November, 2025-
BOTTOM LINE
The impact of U.S. tariffs on North American end markets and consumers, and the world at large, are still evolving and probably cannot be overstated.
The Organization for Economic Cooperation and Development issued its latest global forecast in September: “Economic Outlook, Finding the Right Balance in Uncertain Times.” OECD’s economists found that industrial production and trade were supported by frontloading ahead of higher tariffs during the first half of 2025 meaning that orders and purchases were placed earlier than needed to meet future demand so that the tariffs, many of which did not go into effect until third quarter, could be avoided.
“U.S. bilateral tariff rates have increased on almost all countries since May. The overall effective U.S. tariffrate rose to an estimated 19.5 percent at the end of August, the highest rate since 1933,” the OECD forecast report states. “The full effects of tariff-increases have yet to be felt with many changes being phased in over time and companies initially absorbing some tariff increases through margins but are becoming increasingly visible in spending choices, labor markets and consumer prices.”
Signs of softening are appearing in labor markets, with rising unemployment rates and declining job openings as a share of the unemployed in some economies, including in the United States.
Inflation is projected to decline in most G20 economies as economic growth moderates and labor market pressures ease. Headline inflation is projected to fall from 3.4 percent in 2025 to 2.9 percent in 2026 in the G20 nations, with core inflation among the group remaining broadly stable at 2.5 percent next year.
GDP FORECAST
Global GDP growth is projected to fall from 3.3 percent in 2024 to 3.2 percent in 2025 and 2.9 percent in 2026 as front-loaded purchasing stops and “higher tariffrates and still-high policy uncertainty dampen investment and trade,” the OECD report states. Annual GDP growth in the United States is projected to fall from 2.8 percent in 2024 to 1.8 percent in 2025 and 1.5 percent in 2026, as strong investment growth in high technology sectors is more than off set by higher tariff rates and a drop in net immigration.
SEEKING PREDICTABILITY
The OECD economists suggest that countries find ways to cooperate within the global trading system “to make trade policy more transparent and predictable while addressing economic security concerns.”
The report noted that U.S. tariffs on all steel and aluminum imports were raised by an additional 25 percentage points and tariffs on all copper imports by 50 percentage points. New bilateral agreements covering tariffs, investment and other areas of cooperation have been concluded with some countries since May, including the European Union, Japan and Indonesia, reducing the tariff rates being applied on some items.
“Amongst the G20, China, India and Brazil face the highest increases in bilateral U.S. tariff rates” to date. Ongoing legal challenges and negotiations, and the risk of new tariffs on currently exempt items, “add to uncertainty about trade policies.”
COLLECTIONS TO INCREASE
The impacts of higher tariff rates are yet to be fully felt in the U.S., according to OECD economists. During the first three quarters, companies made use of large inventories and/ or ample profit margins to avoid or absorb the initial impact of higher tariffs. They benefited from lags between the announcement and imposition of higher tariffs and from the exemption of goods already in transit.
However, there are “some signs of reduced purchases of goods subject to higher tariff increases.” Separately, there are already some signs that tariffs have begun to be passed through into consumer prices, notably durable goods with a high import content.”
Significant risks to the economic outlook remain. Further increases in bilateral tariff rates, a resurgence of inflationary pressures, increased concern about fiscal risks or substantial risk repricing in financial markets could all lower economic growth relative to the baseline.
METALFORMERS
The latest business conditions survey conducted by the Precision Metalforming Association, in which 91 companies took part, showed that the proportion of respondents who forecast that general economic activity would decline in the next three months nearly doubled to 27 percent in September from 14 percent in August. Thirty-two percent predict a downturn in activity, compared with only 24 percent who did so a month earlier.
Shipments declined month over month, but the expectation for incoming order rates through the end of 2025 was off by only 3 percentage points in the comparison.
