Caterpillar’s shares dropped over 3% as the heavy-equipment maker anticipates higher tariff costs for 2025 due to shifting U.S. trade policy. Industrial machinery firms are grappling with increased expenses and low demand amid Trump’s tariffs and high interest rates. Expenses may rise to $1.8 billion this year, with a potential $1.1 billion extra hit in 2026.

Analysts like Angel Castillo and Michael Feniger warn of rising tariff headwinds impacting not just Caterpillar, but other global companies. Baird Equity’s Mircea Dobre estimates a $1.1 billion tariff cost for Caterpillar in 2026. However, Langenberg LLC’s Brian Langenberg remains optimistic about demand, believing customers will absorb tariffs for needed equipment.

Oppenheimer analyst Kristen Owen sees potential in volume growth as the next catalyst for Caterpillar, despite tariff concerns. The company’s shares trade at a premium, at about 21.34 times forward profit estimates, above the industry median of 18.46. Despite challenges, Caterpillar shares have risen by 20.9% this year.

Read more at Yahoo Finance: Caterpillar falls after raising annual tariff hit forecast