Temporary Tariff Relief for Agricultural Machinery

By Dongin Kim and Sandro Steinbach

Agricultural machinery became part of the 2026 trade policy discussion through the broader Section 232 framework for steel, aluminum, copper, and metal-intensive derivative products. The framework was de- signed to address national security concerns related to metal imports and also applies to downstream products that rely heavily on metal inputs or incorporate substantial metal content.

Under Proclamation 11021, the administration modified the Section 232 tariff regime for metal products and derivative articles. The revised framework included a 25% ad valorem duty on derivative products made predominantly of steel, aluminum, or copper, including agricultural machinery. The tariff took effect on April 6, 2026 (The White House, 2026a).

The administration made a further adjustment in June 2026 to account for conditions facing industries that use agricultural equipment, industrial equipment, machinery, and related products. A June 1 proclamation, effective June 8, moved specified agricultural machinery into a temporarily reduced 15% tariff category through the end of 2027 (The White House, 2026b). The proclamation states that agricultural equipment plays an important role in productive domestic economic activity and that the modification accounts for recent circumstances affecting the industries and services that use these products.

The resulting tariff schedule affects the agricultural machinery market through both finished equipment imports and domestic production costs. The June modification lowers the tariff on covered finished equipment imports from 25% to 15%. At the same time, domestic manufacturers continue to operate in a broader metal tariff environment that affects steel, aluminum, copper, and other production inputs.

This brief evaluates the market implications of the tariff adjustment. Specifically, we ask how much the reduction from 25% to 15% cushions projected U.S. agricultural machinery imports. To answer this question, we conduct an exante simulation of agricultural machinery imports under the two tariff rates.

Projections of 2026 U.S. Agricultural Machinery Imports

We project 2026 U.S. imports for agricultural machinery products under HS headings 8432 (soil preparation & seeding equipment) and 8433 (harvesting & threshing machinery). The June tariff adjustment ap- plies only to specified HS6 products within these headings. Table 1 reports the covered products used in the simulation, their 2025 import values, and their shares of total imports within each HS 4-digit heading.

Table 1: Covered HS6 Products for Tariff Adjustment

Note: Import values are 2025 U.S. imports in millions of dollars. Shares are calculated relative to total 2025 imports within the corresponding HS 4-digit heading. Total 2025 imports are $$832.7 million for HS 8432 and $3.5 billion for HS 8433.

Source: NDSU using data from US International Trade Commission DataWeb.

Because the initial tariff was introduced after the first quarter of 2026, the projections focus on the post- April period, measured against a monthly import baseline. This baseline is calculated from the 2024–2025 average to account for seasonal purchasing patterns and year-to-year fluctuations.

To estimate how post April tariff shocks will affect these baseline imports, we use product level trade elasticities. These elasticities, obtained from Fontagné et al. (2022), measure the extent to which imports respond to changes in trade costs (import tariffs).

Because the original elasticities primarily capture substitution among products from different sources, we adjust them to reflect competition between imported and domestically manufactured machinery. Domestic manufacturers account for approximately one-third of U.S. expenditure in this market (Utomi et al., 2023). We therefore apply a domestic expenditure share of 33% to the product-level elasticities.

We compare projected imports under the original 25% tariff with projected imports under the reduced 15% tariff. The difference between the two estimates measures the extent to which imports were pre- served by the June tariff reduction. While projections are conducted at the HS 6-digit product level, findings are aggregated and discussed at the HS 4-digit heading level.

Figure 1 shows that the projected effect of the tariff reduction differs across the two machinery headings. These projections should be interpreted as tariff induced deviations from the 2024–2025 monthly base- line, not as a full forecast of all market forces affecting machinery imports.

If the 25% tariff remained in place, imports of soil preparation & seeding equipment are projected at $707.7 million in 2026. This is 21.7% below the 2024–2025 average and 15.0% below the 2025 level. Under the reduced 15% tariff, projected imports increase to $734.6 million. This remains 18.7% below the 2024– 2025 average and 11.8% below the 2025 level. Note that the post April projected path remains close to the 2025 monthly pattern. The projected annual decline therefore reflects the weaker import levels already observed in the first quarter of 2026 more than a large post April tariff induced divergence from recent monthly imports.

For harvesting & threshing machinery, the tariff reduction has a more visible effect. If the 25% tariff remained in place, imports are projected at approximately $2.0 billion in 2026. This is 48.4% below the 2024– 2025 average and 43.9% below the 2025 level. Under the reduced 15% tariff, projected imports reach approximately $2.4 billion, or 38.1% below the 2024–2025 average and 32.7% below the 2025 level.

Because the covered products account for 29.7% of total HS 8432 imports as shown in Table 1, the tariff induced change is relatively small when covered and non-covered products are aggregated to the HS 4-digit level.

Figure 1: Projected U.S. Agricultural Machinery Imports.

Note: Actual values reflect historical data through April 2026. Projections are based on an ex-ante simulation using product-level trade elasticities. Tariff changes are applied only to covered HS6 products within HS headings 8432 and 8433. Scenario A ap- plies the initial 25% Section 232 ad valorem duty, while Scenario B applies the reduced 15% rate for comparison. Non-covered products are held at their 2024–2025 baseline values.

Source: NDSU using data from US International Trade Commission DataWeb.

