Trump's trade war is prompting farmers to put off big ticket purchases, and it's another sign of the pain the tariffs are causing (DE)

Ethel Jiang

February 19, 2019 9:57 PM

John Deere HarvestLab

American farmers are tangibly deferring equipment purchases as a result of the ongoing trade war between the US and China, Deere & Co says.
The agriculture machinery manufacturer said its quarterly results were hurt by customer concerns over tariffs and trade policies.
Whether Trump can reach an eventual trade deal with China will decide the performance of Deere shares and the whole industry in 2019, Morgan Stanley says.
Watch Deere & Co trade live.

As the prolonged trade war between the US and China continues, American farmers are tangibly deferring equipment purchases, according to agriculture machinery manufacturer Deere & Co.

Trade frictions "have weighed on market sentiment and caused farmers to become more cautious about making major purchases, " Deere CEO Samuel Allen said Friday in his company's first-quarter earnings release , adding that its results were hurt by customer concerns over tariffs and trade policies.

It has been nearly a year since President Donald Trump announced plans to charge a 25% tariff on $50 billion worth of Chinese goods, kicking off a trade war between the world's two largest economies. So far, the US has imposed duties on $250 billion of Chinese imports, prompting China to retaliate.

Tit-for-tat tariffs between the US and China caused pain for many industries, from tech giants who saw their revenue plunge to American soybeans which shed more than a fifth of their value . And now the whole world is watching the next round of trade negotiations between Washington and Beijing, which kick off Tuesday. If the two sides fail to reach an agreement, the 10% tariff increase imposed on $200 billion of Chinese goods will rise to 25% on March 2.

Whether Trump can reach a trade deal with China will decide the performance of Deere shares and the whole industry in 2019.

"We see an eventual trade resolution as a tangible catalyst for the shares," said Morgan Stanley analyst Courtney Takavonis in a note out Tuesday. "Investors are unlikely to step in in the absence of further evidence of trade resolution or a notable improvement in farm sentiment."

Takavonis has an "overweight" rating and $192 price target 18% above where Deere shares were trading on Tuesday.

Deere was up 5.8% this year.

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Trump's trade war is prompting farmers to put off big ticket purchases, and it's another sign of the pain the tariffs are causing (DE)

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