AKRON—Following a cyclical slump in the OTR equipment and tire markets in 2024, manufacturers are looking toward improved sales this year in the U.S. market.
However, the Trump Administration's tariff increases on steel and other commodities, which in turn could spur a trade war, could stunt the rebound.
Farm profits are forecast to increase in 2025, according to the U.S. Department of Agriculture, with net cash farm income forecast to increase almost 22 percent and net farm income to jump almost 30 percent, after declines in 2023 and 2024.
Direct government farm payments are forecast to increase in 2025, largely from supplemental and ad hoc disaster assistance to farmers and ranchers under the American Relief Act of 2025, passed in late December, the department said, helping to offset a predicted 0.3-percent dip in farm cash receipts this year.
On the equipment front, low-horsepower tractor shipments in the U.S. were down 13 percent in 2024, compared with the previous year, according to the Association of Equipment Manufacturers (AEM), with Canada ending the year 18 percent lower. Both countries were running 24 percent below the five-year average.
High-horsepower tractors and combines also struggled, with shipments down 17 percent year-over-year in the U.S.
The AEM attributed the slump to lower commodity prices and government subsidies against high interest rates and input costs which negatively impacted equipment purchases.
For 2025, the AEM is forecasting lower interest rates and stabilized equipment pricing could positively impact equipment purchases, especially among farmers who deferred purchases over the past couple of years.
However, increased tariffs and a potential trade war could negatively impact farmers and the ag equipment industry, the AEM said.
The AEM said a trade war with Canada in particular could be troubling as about 40 percent of U.S. ag equipment exports head north while about 10 percent of U.S. ag equipment imports come from Canada.
For tire manufacturers, 2024 was a down year for both the OE and replacement ag tire markets, with OE being significantly more impacted than replacement, according to Brian Adams, brand manager of agriculture, B2B Beyond Road at Michelin North America Inc.
This year may be the same.
"Historically the ag business flows in two- to three-year cycles, and we are now in Year Two of a downturn," Adams said.
"As farming is an active industry, which Michelin expects to remain strong, equipment and tires will need to continually be replaced, repaired and upgraded, so it is a matter of 'when' the agricultural market returns to growth."
Michelin expects farmers will continue to seek out "optimal value" as net farm income levels are consistent with 20-year averages, Adams said.
"However, it has decreased over the last 12-plus months, so optimizing all input costs will be important in 2025 and beyond. Michelin recognizes this and is exactly why we continue to maximize our products and value for farmers season after season."
The upheaval in funding under the Trump Administration is unlikely to impact infrastructure spending and the construction market this year, according to the Dodge Construction Network's Dodge Report.
"Instead, state and local elections matter much more to the starts forecast through tax incentives, zoning changes and bond issuances for construction projects.
"For the coming year at least, the change in administration is unlikely to have a considerable impact on the construction forecast," the report said, adding, "While government spending under the new Trump Administration is expected to downshift over time, the outlook for business investment may now be brighter if the new administration passes promised legislation to considerably lower taxes for the business sector."
Construction starts in 2024 increased 6 percent over 2023, with residential construction up 7 percent, nonresidential up 4 percent and non-building starts up 7 percent.
The positive trend is expected to continue into 2025, according the Deloitte Research Center for Energy & Industrials, with possible short-term interest rate cuts and improved economic conditions.
Declining mortgage rates could boost demand and residential construction activity, Deloitte said, while the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act may continue to drive growth in the manufacturing and energy markets.
"Overall, the U.S. construction industry is likely to record moderate growth in the medium term with slowing inflation and a supportive monetary policy," Deloitte said.
The glitch in the positive outlook is the potential impact of Trump's proposed tariffs on imported steel, a key material in building and infrastructure projects, that could increase the cost of construction materials.
Michelin, in its annual financial report, said demand for construction tires contracted over the year, by around 15 percent in the OE segment and somewhat less in replacement, due to the slowdown in homebuilding in both Europe and North America, where inflation and interest rates remain high.
The construction OE tire market experienced a cyclical downturn in 2024 after a peak year in 2023; the replacement market also experienced a decline in 2024, according to Michelin.
The down year in OE is expected to continue this year.
"However, we have not seen a reduction in construction spending or activity. Because of that, Michelin expects the construction replacement market to show signs of recovery in 2025," Jesse Burdett, Beyond Road Market Intelligence manager at Michelin North America, said.
The Infrastructure Act's funding of construction projects over recent years will still have a positive impact for the construction tire market this year.
"While the current administration policies may impact spending, Michelin believes there is enough of a back log of work to keep construction activity consistent throughout the current year," Burdett said.
However, the Trump Administration decisions could quickly swing the construction tire market in either direction, Burdett added.
A reduction in interest rates could stimulate more demand for housing, unless funding is completely cut off.
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