Published: Tue, June 26, 2018
Markets | By Erika Turner

Rising tariffs forces Harley-Davidson to shift some production overseas

Rising tariffs forces Harley-Davidson to shift some production overseas

The EU tariffs on $3.4 billion worth of us products are retaliation for duties the Trump administration is imposing on European steel and aluminum. In addition to four US-based manufacturing facilities, Harley operates plants in Australia, India, Brazil, and Thailand.

The EU imposed retaliatory tariffs last week on $3.4 billion worth of USA products like bourbon, motorcycles and orange juice.The new duties are in direct response to President Trump's decision to increase fees on aluminium and steel coming from Europe.

But because of President Donald Trump's trade war with the European Union, tariffs recently grew from 6 percent to 31 percent, adding an additional $2,200 to each motorcycle exported from America.

The shift of production - and jobs - from the U.S.to factories in Europe was disclosed in a regulatory filing Monday.

"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.

Harley stock is down 13 percent this year.

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"Europe is a critical market for Harley-Davidson".

In January, the company announced the closure of a plant in Kansas City, Missouri as part of a consolidation plan after its motorcycle shipments fell to their lowest level in six years.

The company made a decision 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. In the U.S., Harley-Davidson sold 147,972 motorcycles previous year, according to company data. These EU tariffs came in retaliation for steep tariffs that the Trump administration has imposed on the EU. All three say they will be forced to close their plants unless they can get relief from the Trump administration's steel tariffs.

Trump hosted chief executive Matt Levatich and other Harley executives and union leaders for a White House listening session in February 2017 and hailed the motorcycle maker as "a true American icon" and "one of the greats". As a result, Harley-Davidson said there will be an incremental cost of approximately $2,200 per average motorcycle exported from the U.S.to the EU.

It is not clear where Harley-Davidson will boost production but the impact on jobs in the United States could be severe. The company has warned that Trump's tariffs on steel and aluminum will drive up raw materials costs.

Republicans also used the Harley announcement to take a shot at Trump's recent trade attacks on the EU, Canada, and Mexico. "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". Shifting manufacturing to the European Union will allow the motorbike maker to avoid that hit-although it will take 9 to 18 months to ramp-up global plants, Harley-Davison says, and in the meantime the company is expecting to lose $30 million to $45 million during the transition.

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