What John Deere's earnings can tell us about the trade war's impact on agriculture

There are certain companies that are considered economic bellwethers, whose performance offers insight into how a whole sector is faring. John Deere is one of them.

The maker of those iconic green and yellow tractors and other farm equipment reports quarterly results Wednesday, giving us a look at how the trade war is playing out in agriculture and manufacturing.

John Deere’s annual day-before-Thanksgiving earnings call means the company plays a special role in lots of analysts’ holiday traditions. 

“We have fond memories where my kids would be in the backseat and I’d be doing the Deere conference call from some parking lot somewhere,” said Stephen Volkmann, a research analyst at Jefferies. 

This year he’ll take the call from his home office, and he’ll be looking for signs of how Deere is managing tariffs on steel, aluminum and components it imports to its U.S. factories. 

“There’s been a lot of inflation in equipment markets and frankly there’s a little bit of fatigue, I think, around price increases,” he said.

Volkmann said U.S. manufacturers are trying to avoid passing more costs on to their customers. Deere has predicted tariffs will take a $600 million bite out of its 2025 profits. 

The company is facing pressure on the demand side, too, with farm profitability slipping. 

“Whenever we see that decline, it tends to also mean that farmers tighten their belts,” said Chad Hart, an agricultural economist at Iowa State University. 

Hart has his eye on Deere’s year-over-year sales as a reflection of farmers’ optimism — or lack thereof. 

“You’re talking about large tractors, combines that can cost hundreds of thousands of dollars. So, when incomes are dropping, it’s hard to justify that large expense,” he said.

John Deere also makes construction equipment. And Kristen Owen, senior analyst with Oppenheimer, expects that to be a bright spot in tomorrow’s report. 

“It tells us a lot about the day-to-day economy that we all exist in. Whether it’s the food that we’re putting on the Thanksgiving table or the roads that we’re driving over,” she said.

In this time of lagging economic data, Owen said John Deere’s performance gives us a window into how American companies are navigating the trade war squeeze.