Caterpillar Expects $1.5 Billion Tariff Hit for 2025
By Reuters | 05 Aug, 2025

The leading American construction equipment maker is forced to pay high tariffs to import components from overseas suppliers.

Caterpillar posted weaker-than-expected quarterly profit and warned U.S. tariffs could pose significant headwinds in the second half and cost the construction and mining equipment maker up to $1.5 billion in 2025.

Sweeping tariffs on U.S. imports have impacted companies across sectors, prompting many to rejig their supply chains and localize production. 

"Impact of tariffs was around the top end of our estimated range for the quarter and it's likely to be a more significant headwind to profitability in the second half of 2025," CEO Joe Creed said.

Shares of Caterpillar, often viewed as bellwether for the industrial economy, fell 1% in early trading, after it also flagged a tariff impact of $400 million to $500 million in the third quarter.

Even though the company has been able to offset the impact of supply-chain snarls and cost inflation through price hikes, a slowdown in U.S. construction spending owing to higher interest rates, led to a pullback in demand for excavators and backhoe loaders. 

Still, the company expects its annual sales and revenue to be slightly higher than last year and compared to its prior expectations of about flat, in anticipation of demand from its energy and transportation unit. 

"We remain constructive on the improving demand backdrop," Oppenheimer analyst Kristen Owen said in a note. 

Including tariffs, the company forecast 2025 adjusted profit margins in the bottom half of its annual target range. 

In the current earnings season, companies have reported a combined loss of $12.1 billion to $13.4 billion between July 16 and August 1 for 2025, Reuters' global tariff tracker shows. A majority of these were from the industrial and manufacturing segment. 

Trump has said the tariffs are a response to persistent U.S. trade imbalances and declining manufacturing power, and that the moves will bring jobs and investment to the nation.

Quarterly revenue in the Asia Pacific region fell 2% to $2.89 billion. Its North American sales, which accounts for more than half of overall revenue, fell 2% to about $8.9 billion. 

Adjusted profit in the second quarter fell to $4.72 per share, compared with estimates of $4.90, according to data compiled by LSEG. Its sales and revenue for the quarter fell 1% to $16.7 billion from a year ago. 

(Reporting by Nathan Gomes in Bengaluru; Editing by Arun Koyyur)