Canada's retaliation for Trump tariffs is biggest concern, says Japan's Komatsu

Komatsu

19/12/2024 23:00

By Kantaro  Komiya and Maki Shiraki
       TOKYO, Dec 20 (Reuters) - The top business risk of the
Trump presidency for heavy-duty equipment maker Komatsu is not
the tariffs he has threatened, but Canada's potential
retaliatory duties on American-made mining machines, the head of
the Japanese company said.
    The view of a global manufacturer flags the possible
knock-on impact of Trump's pledge for tariffs on imports from
Canada, China and Mexico when he takes office, especially if the
targets decide to retaliate with trade barriers on their own.
    Komatsu  6301.T , the world's second-largest construction
machinery company after Caterpillar  CAT.N , earns more than a
quarter of its sales from North America and employs about 8,000
staff in the United States.
    The risk of retaliatory tariffs by Canada, the largest
export destination for the mining equipment Komatsu makes in the
United States, is "my biggest concern" when Trump's second term
begins next month, Chief Executive Hiroyuki Ogawa told Reuters.
    "We are an exporter in America," Ogawa said, adding that
Komatsu's U.S. exports have surpassed imports by about $1
billion a year since its 2017 acquisition of Milwaukee-based
mining machinery maker Joy Global.
    "We're basing our business on free trade," Ogawa said. "A
tariff war could land a one-two punch on us."
    The impact of the threatened tariffs on U.S.-bound
components such as sheet metal from China is "not very big" and 
could be mitigated if necessary by shifting supply sources
elsewhere, such as from Southeast Asia, within two to three
months, he added.
    Apart from trade policies, Trump's vow to maximise fossil
fuel use would serve as a positive counterbalance to shrinking
demand for heavy machinery in the United States due to
oversupply in the rental market, Ogawa said.
    Komatsu will keep investing in the United States regardless
of who the president is, Ogawa said, vowing to spend about $80
million for a mining equipment service centre in Arizona and $65
million for ABS, a Detroit-based battery maker bought last year.
    Ogawa expects a "challenging" business landscape in the next
fiscal year starting in April, with global demand likely to stay
flat. He cited concerns about rising fixed costs and fewer
chances for price hikes as supply chains return to normal.
    Komatsu forecasts operating profit of 573 billion yen ($3.65
billion) in the current fiscal year to March 2025, down 5.6% on
the year.

($1 = 156.8800 yen)

 (Reporting by Kantaro Komiya and Maki Shiraki; Editing by
Clarence Fernandez)
 ((Kantaro.Komiya@thomsonreuters.com; Twitter: @kantarokomiya;))