Caterpillar warns of up to $1.5 billion tariff hit, profit misses on weak demand

Heavy equipment is parked at the site of Caterpillar Belgium, in Gosselies, Belgium. U.S. (AP Photo/Yves Logghe, File)

Caterpillar missed second-quarter profit expectations on Tuesday due to sluggish demand for construction equipment and warned of up to US$1.5 billion hit from costs tied to U.S. tariffs in 2025.

Even though the company has been able to offset the impact of supply-chain snarls and cost inflation through price hikes, a slowdown in U.S. construction spending has led to a pullback in demand for its products such as excavators and backhoe loaders.

Shares of Caterpillar, often viewed as bellwether for the industrial economy, fell about three per cent in premarket trading after it also flagged a tariff impact of $400 million to $500 million in the third quarter.

Sweeping tariffs on U.S. imports have impacted companies across sectors, prompting many to rejig their supply chains and localize production. Caterpillar also flagged unfavorable manufacturing costs largely due to tariffs.

Including tariffs, the Irving, Texas-based company forecast 2025 adjusted profit margins in the bottom half of its annual target range.

In the current earnings season, companies have reported a combined loss of $12.1 billion to $13.4 billion between July 16 and Aug. 1 for 2025, Reuters’ global tariff tracker shows. A majority of these were from the industrial and manufacturing segment.

U.S. President Donald Trump has said the tariffs are a response to persistent U.S. trade imbalances and declining U.S. manufacturing power, and that the moves will bring jobs and investment to the nation.

Quarterly revenue in the Asia Pacific region fell two per cent to $2.89 billion. Its North American sales, which accounts for more than half of overall revenue, fell two per cent to about $8.9 billion.

Adjusted profit in the second quarter fell to $4.72 per share, compared with estimates of $4.90, according to data compiled by LSEG.

Its sales and revenue for the quarter fell one per cent to $16.7 billion from a year ago.

The company expects its annual sales and revenue to be slightly higher than last year and compared to its prior expectations of about flat, in anticipation of demand from its energy and transportation unit.

(Reporting by Nathan Gomes in Bengaluru; Editing by Arun Koyyur)