Source: Institute for Supply Management
MANUFACTURING SECTOR
The Institute for Supply Management’s manufacturing purchasing managers index (PMI) landed at 49.1 percent in September, up slightly from August. However, the New Orders Index contracted in September to 48.9 percent from 51.4 percent in August. The Backlog of Orders Index reached 46.2 percent, up 1.5 percentage points from August.
Susan Spence, who chairs ISM’s Manufacturing Business Survey Committee, said that “67 percent of the manufacturing sector’s GDP contracted in September and that 28 percent [of the sector] is strongly contracting.” Eleven of 16 industries reported contraction during September. Of the five that saw growth were primary metals and fabricated metal products.
Anecdotally, September’s survey respondents had a lot to say about the U.S. tariffs.
A machinery builder reported that “ongoing macroeconomic conditions highlighted by interest-rate management and tariffs continue to impact customer purchasing decisions, resulting in subdued production rates and growing cost concerns on direct material and operations.”
Another manufacturer in electrical equipment, appliances and components said that heavy machinery orders “are depressed because tariffs are so impactful to high-end capital equipment. Revenue expectations are flat for the rest of 2025, with no outlook to improve in 2026.”
Tariffs are “affecting vast amounts of [price] increases in hardware and stainless steel,” among other inputs, a metal fabricator reported. “Business continues to be severely depressed. Profits are down and extreme taxes (tariffs) are being shouldered by all companies in our space. We have increased price pressures both to our inputs and customer outputs as companies are starting to pass on tariffs via surcharges—raising prices up to 20 percent,” a transportation equipment builder reported.
“The addition of the derivative steel and aluminum tariffs in the middle of the month—with no announcement— was devastating. We believe we are in a stagflation period where prices are up but orders are down due to tariff policy. Customers are not willing to pay the higher prices, so they are just not buying,” the manufacturer said in the survey response.
Another manufacturer put it more succinctly: “Steel tariffs are killing us.”
FOMC
DOWNSIDE RISKS
The Federal Reserve Bank’s Federal Open Market Committee issued a statement Sept. 17, acknowledging that “job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated. Uncertainty about the economic outlook remains elevated. The committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”
THE OVERALL EFFECTIVE U.S. TARIFF RATE ROSE TO AN ESTIMATED 19.5 PERCENT AT THE END OF AUGUST, THE HIGHEST RATE SINCE 1933.
AEROSPACE
GE Aerospace prepares for an atmospheric test of its air breathing system.
BALANCING ACT // Tariffs and supply chain issues battle a very strong demand picture
■ THE BALANCE OF TRADE ACTIVITY and the tariff activity has “put a keen focus on airlines and aircraft. There’s no better way to correct the balance of trade than to buy a large number of aircraft, and we’re the benefficiary of that,” Robert Kelly Ortberg, president and CEO for the Boeing Co., said during a Sept. 11 investor presentation.
\“We’ve been in a supply-constrained environment for quite a while. We have inflationary pressure coming from the supply chain, and we’re taking that into account in how we’re pricing the new product.”
The company has excess inventories, particularly on its MAX production, Ortberg said, “and we’ll be using that inventory, [which is] why you see some of [our] suppliers are producing at a higher rate than others.”
He said Boeing is working to increase its monthly production rate from 38 to 42 aircraft, noting, “our inventory is going to butter even if we do have any supply chain challenges.”
A “mountain of work” remains, he said. On the 777X program, Boeing has five aircraft now in testing. Both the airplane and the engine are “really performing quite well. Demand for the aircraft is fantastic. It’s going to be a great airplane. We’ve just got to get ourselves through the certification program, and [that part of the] work is still in front of us.”
Airbus, in its second-quarter earnings report, said that its A320 family program continues to ramp up toward a rate of 75 aircraft per month in 2027. The A330 program is stabilizing at a monthly production rate of four aircraft and, in order to meet customer demand, now targets a rate of five per month by 2029. “Specific supply chain challenges notably with Spirit AeroSystems are putting pressure on the ramp-up of the A350 and the A220. The company continues to target rate 12 for the A350 in 2028 and a monthly A220 production rate of 14 aircraft in 2026.”
