Shares of Caterpillar (CAT -2.37%) were pulling back on concerns around new tariffs on goods from Canada, Mexico, and China. Those weighed on the stock market generally, and Caterpillar specifically, as the multinational company is heavily dependent on the global supply chain.

As of 12:17 p.m. ET, the S&P 500 (^GSPC -0.63%) was down 0.8%, and Caterpillar stock was down 1.9% at the same time.

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Caterpillar's tariff risk

The maker of mining and construction equipment has several manufacturing facilities in China and Mexico. Over the weekend, the White House announced a 25% tariff on goods from Canada and Mexico, though the tariff on Mexico was suspended for a month after an agreement between the two countries. The U.S. also imposed a 10% tariff on goods from China.

Canada responded with retaliatory tariffs, which could impact sales of Caterpillar products in the country, and China is reportedly planning "necessary countermeasures."

In its risk factors, Caterpillar acknowledges that more restrictive trade policies could negatively impact its business. A majority of Caterpillar's employees are based outside the U.S., and approximately half of its revenue comes from North America, showing it has significant exposure to global trade.

Asked about tariffs during the company's earnings call last week, Caterpillar CEO Donald Umpleby said, "Our largest manufacturing presence is in the United States, and we are a net exporter outside of the U.S., and that positions us pretty well versus many other companies out there." It aims to manufacture in the same region that sells, limiting tariff exposure, but it does move some components around the world.

What's next for Caterpillar?

Caterpillar stock pulled back 5% last week as the company missed the mark in its fourth-quarter earnings report. Revenue fell 5% to $16.2 billion, below the consensus at $16.5 billion, and adjusted earnings per share fell from $5.23 to $5.14, beating estimates at $5.03.

The company said it expects a slight decline in revenue in 2025 and a lower adjusted operating profit margin due to weak demand in many of its international markets.

A trade war, especially if it spreads, is only going to make a return to growth more difficult for Caterpillar.