariff disclosure, but three things it leaves out are worth naming, because the same gaps appear in most manufacturers’ reporting.
The first is geographic composition. The company identified European imports as the source of the 100 million dollar improvement, which tells analysts that a meaningful share of the gross duty burden originates in Europe rather than Asia. It did not break the remainder down by origin. Without that, an outside observer cannot assess how the fiscal 2027 estimate would respond to a change in any single bilateral relationship, and cannot judge how much exposure sits behind the Section 301 China layers as opposed to the Section 232 metal layers.
The second is the split between duty paid at the port and duty embedded in supplier pricing. Seibert’s remark about suppliers passing tariffs through is the only public acknowledgement that the second category exists, and no figure attaches to it. The roughly 1 billion dollar estimate almost certainly describes duties Deere itself pays as importer of record. The total tariff-attributable cost, including the embedded portion, is necessarily higher by an amount nobody outside the company can calculate.
The third is the pricing response. Manufacturers facing input cost increases raise prices, absorb margin or reduce cost elsewhere, usually in some combination. Deere has not disclosed how much of its duty burden has been recovered through price. That matters because it determines who ultimately pays. If the majority is recovered through price, the duty is functionally a tax on American farmers and construction firms rather than on the manufacturer. If the majority is absorbed, it is a tax on shareholders. The distinction is central to any honest assessment of tariff incidence, and it is almost never disclosed.
None of these omissions is unusual or improper. Companies disclose what is material and decision-useful to investors, and origin-level duty breakdowns are competitively sensitive. But analysts and policymakers reading corporate tariff disclosures should understand that even a relatively transparent one describes a subset of the total cost.
The demand side
Tariff costs are only half of the picture. The other half is what they do to customers, and in Deere’s largest segment the answer is caution.
Deanna Kovar, president of Deere’s worldwide agriculture and turf division for production and precision agriculture, told investors that customer financial health remains sound but that purchasing behavior has changed.
“In general, customer balance sheets remain relatively healthy, yet many are taking a measured approach to capital spending as they evaluate crop margins, cash flow expectations and the broader outlook for agriculture,” Kovar said.
That is a careful description of a familiar dynamic. American farmers face tariff pressure from both directions. Equipment, fertilizer, chemicals and parts all cost more because of duties on inputs. At the same time, retaliatory measures by trading partners narrow the export markets for the crops those inputs produce. Canada’s retaliatory package announced this month targets American agricultural equipment among other categories, and takes effect Sept. 8.
A farmer weighing a combine purchase against uncertain crop margins and uncertain export access will generally wait. Multiplied across a customer base, that hesitation shows up as deferred replacement cycles, which is a slower and less visible cost of the tariff regime than the duty line itself but not necessarily a smaller one.
Deere nonetheless raised its full year profit outlook and posted its first quarterly profit increase in three years, results driven substantially by demand associated with artificial intelligence infrastructure and construction activity. The company is managing the tariff burden from a position of operating strength, which is not true of every manufacturer facing the same duty structure.
Reading the peer group
Deere’s numbers are more useful when set alongside those of comparable manufacturers, because the pattern across the industrial sector is consistent enough to be treated as a general condition rather than a company-specific problem.
Caterpillar’s 392 million dollars in customs refunds is the closest comparison, and the near-identical magnitude is not coincidental. Both companies import similar categories of specialized components, both were significant payers under the invalidated country-specific tariffs, and both maintained the documentation to support claims. The parallel recovery suggests that the refund cycle following the Supreme Court decision was broadly distributed among large industrial importers rather than concentrated.
The more instructive comparison is what happens after the refunds stop. Deere has now told investors what its steady-state duty burden looks like. Other manufacturers have generally been less specific, offering directional commentary about tariff headwinds without quantifying the run rate. Deere’s willingness to put a number on fiscal 2027 gives analysts a benchmark against which to test the vaguer disclosures elsewhere in the sector.
Scaled to revenue, roughly 1 billion dollars in annual duties against a company of Deere’s size represents a persistent margin drag measured in hundreds of basis points, absorbed through some combination of price increases, supplier concessions and internal cost reduction. The company’s ability to raise its full year profit outlook while carrying that burden reflects genuine operating strength and favorable demand in construction and infrastructure, not an absence of tariff pressure.
There is a distributional point embedded in that observation. A manufacturer with pricing power passes a substantial share of the duty to customers. A manufacturer without it absorbs the duty in margin or exits the product line. The tariff structure is formally neutral across firms of different sizes, but its effect is not, because the ability to pass through cost is a function of market position. Deere’s disclosure quantifies the burden for a company at the favorable end of that distribution.