Howmet Aerospace Executive Chairman and CEO John Plant told investors recently that the commercial aerospace market should continue to grow, driven by healthy passenger traffic, “extraordinarily high OEM backlogs and the desire for new, fuel-efficient aircraft. We acknowledge positive signs for narrow-body build rate increases, particularly on the Boeing 737MAX. Demand for engine spares also remains robust across all markets.”
CAPACITY CONSTRAINT
PwC’s analysts for the global aerospace and defense industry warned that in spite of strong revenues, “operational cracks are showing. Demand persists in outpacing supply while capacity remains constrained.” Meanwhile, “systemic pressures in the workforce and supply chain have intensified, compounded by evolving trade dynamics and tariff risks.
“Production continues to lag,” the analysts wrote. “Labor gaps and vulnerable supply chains are limiting output, and backlogs now stretch for years. Tariff shiffs are also complicating global sourcing strategies, particularly for raw materials and specialized inputs. Aerospace manufacturers are prioritizing resilience diversifying suppliers, reskilling workers and redesigning operating models for long-term flexibility.”
Commercial aircraft backlogs have topped 14,000 units, “equal to a decade of output.
Commercial aviation is booming. Airlines are placing orders to modernize their fleets and meet surging travel demand, but manufacturers can’t build fast enough. Labor, inflation and limited parts availability all continue to pinch production,” PwC reported.
BUSINESS JETS
In August, Embraer surpassed 2,000 business jet deliveries with a Praetor 500 model. Embraer claims this is the fastest and furthest-flying midsize jet, “capable of true nonstop North America corner-to-corner flights, such as Miami to Seattle or Los Angeles to New York.” Embraer’s executive aviation business has accumulated an average compound growth rate of 14 percent since 2002, when the first executive jet model was delivered. In 2024 alone, nearly one in every three small and midsize cabin jets delivered was an Embraer Phenom or Praetor.
Bombardier relocated and expanded its component manufacturing facility in Moorpark, California, in late August. The Moorpark facility produces key components for the Global 7500 and Global 8000 business jets.
INVESTMENT
GKN Aerospace will expand its Newington, Connecticut, facility, bringing in a new production line dedicated to additive fabrication of the fan case mount ring, a critical component of the Praft& Whitney GTF engine that powers Airbus’ A220 and the Embraer E195-E2 aircraft.
The component’s core structure, the additively fabricated “hot size ring,” is already being delivered from GKN Aerospace’s Trollhättan facility in Sweden, with final machining completed in Newington. The expansion will support production ramp-up and help to meet wider market demand.
Sébastien Aknouche, senior vice president for material solutions at GKN Aerospace, said the company makes 30 mount rings per month in Sweden, but expanding the technology to the United States “will support the full volume of production in one place. It will also enable us to expand our additive fabrication offering to other customers in the U.S.”
AUTOMOTIVE
Nissan is restructuring capacity in Mexico. Shown: Nissan assembly plant in Smyrna, Tennessee
CALIBRATION // Production and sales remain steady despite high import costs, but one carmaker enters restructuring phase
■ AUTOMAKERS ARE ADJUSTING to shifting U.S. trade policies and regional dynamics by adopting strategies to off set tariff impacts, leading to a more favorable demand and production environment, analysts at S&P Global Automotive insights said in a recent report.
The credit rating agency’s consulting arm said that its September forecast update reflects mostly upward revisions, driven by strong vehicle sales in Greater China and solid production gains in North America. These changes point to increased production expectations and a more constructive demand outlook across multiple regions.
“The outlook for light vehicle production in North America was increased by 212,000 units for 2025 and 337,000 units for 2026. Continued strength in production planning and resilient demand have led to a positive revision, with U.S. sales also projected to rise meaningfully,” S&P said in its report.
