Production of Harley-Davidson motorcycles sold in Europe will move from USA factories to facilities overseas, the Milwaukee-based company announced Monday, a outcome of the retaliatory tariffs the European Union is imposing on American exports in an escalating trade war with the Trump administration.
Harley said in a Monday filing that European Union tariffs on its motorcycles built in the us just jumped from 6% to 31%, adding roughly $2,200 to the cost of each. "In 2017, almost 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the European Union countries is second only to the USA". Since Trump's trade tariffs took effect in March, the company has reported losses of 9 percent.
Harley-Davidson's stock fell 5% on Monday.
In early 2017, President Donald Trump met with executives from Harley-Davidson who he thanked for "building things in America". That increases the costs for companies to bring the parts they need into the U.S. to complete their products. Who knows? Since no one in the White House seems to understand how worldwide trade works, and we've seen how capricious and easily distracted The Donald is, it's 50/50 whether or not the tariffs go into effect or he gets distracted by a squirrel and forgets all about them. Trump's tariffs also raise costs on imported parts they need to manufacture in the United States.
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The company estimates the tariffs will result in $30 million to $45 million in additional costs this year and $90 million to $100 million on an annualized basis. "I expect many other companies will be forced reluctantly to move production as Harley has done in order to maintain their viability".
"For Harley to be forced to move production out of the country because of the tariffs is very damaging to Trump's repeated claim that his trade, tax and regulatory policies will get companies to boost their United States investments and create good manufacturing jobs", Edward Alden, senior fellow at the Council on Foreign Relations, told Business Insider.
The International Association of Machinists and Aerospace Workers (IAM), the union that represents Harley employees in three USA plants, said the offshore move had been planned long in advance.
It said the tariffs would add, on average, $2,200 (£1,660) to each bike exported to Europe from the U.S. as the import tax increases from 6% to 31%. In the near term, Harley-Davidson will instead absorb most of the cost of moving the production of motorcycles overseas.
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On Monday, the vice president of the European Union's governing body said that Europe and China will form a group aimed at updating global trade rules to address technology policy, government subsidies and other emerging complaints in a bid to preserve support for worldwide commerce. A year after Trump pulled the U.S. out of the TPP in January 2017, Harley announced it would close its factory in Kansas City and consolidate production in York, Pennsylvania, eliminating about 260 jobs.
After early steep declines, markets pared losses after White House trade adviser Peter Navarro softened the country's stance on investment restrictions. He has events that day in Milwaukee, where Harley-Davidson has its headquarters, and Mount Pleasant. It also has manufacturing operations in Australia, Brazil, India and Thailand.
Setting up production facilities overseas will take between nine and 18 months, the company said. Passing that on to dealers or customers would cause an "immediate and lasting detrimental impact" on the company's business in its second-largest market, so it'll bear the brunt of the expense. The EU threatened that its payback for those levies would be to boost taxes on United States motorcycles, Levi Strauss jeans and bourbon whiskey.
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