U.S.-China Trade Truce Could Save Komatsu $140M in Tariff Costs, CEO Reveals

TOKYO, May 22, 2025 – A temporary U.S.-China trade truce may significantly alleviate the financial burden of U.S. tariffs on Komatsu Ltd., potentially reducing the impact by approximately 20 billion yen ($140 million), according to President and CEO Takuya Imayoshi. The Japanese construction and mining equipment giant, which derives over 25% of its sales from North America, had previously forecasted a substantial 94.3 billion yen hit to its bottom line due to tariffs imposed by U.S. President Donald Trump.

The 90-day pause on additional tariffs on Chinese imports, announced last week, offers a reprieve, particularly for Komatsu’s reliance on cost-effective Chinese steel for its U.S.-manufactured machinery. This development suggests the company’s earlier projection of a 27% profit drop for the fiscal year ending March 2026 may be less severe than anticipated.

Tariff Relief Boosts Profit Outlook

In an exclusive interview with Reuters on May 21, 2025, Imayoshi indicated that the tariff truce could reduce the financial strain by about 20%, although Komatsu has not yet officially revised its April forecast of a 478 billion yen operating profit. This figure was notably conservative compared to analysts’ consensus of 597.5 billion yen, which projected a milder 9% decline from the previous year. “The retaliatory tariffs from various countries have not escalated as we feared, limiting the negative impact on our performance,” Imayoshi noted.

Despite this optimism, he remained cautious, acknowledging that roughly half of Komatsu’s U.S.-sold products, including construction equipment imported from Japan, Brazil, and Thailand, remain subject to higher levies, which could still pose challenges if tariff rates increase post-truce.

Strategic Supply Chain Adjustments

To navigate potential future tariff hikes, Komatsu is exploring strategic shifts in its supply chain. Imayoshi outlined plans to bypass U.S. warehouses for spare parts exports to Canada and Latin America and potentially relocate production of U.S.-bound goods from China to Thailand. However, he dismissed the feasibility of expanding U.S. manufacturing, citing American steel prices that are more than double those in China. “It’s never the case that tariffs make U.S. production cost-competitive,” he stated. Real-time data from industry sources indicates that global steel prices remain volatile, with Chinese steel prices averaging $550 per metric ton in May 2025, compared to $1,200 in the U.S., reinforcing Komatsu’s reliance on Asian supply chains.

Did You Know?
Komatsu’s origins trace back to 1921, when it was founded in Komatsu City, Japan, as a manufacturer of mining equipment. Today, it operates in over 170 countries and is a leader in sustainable construction solutions.

Competitive Landscape and Chinese Rivals

While the tariff truce may level the playing field with primary competitor Caterpillar, which reported tariff-related costs of $250-$350 million for Q2 2025, Imayoshi highlighted growing competition from Chinese manufacturers like Sany, XCMG, and LiuGong. These firms are capturing market share in emerging economies by offering lower-priced equipment amid China’s property market slowdown. “Chinese rivals have largely caught up in performance while maintaining lower costs, and in electrification, they are ahead,” Imayoshi admitted.

Industry analysis from Off-Highway Research confirms that Chinese manufacturers have increased their global market share by 8% since 2023, driven by aggressive pricing and advancements in electric machinery.

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Innovation and Acquisition Plans

To stay competitive, Komatsu is prioritizing innovation in electrification and autonomous vehicle technologies, areas where it seeks external expertise. Following its 2023 acquisition of Detroit-based battery startup ABS, Imayoshi hinted at further acquisitions to bolster these capabilities.

The company’s mid-term plan, announced in April 2025, targets 1 trillion yen in free cash flow over the next three years, which Imayoshi said could fund strategic investments while balancing shareholder returns. “We have considerable financial leeway,” he emphasized, noting no major acquisitions have been made since the $2.9 billion purchase of Joy Global in 2017.