STICKER SHOCK MUTED
Another branch of the consultancy, S&P Global Mobility, published research that found despite widespread 25 percent tariffs on imported vehicles and parts since May, the expected sticker shock for U.S. car buyers has not materialized. Automakers have been navigating a complex U.S. trade policy that includes the tariff on imported vehicles and parts from nearly all countries. But automakers have taken a more measured approach to their pricing and production strategies, even as tariff effects ripple across supply chains and cost structures.
“Each vehicle can see unique scenarios leading to varied cost increases, which affects pricing strategies and, therefore, market dynamics. Consumer willingness to accept a price increase that is described as a tariff surcharge remains an open question. This does not seem to be happening in other consumer goods industries, and it has been rare in the auto industry,” the analysts stated.
For automakers and suppliers, determining exposure and tariff costs depends on production location and sourcing. Vehicles imported from Canada and Mexico that are compliant with the US-Mexico-Canada Agreement are treated differently. Currently, USMCA-compliant parts are traversing the borders with no tariffs.
SOURCING DECISIONS
“The most obvious way to avoid tariff effects is to increase vehicle assembly and sourcing of components in the U.S. rather than importing. However,” the analysts found, “that solution is not necessarily the simplest, and it will mean an increase in manufacturing costs compared with the production and sourcing structure in place prior to U.S. tariffs.”
Changing sourcing requires investment, and the type of change will dictate how much the investment is and how long it will take. Vehicle assembly is also most efficient when the suppliers to that vehicle are as close as possible. Which means, among other things, that a production investment must come from the automaker as well as the supplier.
General Motors and Hyundai have announced new assembly investments in the U.S., with a Hyundai Motor Group subsidiary also investing into a new steel mill. While the GM investment is into existing facilities to move products from one plant to another, it is also scheduled around natural vehicle lifecycle changes.
GM’s new investment will not be online until the second half of 2027. Hyundai’s investment increases production capacity in another two years, as well. Changes can and will happen in the high-tariff environment, but they do not happen quickly.
SHRINKING FOOTPRINT
One carmaker has decided to restructure, and these decisions affect its operations in Mexico particularly. Nissan will consolidate vehicle production from the CIVAC Plant in Cuernavaca to the Aguascalientes plant in Mexico. This move strengthens the company’s resilient and responsive global manufacturing footprintaligned with market realities and agile enough to meet future demands.
Nissan will transition all vehicle production in Mexico to its Aguascalientes complex through next March, ceasing operations at the CIVAC Plant in Morelos.
“We have made the difficult but necessary decision that will allow us to become more efficient, more competitive, and more sustainable,” Nissan CEO Ivan Espinosa said in a statement.
Under its restructuring program, Nissan aims to reduce its global production capacity from 3.5 million units (excluding China) to 2.5 million units, while maintaining a plant utilization rate of around 100 percent. To achieve this, the company has been considering the consolidation of production sites from 17 to 10.
Nissan’s CIVAC Plant began operations in 1966 and marked Nissan’s first expansion outside Japan. To date, the factory built more than 6.5 million vehicles, delivering cars to customers in Mexico and to various parts of the world. Current models under production at CIVAC Nissan NP300, Nissan Frontier and Nissan Versa will all be transferred to Aguascalientes.
CONSTRUCTION
Rising costs are one of the key reasons for delayed, canceled or scaled-back projects.
PRICE PINCH // Building rates stall while interest rates and infl ation prevent many inquiries from turning into contracts
■ THE VALUE OF CONSTRUCTION put in place during the first eight months of 2025 (seasonally adjusted) fell 2.2 percent compared with the spending during the same period of 2024, according to the most recent U.S. Census Bureau report.
Year to date, the non seasonally adjusted rate for the value of private build projects fell 3.8 percent while the value of public build projects increased 3.8 percent, Census reported. Commercial project spending fell 11.9 percent and manufacturing project spending fell 3.4 percent year over year. Residential housing, which represented 42.6 percent of the U.S. construction spending total through July, fell 4 percent since last year.
