Harley-Davidson, the U.S. motorcycle manufacturer, said Monday that it would shift some production of its iconic bikes overseas to avoid retaliatory tariffs imposed by the European Union in response to U.S. President Donald Trump’s trade moves.
The decision, announced in a public filing, is the latest and most high-profile example of how Trump’s trade war is beginning to ripple through the U.S. economy as domestic companies begin struggling with a cascade of tariffs both here and abroad. While Trump says his trade policy is aimed at reviving domestic manufacturing, Harley-Davidson’s decision shows how the administration’s moves could have the unintended effect of reducing U.S. employment and economic growth.
Last week, the European Union hit back against Trump’s steel and aluminum tariffs with penalties on $3.2 billion (U.S.) worth of U.S. products, including bourbon, orange juice, playing cards and Harley-Davidsons. On Monday, the Wisconsin-based company said that European tariffs on its motorcycles had increased to 31 per cent from 6 per cent and estimated that would add about $2,200 on average to every motorcycle exported from the United States to the bloc.
Rather than pass that cost along, the company said it would shift production to its overseas facilities to avoid the EU tariffs.
“Harley-Davidson believes the tremendous cost increase, if passed on to 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,” the company said in the filing.
Harley-Davidson’s decision carries huge significance given Trump’s frequent championing of the Wisconsin company as an American icon and a successful U.S. manufacturer that is creating jobs in the United States. Trump hosted Harley-Davidson executives at the White House in February 2017, where he called the firm a “true American icon” and thanked it “for building things in America.”
He has publicly criticized other countries, such as India, for imposing tariffs on Harley-Davidson and over the weekend threatened to fire back at any country that throws up “artificial” barriers to U.S. goods.
Harley-Davidson did not specify how many jobs it might shift to its overseas facilities as it ratchets up European production. The company already produces some bikes and parts at facilities in India, Brazil, Australia and Thailand and said the shift should take nine to 18 months to complete. The company sold about 40,000 new motorbikes last year in Europe, equivalent to a sixth of its worldwide sales, making the region its most important market after the United States.
Shares of Harley-Davidson fell more than 6 per cent in early afternoon trading.
“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” Harley-Davidson said in the filing.
Moving production abroad is likely to draw the ire of Trump, who as a presidential candidate publicly assailed companies such as the furnace and air-conditioner-maker Carrier, which planned to close a U.S. plant and shift manufacturing operations to Mexico. Trump regularly tells his supporters that U.S. manufacturing is making a major comeback and lavishes praise on companies that build domestically.
But that was before Trump followed through on his plans to levy tariffs on steel and aluminum imports from around the world in an effort, he says, to get other countries to lower their trade barriers. Instead, the opposite has happened, as the European Union, Mexico and Canada respond with their own levies, many of which are aimed at Trump’s political base.
Rep. Paul Ryan, the House speaker, said Monday that Harley-Davidson’s move was evidence that raising trade barriers is a bad idea.
“This is further proof of the harm from unilateral tariffs,” Ryan said. “The best way to help American workers, consumers and manufacturers is to open new markets for them, not to raise barriers to our own market.”
Other industries have also expressed fear that Trump’s tariffs on foreign steel and aluminum, and retaliation from other countries will be damaging for business.
Trump has shown no signs that he will let up. In a statement posted on Twitter on Sunday, Trump threatened even more draconian tariffs to come.