Harley, stung by tariffs, shifts some production overseas

Sean Reid
June 26, 2018

Harley shares have lost about 6 per cent since early March when the trade skirmish between the United States and the European Union started, and are down over 15 per cent since the end of 2017.

"A company that is as connected to America, and Americana, as Harley is probably going to be laying off USA workers in favor of foreign workers and going to be losing money as a result of this", said James Hardiman, an equity research analyst with Wedbush Securities.

The European Union is taxing a range of imports from the USA in response to President Donald Trump's decision to slap tariffs on European steel and aluminum. Harley-Davidson say the tariffs will result in approximately $2200 (£1650) being added to the export cost of each motorcycle. The company said that it would not raise the cost of its bikes, but that the increased tariffs would cost it between $30 million and $45 million.

Harley-Davidson said in a statement: 'Harley-Davidson maintains a strong commitment to US-based manufacturing which is valued by riders globally.

Harley-Davidson, the dominant player in the heavyweight USA motorcycle market, said it would not pass on any retail or wholesale price increases in the European Union and instead focus on shifting some US production.

European sales of Harley-Davidson motorcycles, the company pointed out, amounted to almost 40,000 bikes in 2017. Outside the United States, Harley-Davidson already has or is constructing facilities in Brazil, Thailand, Australia and India, with its site in India producing a number of models for the European market.

Economists said Harley's decision to shift production outside of the USA is a predictable result of Trump's increased trade restrictions and, likely a sign of things to come.

The president's comments follow the company's announcement that new duties mean each motorcycle heading into Europe will cost an increased cost of $2,200.

The company's move is one of the most visible consequences of the trade disputes triggered by Mr Trump's decision to levy tariffs on steel and aluminium imports.

These examples of job losses come amid promises from Donald Trump to save American jobs, casting doubt across the country about the effectiveness of Trump's tariff strategy for trade.

The impact on USA workers because of Harley-Davidson's decision was not immediately clear.

Harley Davison will shift production to global facilities, saying the move will take nine to eighteen months.

In response, the European Union hit the US with tariffs on $3.2 billion worth of American products, including motorcycles. In March, the president tweeted that "trade wars are good, and easy to win".

Shares of Harley-Davidson fell 3 percent in pre-market trading Monday. Daimler AG warned last week that escalating tension between the USA and China will impair earnings its Alabama SUV plant and lower profit this year. It confirmed today that, as a result of the tariff squeeze, it will now move a decent-sized chunk of production outside of the US.

Later that day Trump said the company was waving the "white flag" and surrendering after he had praised the company numerous times and invited its executives to the White House.

Europe represents Harley's No. 2 market, after the United States, with sales previous year approaching 40,000 units.

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