The American Institute of Architects/ Deltek Architecture Billings Index (ABI) weakened again in July, posting a score of 46.2, down from 46.8 in June indicating that a majority of firms are still experiencing declining firm billings. The index reflects future potential contracts for architecture firms.
Inquiries into new work grew slowly but steadily in July, following a brief three-month pause earlier this year, the institute reported. However, design contract values fell again in July as firms struggle to convert inquiries into projects a challenge persisting alongside declining billings for over two and a half years. Billings have been negative for 31 of the last 34 months.
“Business conditions remain challenging for architecture firms nationwide, with billings declining across all regions in July,” said Kermit Baker, AIA’s chief economist. “Client inquiries into new projects continue to build. Still, while commercial and institutional sectors show some signs of stability, the multifamily residential sector still is facing significant headwinds.”
MATERIALS COST HEADWIND
The producer price index for materials and services used in nonresidential construction rose 0.2 percent in August and 2.5 percent from August 2024, driven by extreme increases in steel and aluminum prices, according to an analysis by the Associated General Contractors of America (AGC) of producer pricing data released by the U.S. Bureau of Labor Statistics. The most recent survey conducted by AGC and the National Center for Construction Education and Research found that rising costs were one of the key reasons for delayed, canceled or scaled-back projects.
“The huge increases in steel and aluminum tariffs appears to have enabled domestic producers to push up their selling prices,” said Ken Simonson, AGC’s chief economist. The survey found that 43 percent of contractors reported at least one project in the past six months had been canceled, postponed or scaled back because of higher costs. “These price increases are prompting some owners to rethink planned construction projects,” said Simonson.
Tariffs on steel and aluminum were raised to 50 percent on June 4, following an earlier increase to 25 percent on March 12. A 50 percent tariff on copper products and components took effect on Aug. 1. In addition, broad tariffs covering most imports from nearly all major suppliers of construction materials were activated in early August, making additional cost increases likely in the months ahead.
Three major construction inputs contributed to the acceleration in year-over-year costs. The producer price index for aluminum mill shapes jumped 5.5 percent last month and 22.8 percent from August 2024. The index for steel mill products rose 1.5 percent in August and climbed by 13.1 percent over 12 months. The index for lumber and plywood increased 0.5 percent for the month and 4.8 percent year-over-year.
Two in five surveyed firms reported raising their own prices in response to tariffs, and many accelerated purchases to get ahead of further hikes. Another 16 percent said they had absorbed the higher costs themselves or worked with suppliers to share the burden. Nearly 40 percent of contractors reported they expect materials costs to climb further in the months ahead.
AGC officials have urged the administration to resolve outstanding disputes with China, Canada, Mexico and several other trading partners to allow for lower tariff rates and provide greater certainty on materials prices.
There is a limit to how many price increases the market can absorb before owners put projects on hold,” said Jeffrey D. Shoaf, CEO of the association. “The more the administration does to resolve trade disputes, provide more certainty and lower punitive tariff levels, the more demand for construction should rebound.”
ENERGY
Lower oil prices in early 2026 will lead to a reduction in supply by global producers, says EIA.
UNEVEN GROUND // Although prices are in fl ux, investments in North American power generation have not abated
■ THE ENERGY INFORMATION Administration predicted Sept. 9 that the Brent crude oil price will decline signi cantly in the coming months, falling from $68 per barrel in August to around $50 in early 2026.
“The price forecast is driven by large oil inventory builds as OPEC+ members increase production. We expect global oil inventory builds will average more than 2 million barrels per day through first quarter. Low oil prices in early 2026 will lead to a reduction in supply by both OPEC+ and some non-OPEC producers, moderating inventory builds later in 2026. We forecast the Brent crude oil price will average $51 next year.”
Falling oil prices will lead to a drop in gasoline prices. “We expect the U.S. average retail price for regular-grade gasoline will fall to an average of $2.90 per gallon in 2026,” EIA stated.
