Caterpillar warned on Tuesday U.S. tariffs would pose significant challenges in the second half of the year and cost the construction equipment maker up to $1.5 billion in 2025.

The construction and mining equipment giant is expecting higher trade-related costs in the second half of the year. Meanwhile, AI data center demand is driving growth in the power generation business.

Tariffs are having a bigger impact on Irving-based Caterpillar Inc.’s margins even as demand for the company’s iconic yellow diggers and bulldozers