Concerns Over U.S. Tariffs for Komatsu

By Kantaro Komiya and Maki Shiraki

TOKYO (Reuters) – The chief executive of Komatsu (OTC:KMTUY), a leading heavy-duty equipment manufacturer, expressed that the most significant risk during Trump’s presidency isn’t the tariffs he proposed, but rather potential retaliatory duties from Canada on American-made mining machinery.

This perspective from a global manufacturer highlights the possible cascading effects of Trump's commitment to impose tariffs on imports from Canada, China, and Mexico upon taking office, particularly if those countries retaliate with their own trade barriers.

As the world’s second largest construction machinery company after Caterpillar (NYSE:CAT), Komatsu generates over 25% of its sales from North America and employs around 8,000 staff in the United States.

Hiroyuki Ogawa, the CEO, labeled the risk of retaliatory tariffs from Canada—the primary export market for Komatsu's U.S.-produced mining equipment—as his “biggest concern” with Trump’s second term beginning next month. He stated, “We are an exporter in America,” explaining that Komatsu's U.S. exports have outpaced imports by about $1 billion annually since acquiring Joy Global (NYSE:JOY) in 2017.

Ogawa emphasized, “We're basing our business on free trade. A tariff war could land a one-two punch on us.”

In addition, the effects of Trump's threatened tariffs on U.S.-bound components like sheet metal from China are “not very big” and can be alleviated by shifting supply chains to other regions, such as Southeast Asia, within two to three months.

Despite trade policy concerns, Ogawa noted that Trump's intention to boost fossil fuel usage could counterbalance the declining demand for heavy machinery in the U.S., driven by an oversupplied rental market.

He reiterated Komatsu's commitment to invest in the U.S., regardless of the presidential outcome, confirming intentions to allocate around $80 million for a mining equipment service center in Arizona and $65 million for ABS, a battery manufacturer acquired last year in Detroit.

Ogawa anticipates a “challenging” business environment for the next fiscal year beginning April, predicting flat global demand while expressing worries about rising fixed costs and diminished price increase opportunities as supply chains normalize.

Komatsu aims for an operating profit of 573 billion yen ($3.65 billion) in the current fiscal year ending March 2025, representing a 5.6% decline from the previous year.

($1 = 156.8800 yen)