EIA forecast the Henry Hub natural gas spot price will rise from an average of $2.91 per million British thermal units (MMBtu) in August to $3.70/MMBtu in the fourth quarter and $4.30/ MMBtu next year. “Rising natural gas prices reflect relatively that natural gas production amid an increase in U.S. liquefied natural gas exports.”
Due to rising natural gas prices and falling oil prices in 2026, EIA forecast that crude oil will trade at its lowest premium to natural gas since 2005. “As a result, we expect drilling activity in the United States to be more centered in natural gas-intensive producing regions in 2026.”
Electricity generation grew rapidly during 2025 as a result of increasing demand for power from data centers and industrial customers. “We expect that total U.S. generation by the electric power sector will grow 3 percent next year. Solar power will supply the largest share of the increase,” EIA predicts.
RESERVES ARE PLENTY
EY (formerly Ernst & Young) issued a report Aug. 19, declaring that “geology has not yet emerged as a constraining factor” for investment in petroleum products exploration drilling. “According to the 2025 EY US oil and gas reserves, production and ESG benchmarking study, the leading 40 companies added more reserves through extension and exploration drilling than the volumes they produced, leading to an organic reserve replacement ratio exceeding 100 percent. Continuing to find new oil reserves is not the issue.
“Geopolitical conflicts, heightened trade tensions and tariff policies, and downgraded economic outlooks are adding to the challenges companies in the U.S. oil and gas space face as they navigate their short-term strategies,” the consultancy said in its report. “This market and investment uncertainty signals needed changes to ensure that unconventional sources of oil and gas sustain increases in U.S. energy production and exports.”
DATA CENTERS
Caterpillar Inc. and Hunt Energy Co. L.P. signed a long-term agreement to deliver “robust and efficient energy solutions for data centers,” said Melissa Busen, senior vice president, Caterpillar Electric Power division. “Hunt’s proven expertise in energy infrastructure complements Caterpillar’s leadership in power systems, enabling us to jointly develop scalable solutions that meet the high demands of reliability, uptime and performance critical to data center operations.”
Caterpillar will leverage its diverse portfolio of power solutions, including natural gas and diesel generation equipment, gas turbines, switchgear, controls, aftertreatment and engineering design services. Caterpillar will also provide leading edge monitoring and servicing capabilities, ensuring customers have complete assurance in uninterrupted power delivery, with or without a connection to the power grid.
Hunt Energy will contribute its expertise in infrastructure development, project financing and operational execution for data center and distributed energy resource projects. The first project is expected to launch in Texas, marking the start of a multi-year initiative to deliver up to 1 gigawatt of power generation capacity for data centers across North America.
HYDROPOWER
With Canada’s energy needs forecasted to double by 2050, and Quebec projecting a demand increase of up to 35 percent by 2035, the province is moving forward with a $150 billion capital expansion part of Hydro-Québec’s roughly $200 billion 2035 Action Plan to upgrade the grid, expand hydropower and wind power capacity and modernize infrastructures.
In light of this, GE Vernova Inc. is expanding its Quebec facilities to meet customer needs, enhance energy resilience and ensure longterm energy security. The company will expand capacity at its hydropower manufacturing facility in Sorel-Tracy. This includes installing new equipment meant for large-scale component manufacturing. The Sorel-Tracy facility is a hub for turbine production.
Hydropower supplies about 60 percent of Canada’s electricity, but the average age of hydropower plants is 53 years old, requiring modernization. GE Vernova and Ontario Power Generation signed a 15-year framework agreement giving GE Vernova exclusivity to modernize up to 25 units at the utility’s hydropower stations in the Niagara region. The turbines for these projects will be manufactured in Sorel-Tracy.
HEAVY EQUIPMENT
Komatsu broke ground in spring for a factory in Arizona. Shown: Komatsu wheeled harvester.
