Rising tariffs forces Harley-Davidson to shift some production overseas

Marco Green
June 26, 2018

President Donald Trump has used the iconic American motorcycle maker as an example of a USA business harmed by trade barriers in other countries, but Harley had warned that tariffs could negatively impact its sales.

In response to the USA tariffs, the European Union began charging import duties of 25% on a range of United States products, including big motorcycles like Harley's.

The EU tariffs are a response to new United States duties on steel and aluminium imports.

A spokeswoman for House Speaker Paul Ryan, a critic of Trump's trade policies, said Harley-Davidson's travails were "further proof of the harm from unilateral tariffs".

"Remember, they came to us, for example, pointing out that India had a 100 per cent tariff on Harley Davidsons".

"Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag", Trump said.

In response, Trump blasted Harley-Davidson for using the tariffs as an "excuse" to move more of their manufacturing overseas.

Harley-Davidson Inc. sold nearly 40,000 motorcycles in the European Union past year, its second-largest market after the United States, according to the company. The company in its US Securities and Exchange Commission (SEC) filing on Monday said that new retaliatory tariffs by the European Union (an increase from six percent to 31 per cent) will result in an incremental cost of approximately Dollars 2,200 on an average motorcycle exported from the US to the EU. Harley-Davidson, the dominant player in the heavyweight U.S. motorcycle market said earlier on Monday it would not pass on any retail or wholesale price increases in the European Union and instead focus on shifting some USA production.

Harley said it plans to shift production of motorcycles for European Union destinations from the United States to its global facilities to avoid the tariff burden.

Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers' businesses.

It will instead absorb a significant amount of the cost in the near term. It anticipates the cost for the rest of the year to be approximately 30 million dollars (£22 million) to 45 million dollars (£40 million).

Harley-Davidson said that shifting targeted production from the U.S. to worldwide facilities could take at least nine to 18 months to be fully completed.

The company is already struggling with falling sales.

In January, it said it would consolidate its Kansas City, Missouri, plant into its York, Pennsylvania, facility.

USA motorcycle sales peaked at more than 1.1 million in 2005 but then plummeted during the recession.

The EU's levies are only the latest blowback Harley has faced from Trump's trade policies.

In addition to the metals tariffs, the Trump administration has also said it will impose tariffs on $34bn of Chinese goods starting on 6 July as punishment for violations of intellectual property protections.

The company chose to build the Thailand plant after Trump pulled out from the Trans-Pacific Partnership, which would have lowered import tariffs on its bikes in some of the fastest-growing motorcycle markets in Asia.

Asked about the Harley decision, Wisconsin Governor Scott Walker addressed the issue of tariffs in general but not specifically the situation faced by the company.

Other reports by Click Lancashire

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