Komatsu is the world's second-largest construction machinery firm, after Caterpillar ( yes, my headline is incorrect on this point).
Top Business Risk for Komatsu:
- Komatsu's primary concern under Trump's presidency is potential retaliatory tariffs by Canada on American-made mining machines.
- Canada's retaliatory duties could significantly impact Komatsu, as Canada is the largest export destination for its U.S.-made mining equipment.
Trump's Trade Policies:
- Trump's proposed tariffs on imports from Canada, China, and Mexico may provoke retaliatory trade barriers.
- Komatsu, a global manufacturer earning over 25% of its sales from North America, sees retaliatory tariffs as a "one-two punch" to its export-focused business model.
Komatsu’s U.S. Operations:
- The company employs about 8,000 staff in the U.S. and exports $1 billion more than it imports annually, following its acquisition of Joy Global in 2017.
- Komatsu relies on free trade for its U.S. operations and views a potential trade war as a major threat.
Impact of Tariffs on Components:
- Tariffs on U.S.-bound components like sheet metal from China would have a minor impact and could be mitigated by shifting to alternative suppliers in Southeast Asia within 2-3 months.
Fossil Fuel and Heavy Machinery Demand:
- Trump’s pro-fossil fuel stance might offset declining U.S. demand for heavy machinery caused by oversupply in the rental market.
Komatsu’s Investment Plans:
- Komatsu plans to invest $80 million in a mining equipment service center in Arizona and $65 million in ABS, a Detroit-based battery maker acquired in 2023.
- The company remains committed to investing in the U.S., regardless of the political landscape.
Market Outlook:
- Komatsu expects a "challenging" business environment in the upcoming fiscal year, with flat global demand, rising fixed costs, and limited opportunities for price increases as supply chains normalize.
***
Political meddling is going to weigh into a rocky 2025 for many firms.
