Business Issues

By Harry Fry

This is especially true for the crane and heavy lifting industry where tariffs affect the import of new and used equipment and parts, increase material costs and cause supply chain disruptions. At the same time, they are causing concern in the banking and lending industry that supports and finances the acquisition of high value commercial assets.

Currently, there is a minimum baseline tariff of 10 % on many products imported to the U. S., which took effect on April 5th. The average effective tariff is 17.8 %, the highest in almost 90 years. China is being hit with a 30 % tariff while tariffs on imported aluminum and steel from various countries are ranging from 25 % to 50 %. It should be made clear that the USMCA( United States Mexico Canada Agreement) trade agreement remains duty free.

The administration’ s stated goal when enacting new tariffs is to protect and enhance our domestic economy and bring nations to the negotiating table regarding international trade. The situation remains lucid as agreements could be reached any day between the U. S and other countries. As a result, it is

causing much apprehension among customers, dealers and banks alike.

Dealers and customers are hesitant to make purchases that have tariffs because at the end of the 90-day period, the tariff has the potential to be lifted. As there is no way to be reimbursed for a tariff once it has been paid, dealers are holding off on importing equipment, and customers are holding off buying because they do not know whether the equipment will arrive before the expiration of the 90-day extension. Therefore, there is a great deal of“ wait and see” in the market.

Finance Market Impacts

If tariffs are enacted at the end of the 90-day period and made permanent, that is a scenario that can be dealt with in the finance world. It is not easy, but it is workable.

Banks and finance companies typically prefer not to over advance on equipment with soft costs, such as taxes and shipping. Customers that are financially stout can typically seek financing and leasing options that will include the soft costs into the finance amount.

However, companies with a moderate or mid to lower tier financial ratings may be affected and required to mitigate the credit risk with larger down payments or additional collateral. These companies may be seen as a greater risk, and therefore, banks and other lenders may not be inclined to over advance on the equipment loan.

Their concern is that should the finance source get this asset back they could be underwater with an undervalued asset due to the tariff on the initial purchase. As a solution, banks may require the customer to pay the tariff out of pocket, which could greatly impact their business cashflow, or they may decide they cannot afford to buy the equipment at all.

If a tariff is enacted after the 90-day pause, then rescinded later in the year or next year, it will cause a major issue for the banking and financing industry because some portfolios may become over advanced or exceed credit risk Loan to Value( LTV) margins. For banks, this could create regulation and compliance issues that may factor into their Financial Stress Test formula. There is also the potential for a portfolio credit risk scenario resulting in a tighter credit policy and higher pricing, which may be required to satisfy Federal Regulators portfolio risk concerns.

Equipment Market Impacts

The uncertainty about the tariffs is causing issues in the equipment market as well. Dealers and customers alike are concerned about overpaying. Should a piece of equipment be imported and purchased while the tariffs are in place, the customer or dealer

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July 2025 • www. cranehotline. com