Harley-Davidson to make motorcycles in Europe to avoid trade-war tariffs


Harley-Davidson motorcycles are one of the American-made products affected by the recent EU-imposed 25 percent tariff and the company chose to avoid being hit with large financial ramifications that it would instead move its production of bikes destined for the European Union, overseas, Bloomberg reports.

Each motorcycle will cost an average of US$2,200 extra after the European Union raised its tariff on imported U.S. bikes to 31 percent from 6 percent on June 22, the Milwaukee-based manufacturer said Monday in a regulatory filing.

In addition, to address the substantial long-term cost burden from the tariffs the company plans to shift production of motorcycles for European Union destinations from the U.S.to global facilities. Trump has already shown he is sensitive to tariffs aimed at American farmers, almost reaching a trade deal with Beijing that would have boosted Chinese imports of USA agricultural goods, instead of putting billions of dollars in sales at risk.

The EU decision to place tariffs on various USA products, including Harleys, was in retaliation to the US imposing tariffs on steel and aluminum exports from the EU into the U.S.

The story of William Harley and Arthur Davidson's brainchild turning into one of the most well-known motorcycle companies is a quintessential example of the American dream. But since then the company has been counting the costs of his trade policy.

Asked earlier Monday about the news at the day's press briefing and whether such tariff imposition would continue, White House press secretary Sarah Sanders claimed that Trump's "trade and economic policies have been a huge benefit to the American economy" and placed the blame on the European Union, arguing that it was "trying to punish US workers because they have engaged repeatedly in unfair trade practices". At the high end, the additional cost from the European tariffs would represent a 2 percentage point reduction in Harley's operating profit margin from past year. He further praised the executives "for building things in America" and predicted the company would expand its operations during his administration.

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Monday morning Harley Davidson announced it is set to begin shifting the production of motorcycles meant for Europe from the United States to factories overseas.

Harley-Davidson's stock fell 5% on Monday.

Harley-Davidson said it would raise investment in its worldwide plants, though it did not say which ones, adding that it expected the increase in production to take nine to 18 months. And in recent years, Harley-Davidson has been courting a younger, more culturally diverse audience anyway-people less likely to have ties to factory workers in Wisconsin and Kentucky who will soon be out of work.

In the name of protecting American jobs, Trump has imposed tariffs on steel and other products coming from China, Europe, and other countries. AshLee Strong says the best way to help American workers, consumers and manufacturers is to open new markets and not raise barriers. The company reported $521.8 million in earnings in 2017 on $5.6 billion in revenue. The company built its reputation and image by making motorcycles here, and if the company wants to continue to market itself as an iconic American brand both at home and overseas, it needs to focus on USA production. The company operates manufacturing facilities in Brazil, India and Australia, and is beginning production in Thailand this year.

Earlier this year the White House imposed a 25% tariff on steel and a 10% tariff on aluminium imports from several countries, including the 27-member EU.