GIVE & TAKE // Order backlogs strong for some machines, but time will tell if demand persists through uncertainty
■ “GIVEN THE STRENGTH OF OUR record backlog, we expect full-year 2025 sales and revenues to increase slightly versus 2024,” said Caterpillar Inc. CEO Joseph Creed, on Aug. 5.
For construction equipment, he said, “We’re encouraged by another quarter of strong order rates across many of our regions and backlog growth. We anticipate full-year growth in construction industries sales to users despite softness in the global industry. In North America, overall construction spending remains at healthy levels, and infrastructure projects funded by the IIJA continue to be awarded.”
Full-year dealer rental revenues are also expected to grow as dealer rental fleet loading is expected to increase in the second half of the year.”
For mining equipment, Caterpillar anticipates lower 2025 sales to users while customers demonstrate “capital discipline. However, we see positive momentum with strong order rates and backlog growth, particularly for large mining and articulated trucks.”
In the energy sector, backlog growth was “driven by robust order activity in power generation and oil and gas.” Demand for power generation “remains strong for both prime and backup power applications driven by increasing energy demands to support data center growth, related to cloud computing and generative AI.
“In oil and gas, we expect moderate growth in 2025. Solar Turbine’s Oil & Gas backlog remains strong, and we see healthy order and inquiry activity,” said Creed.
Volvo Construction, during its first-half earnings call, said that order intake and deliveries had risen, and that [broadly], the machine market grew in total, except for a continuing decline in sales for Europe and North America due to market uncertainty.
DECLINING ORDERS
“Order intake in North America increased but continued to be on a relatively low level.”
Deere & Co., during its earnings call Aug. 14, said that in the U.S. and Canada, “we expect large agriculture equipment industry sales to be down 30 percent for the year. Demand continues to be pressured by high interest rates, elevated used inventory levels in latemodel year machines and trade uncertainty.”
For small agricultural and turf machinery in the U.S. and Canada, industry demand is now projected to be down 10 percent. “Dairy and livestock fundamentals remain strong, while capital investment in the segment remains muted due to the high cost of expansion.”
Industry sales for earthmoving equipment in the U.S. and Canada were projected to fall 10 percent, while compact construction equipment in the region is forecast to be flat to down 5 percent.
“Construction markets remain stable and construction backlog is at above-average levels. U.S. government infrastructure spending remains elevated and continues to provide support to the industry.”
INVESTMENTS
Volvo CE expanded its crawler excavator footprint globally with investment in three main production sites, including in North America.
Komatsu broke ground in early April on an $80 million factory in Mesa, Arizona, that will span 215,000 square feet. It is scheduled for completion in summer 2026.
“As the copper industry continues to grow, Arizona is at the heart of that momentum,” said Tom Suess, vice president of Komatsu North America Mining. “Expanding our presence [here] positions us to support our customers and partners in a region that’s leading the way in critical mineral production.”
TARIFFS
Josh Beale, director of investor relations for Deere, said the company increased the expected impact of tariffs on its raw and semifinished materials to reach $600 million for 2025. “The biggest drivers there were a higher reciprocal rate on Europe as well as steel going from 25 to 50 percent, and a higher rate on India, too.
“From a mitigation standpoint, [we are] doing a lot of work on USMCA certification, particularly in Mexico, where we have both complete goods and components flowing over the border. [We] made a lot of progress there and significantly reduced that exposure with the certification.”
Deere is also making “no-regret sourcing decisions, where we can move [components] around as we work to mitigate exposure.” The manufacturer has also embedded costs in pricing in its early-order programs for 2026.
TRUCK & TRAILER
OEMs face mounting pressure to balance production against a thinning pipeline,” says Dan Moyer of FTR Transportation Intelligence.
PULLBACK // Order rates decline amid policy volatility, even as freight volumes are stable
■ TRUCK FREIGHT TONNAGE ROSE 0.9 percent during August compared with the same period a year earlier, following a gain of 1.1 percent in July, while year to date, tonnage was up 0.1 percent versus the same eight months of 2024, the American Trucking Associations (ATA) reported Sept. 23.
