DE · Earnings call · 2026Q3T · Full report
Trade Policy and Tariffs
DEERE & CO · 2026-08-20 · Importance 63 · Surprise 42 · Contradicted
Deere recognized $110 million of incremental tariff refunds in the third quarter, bringing fiscal 2026 refunds to $382 million, with no additional refunds assumed for the remainder of the year. Following changes to Section 122 and Section 321 policies, fiscal 2026 direct tariff expense is expected to be approximately $1.1 billion, excluding IEPA refunds. The reduction from a previously communicated $1.2 billion run rate primarily reflects imported-goods tariff rates on European imports falling from approximately 25% to 15% effective June 1, 2026. Net tariff exposure is approximately $718 million in fiscal 2026 after refunds, while the company expects a run rate near $1 billion in fiscal 2027, creating a year-over-year headwind.
Key facts
- Following changes to Section 122 and Section 321 policies, Deere now expects direct tariff expense of approximately $1.1 billion for the fiscal year, excluding IEPA refunds.
- Previously communicated annual tariff run rate of $1.2 billion was updated to $1.1 billion due mainly to changes in Section 32 tariffs (import tariff rate dropped from roughly 25% to 15%), effective June 1st.
- Net tariff exposure for fiscal year 2026 is approximately $718 million (about $1.1 billion in direct tariffs less $382 million of refunds).
- Expected tariff run rate for fiscal 2027 is closer to, or right around, $1 billion.
- Current outlook assumes no further refund activity during the balance of the fiscal year.
- The quarter included tariff-related developments with $110 million of incremental refunds recognized in Q3 due to timing of Phase II AIPA refund approvals.
- Deere recognized that Small Ag and Turf benefited in the quarter from the favorable impact of the IEPA refund and adjustments to Section 32 tariff policies, contributing to improved profitability.
- Total refunds recognized in fiscal year 2026 now stand at $382 million.
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| operating_income | negative | committed | -4.6% | Net tariff exposure for fiscal year 2026 is approximately $718 million (about $1.1 billion in direct tariffs less $382 million of refunds). |
| operating_income | negative | probable | -3.7% | Expected tariff run rate for fiscal 2027 is closer to, or right around, $1 billion. |
| operating_income | positive | committed | +0.3% | Previously communicated annual tariff run rate of $1.2 billion was updated to $1.1 billion due mainly to changes in Section 32 tariffs… |
| operating_income | negative | committed | — | Current outlook assumes no further refund activity during the balance of the fiscal year. |