Overall, lowering the tariff from 25% to 15% preserves an estimated $26.9 million in soil preparation & seeding equipment imports and $394.2 million in harvesting & threshing machinery imports. The tariff reduction therefore provides measurable relief, with a larger projected effect for HS 8433 than for HS 8432. This difference reflects the larger share of covered products in HS 8433, while non-covered products remain at their 2024–2025 baseline values in the simulation.

Can Domestic Production Offset Lower Imports?

Whether lower imports affect the broader machinery market depends in part on U.S. supply responsiveness. To assess domestic production conditions, Figure 2 presents four indicators for the U.S. agricultural machinery industry: value of shipments, total inventories, industrial production, and producer prices.

The indicators suggest that the domestic agricultural machinery industry entered the 2026 tariff period from a weaker position than in early 2023.

Figure 2: U.S. Farm Machinery and Equipment Manufacturing Indicators, 2023-2026.

Note: Panel (a) and Panel (b) represent the monthly value of manufacturers’ shipments and total inventories, respectively, both measured in millions of dollars (seasonally adjusted). Panel (c) tracks the Industrial Production Index, which measures actual output and is indexed to a 2017 baseline of 100. Panel (d) displays the Producer Price Index for farm machinery and equipment manufacturing, capturing factory-gate price changes relative to a 1982 baseline of 100.

Source: NDSU using data from Federal Reserve Bank of St. Louis.

As shown in Panel (a), the monthly value of shipments declined from approximately $3.0 billion in 2023 to about $2.5 billion by early 2026. Although shipments fluctuated during 2023 and 2024, the overall trend has been downward, indicating softer market conditions before the latest tariff changes took effect.

Panel (b) shows a similar decline in total inventories, which fell from nearly $7.0 billion in early 2023 to approximately $5.6 billion in 2026. This decline should not be interpreted on its own as evidence of an equip- ment shortage. However, lower inventories reduce the stock available to absorb further market adjustments.

The industrial production index in Panel (c) measures actual manufacturing output. The index declined from approximately 132 in early 2023 to nearly 100 in 2025. Production has since recovered to around 110 in 2026, but it remains below its early-2023 level.

Panel (d) shows that the producer price index increased from approximately 285 in January 2023 to nearly 300 by early 2026. Because this index measures prices received by domestic producers, it should not be interpreted as a direct measure of input costs. However, the combination of lower production activity and higher producer prices is consistent with a sector facing continued cost and demand pressures.

The indicators point to a domestic industry that has begun recovering from its 2025 production low but remains below earlier levels of shipments and output. Domestic producers may be able to offset part of the projected import reduction, but available indicators suggest that any adjustment may be gradual rather than immediate.

Temporary Relief and Market Adjustment

The temporary tariff relief from 25% to 15% is projected to preserve $27 million in soil preparation and seeding equipment imports and $394 million in harvesting and threshing machinery imports relative to the original 25% tariff scenario. However, these gains are measured against the higher-tariff counterfactual. Under the reduced 15% tariff, projected imports remain approximately 11.8% and 32.7% below the 2025 level for soil preparation and seeding equipment and harvesting and threshing machinery, respectively. The tariff adjustment therefore moderates the projected import reduction, but the market still faces lower import availability heading into the second half of 2026.

Broader equipment market conditions remain under pressure, with industry reporting higher raw material costs, labor constraints, lower equipment sales, and expectations of further price increases among equip- ment dealers. At the same time, delayed equipment replacement may support demand in the second half of 2026 (Hanrahan, 2026). These conditions suggest that the tariff adjustment may ease near-term import pressure while leaving cost, supply, and demand factors important for the equipment market.

The reduced 15% tariff rate is also temporary, applying through December 31, 2027, under the June proclamation. Absent further action, covered products would return to the tariff treatment specified under Proclamation 11021 beginning January 1, 2028 (The White House, 2026b). The central implication is that the June adjustment provides temporary tariff relief, while realized market conditions will continue to depend on import availability, domestic production conditions, input-cost pressures, and equipment demand.

References

Fontagné, L., Guimbard, H., & Orefice, G. (2022). Tariff-based product-level trade elasticities. Journal of International Economics, 137. https://doi.org/10.1016/j.jinteco.2022.103593

Hanrahan, R. (2026). Trump cuts tariffs on ag equipment to 15%. Farm Policy News. https://farmpolicynews.illinois.edu/2026/06/trump-cuts-tariffs-on-ag-equipment-to-15/

The White House. (2026a). Strengthening actions taken to adjust imports of aluminum, steel, and copper into the United States. Presidential Proclamation. https://www.federalregister.gov/documents/2026/04/09/2026-06960/strengthening-actions-taken-to-adjust-imports-of-aluminum-steel-and-copper-into-the-united-states

The White House. (2026b). Further adjusting the tariff regimes for imports of aluminum, steel, and copper into the United States. Presidential Proclamation. https://www.whitehouse.gov/presidential-actions/2026/06/further-adjusting-the-tariff-regimes-for-imports-of-aluminum-steel-and-copper-into-the-united-states/

The White House. (2026c). Advancing regenerative agriculture and strengthening American farm resilience. Executive Order. https://www.whitehouse.gov/presidential-actions/2026/06/advancing-regenerative-agriculture-and-strengthening-american-farm-resilience/

Utomi, A., Crotty, P., Lotze, N., & Taylor, B. (2023). Trends in U.S. merchandise trade, 2022. Office of Economics Working Paper ID-096, U.S. International Trade Commission. https://www.usitc.gov/publications/332/working_papers/merchandise_trends_pt_1.pdf