“Truck freight volumes had a nice end of the summer,” said ATA Chief Economist Bob Costello. “However, while I’d like to predict a strong rebound in freight levels through the upcoming holidays, I can’t. Traditional seasonal patterns are off this year as shippers adjust to tariffs. Plus, housing remains soft, the slowing labor market is likely to show up in consumer spending at some point, and most manufacturing metrics are either decelerating or declining.”
On the vehicle manufacturing front, North American Class 8 truck net orders totaled 12,844 units in August, down 21 percent from a year ago, according to ACT Research, and total Class 5 through 7 orders fell 24 percent to 12,613 units in the same period.
“August marks the eighth consecutive month of year-over-year Class 8 order declines,” said Carter Vieth, analyst at ACT Research. “August tractor orders of 7,493 units, down 34 percent, were notably weak, but in line with the trend since April. Current tariff and regulatory purgatory continue to sow industry uncertainty.”
Vocational Class 8 orders totaled 5,351 units, up 7.8 percent, but on a year-to-date basis, vocational orders were down 20 percent in 2025 compared to 2024. “Vocational, like the tractor market, continues to be hampered in the short-to-medium term by policy fluctuations related to tariffs, federal funds and regulations.
Regarding medium-duty vehicles, Vieth said orders have slowed notably this year “as stillelevated inventories, a weaker economic outlook, and notable increased consumer pessimism weigh on demand.”
TRAILER VOLUMES
Meanwhile, the U.S. trailer market has transitioned from cautious optimism to stay affloat, “as the modus operandi of wait-and-see continues,” Jennifer McNealy, director for market research and publications at ACT Research, reported Sept. 18.
“Carrier profits remain weak, freight rate traction is incremental, private fleets are pulling back on asset investments, and Class 8 indicators continue to deteriorate. Within this environment, trailer demand remains subpar,” she said.
“At this point, muted intake continues to be expected until policies and pricing are more transparent and carrier profitability sustainably increases.”
Trailer production was about double order placements, according to McNealy. “With weak orders, an elevated cancelation rate and lower build rates, the industry backlog-to-build ratio fell to 3.6 months in August, which doesn’t commit the industry into the beginning of 2026 and is well below the long-term [ratio] average of 5.7 months. To say that the environment is challenging at present may be an understatement.”
Dan Moyer, senior analyst, commercial vehicles, at FTR Transportation Intelligence, commented, “With builds continuing to outpace new orders, OEMs face mounting pressure to balance production against a thinning pipeline. Unless order activity strengthens with the opening of 2026 order boards, the industry may confront additional headwinds heading into next year.”
For trailer manufacturers and their suppliers, he said, tariffs are producing costs, tighter margins and increased risk of consolidation. “Larger, integrated players are more resilient, while smaller firms are vulnerable. Many fleets are delaying replacements, relying more on used trailers and curbing expansion.”
SELF DRIVING
International Motors LLC (formerly Navistar) is launching customer fleet trials using second- generation autonomous vehicles. In partnership with PlusAI, the manufacturer will pilot its autonomous on-highway tractor along the Interstate 35 corridor between Laredo and Dallas with select fleet operators. The fleet trials will be managed from International’s autonomous hub in San Antonio, ensuring close collaboration with customers and a deeper understanding of real-world applications.
“This pilot program is a big step toward seamless digital operations that are designed to deliver an exceptional customer experience,” Tobias Glifferstam, chief strategy and transformation officer, said Sept. 8. “By working with customers, we are proving the commercial viability of autonomous technologies and providing innovative solutions that improve safety, efficiency and the bottom line.”
As part of broader efforts to drive the future of road freight, International and PlusAI seek to bring scalable, factory-installed autonomous solutions to the transportation industry. The collaboration builds on a shared commitment to creating hardware and software solutions that are both technologically advanced and commercially viable for hub-to-hub operations. The customer fleet trials represent a crucial opportunity to incorporate feedback and refine the autonomous solution.