What smaller companies should take from this
Deere’s disclosure is useful to firms many times smaller precisely because of the company’s profile.
If a manufacturer with 80 percent domestic production, 75 percent domestic component sourcing, a dedicated trade compliance function and the scale to negotiate with suppliers still pays roughly 1 billion dollars a year in duties, then a mid-sized manufacturer with a higher import share, thinner compliance resources and less supplier leverage is proportionally more exposed, not less.
Several practical conclusions follow.
Measure the indirect exposure, not just the direct. Most companies know what they pay in duties because it appears on entry summaries. Far fewer have quantified how much of their supplier price increases are tariff-driven. Asking suppliers to identify the tariff component of a price increase, and requiring that identification in contract terms, converts an invisible cost into a negotiable one.
Track the derivative lists actively. The Section 232 derivative product coverage has changed at least four times in 2026, in both directions. Deere’s 100 million dollar improvement came from a rate reduction it did not lobby into existence and could easily have missed in its forecasting. Companies that do not monitor Federal Register proposals and comment periods forfeit both the chance to influence outcomes and the chance to plan around them.
Preserve refund standing. The 382 million dollars Deere recovered and the 392 million Caterpillar recovered were available because those companies were the importers of record and had the documentation to support claims. Firms that import through third parties, or whose records are incomplete, may find themselves without standing if another tariff program is invalidated. Given that litigation against the current Section 301 actions is pending in the Court of International Trade, that is not a theoretical concern. A coalition of 25 state attorneys general and governors filed suit on Aug. 4 challenging the Section 301 forced labor tariffs, and the outcome of that case could generate another refund cycle.
Model the demand effect separately from the cost effect. Deere’s numbers show that the two are distinct. Duty expense is a margin problem. Customer hesitation is a volume problem. A forecast that captures only the first will understate the total impact.
The forecasting problem
There is a further difficulty embedded in Deere’s guidance that deserves attention, because it applies to every company attempting a multiyear tariff forecast.
The roughly 1 billion dollar figure for fiscal 2027 assumes the current duty structure holds. Several pending developments could move it in either direction, and none of them are within the company’s control.
On the downside for costs, the Section 232 rate adjustments that produced this year’s 100 million dollar improvement could extend to additional categories. Trade negotiations with the European Union, Mexico and other partners could produce sectoral relief. Litigation could invalidate another program and generate a further refund cycle.
On the upside for costs, the Commerce Department’s Aug. 6 proposal would add 14 derivative categories to Section 232 coverage, some of which touch agricultural and construction equipment components. A finalized Section 301 overcapacity action would add duties on Chinese-origin machinery and components across sectors that include machine tools, machinery, robotics and transportation equipment. Retaliation by trading partners against U.S. equipment exports, of the kind Canada announced this month, raises costs on the export side rather than the import side but affects the same income statement.
The result is a forecast with wide error bars on both sides, built on a policy environment that has changed materially at least four times in the current fiscal year. Deere’s guidance should be read as a reasonable central estimate under current conditions rather than as a firm commitment, and the company’s language, describing a run rate closer to right around 1 billion dollars, reflects exactly that hedged posture.
For finance teams at smaller manufacturers, the lesson is about method rather than magnitude. A single-point tariff forecast is nearly useless in this environment. A scenario framework, with an identified base case and explicitly costed upside and downside branches tied to named policy triggers, is considerably more useful and takes little more effort to build. The triggers worth naming for fiscal 2027 include the Section 301 overcapacity determination, the outcome of the state attorneys general litigation, the September USMCA round, the November expiry of the U.S. and China truce, and the finalization of the August derivative product proposal.
The broader reading
Deere’s guidance offers a clean data point on a question that has been difficult to answer with precision. The reconstructed tariff regime, built on Section 232, Section 301 and Section 338 authorities after the Supreme Court removed the emergency-powers foundation, is producing a persistent cost for American manufacturers that does not diminish as domestic content rises above 75 percent.
That finding cuts against a simple version of the reshoring argument, in which tariffs penalize importers and reward domestic producers. In an economy where the domestic supply base itself relies on imported inputs, duties propagate upstream to downstream through supplier pricing regardless of where final assembly occurs. Advocates of the current approach would respond, with some force, that this is a transition cost, and that sustained tariff pressure will eventually pull the input supply base onshore in a way that a shorter or narrower program never could. That is a genuine empirical question, and the answer will not be visible for several more years.
What is visible now is the interim arithmetic. Refunds from invalidated tariffs are ending. Sectoral duty rates are settling. Coverage lists are still expanding. And a company that makes four fifths of its products in the United States expects its tariff bill to grow by roughly a third next year.