When generally speaking about the U.S. tariff environment, the typical lens in the media is the price impact on an end individual consumer. From groceries and food like coffee, tea, fresh fruit, and olive oil to household goods such as clothing and electronics, tariffs have increased real end prices to consumer purchasers of these products. Equipment finance rarely makes the story, but it sits just as directly in the path of tariffs. Perhaps the most challenging aspect is the fluid, ever changing nature of the U.S. tariff environment. At the time of writing, the prior two weeks saw an escalating trade conflict with Canada due to U.S. issued tariffs and retaliatory ones by Canada. Uncertainty around tariffs impacts the equipment finance industry due to potential price fluctuation of equipment. Higher equipment prices can delay capital expenditures, give rise to challenges related to residual value settings, and alter the credit risk of transactions.
Complexity and Uncertainty
The current tariff environment in the U.S. is quite complex and as noted above, uncertain. There are several areas that make up the current environment, including, but not limited to, country and product specific tariffs, trade agreements, and retaliatory tariffs. There is a main source of record published online called the Harmonized Tariff Schedule (HTS) which “sets out the tariff rates and statistical categories for all merchandise imported into the United States.” Of particular interest to our industry would be industrial type inputs like steel, aluminum, and copper because of their use in so many categories of assets. These fall under a specific section of tariffs titled Section 232. Between September 2024 and September 2026, there have been at least six major Section 232 actions made. In summary, the current tariff environment is constantly changing and quite complex and knowing key variables like equipment, country, and classifications is essential to keeping up.
Let’s examine some impacts on the equipment finance space given the current tariff environment in the U.S. First, much like the consumer side at that start of this article, commercial equipment costs are rising. Tariffs add an additional cost component to imported equipment. This cost could be absorbed somewhat by the manufacturer, or passed on to the dealer and/or customer, but the tariff is not always 100% staying with the importer. The higher the equipment price, the larger the financing requirement which can impact much of the deal: higher lease/loan repayments, larger down payment requirements, and higher working capital required. This makes pricing less predictable and more complex.
Effect of Tariffs
With commercial equipment costs going up, this could generate an increase in financing because businesses may not want to or cannot afford to pay the higher price in cash. This could lead to more leasing and straight financing but also accelerate purchases with financing before additional tariffs come into play given the uncertainty highlighted above. In July of this year, U.S. imports of capital goods increased by $14.4 billion which highlights potential evidence of accelerated purchasing.
Higher equipment costs are not the only effect of tariffs for operating businesses. Tariffs increase other elements of operating costs such as maintenance, transportation, inventory management, etc. These increased operating costs can lead to narrowing margins. From an equipment finance credit risk perspective, lenders may need to evaluate certain criteria of the business with more scrutiny. Customer cash flow can be squeezed, so debt-service coverage and liquidity need to be examined. Lenders also will want to evaluate their portfolio against industry exposure and customer/supplier concentration when factoring in the elements discussed above that make up the U.S. tariff environment.
With respect specifically to lease transactions, asset managers are now having to deal with used equipment pricing fluctuations, and therefore, corresponding challenges when setting residual values. As new equipment prices rise, this makes used equipment somewhat more attractive from a costing perspective. A good analogous example of this was back in 2021 with the automotive microchip shortage. During the COVID-19 pandemic, a global semiconductor shortage restricted supply chains resulting in fewer newer vehicles on dealer lots, which caused large dealer markups on the limited new car inventory. The result was a drastic increase in used vehicle prices, some upwards of 40% (some vehicles actually sold used for higher than their original sticker cost). The bottom line here is that tariffs add more complexity to residual value setting depending on several factors, including type of equipment and the supply chain process.
Industry Responses
What are folks in our industry doing now and what should they be doing as we operate in such a volatile U.S. tariff environment? I spoke with several industry experts, from banks to captives to independents, and saw some consistent responses to this question. Many lenders have established new monitoring processes by specific asset class for current portfolio tariff exposure and projected tariffs. They are closely watching more and more the country of origin of the equipment as well as the OEM’s supply chains. From a pricing perspective, several incorporated an element of tariff uncertainty into their rates. Others reduced how long financing prices were good for given uncertainty, as well as established very specific residual value setting committees.
The industry's own sentiment tracks the policy calendar closely. The ELFA Monthly Confidence Index, a qualitative read on business conditions and expectations, fell to 41.9 in April 2025, its lowest level since October 2023. April 2 was the day the White House formally enacted the tariff framework. By August 2026 the index had recovered to 62.4.
That rebound is worth reading carefully. It says the industry has learned to price and structure around tariffs, not that tariffs stopped mattering. Higher equipment costs have pushed more buyers toward financing rather than cash, and lenders have rebuilt deal structuring, asset management, and portfolio credit review around a moving cost base. What has not returned is predictability. The capability that now separates shops is the ability to reprice a transaction between approval and funding, and that will hold regardless of where policy lands.
