Harley Davidson, the iconic motorcycle brand, will begin moving some of its production out of the United States in an effort to avoid retaliatory tariffs on American goods imposed by the European Union.
Earlier this year, President Donald Trump announced 25 percent tariffs on imported steel and aluminum from Europe and Asia. In response, the EU has levied additional import taxes on American products, including motorcycles, orange juice, bourbon, peanut butter, motorboats, cigarettes, and denim.
These new tariffs would hit Harley Davidson particularly hard - the EU is raising tariffs on American motorcycles from six percent to 31 percent.
Harley Davidson has said the new tariffs would make every motorcycle $2,200 higher to export, and the total cost of the new tariffs could top $100 million.
The company doesn't plan on raising prices for its customers, so it plans “to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden.”
Harley Davidson expects to lose between $30 and $45 million this year.
In a Monday filing, Harley Davidson wrote:
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.
In April, Harley Davidson revealed that it would be shifting some of its production to Thailand after Trump withdrew the United States from the Trans-Pacific Partnership.
Harley Davidson’s CEO Matt Levatich said building a Thai plant was a “plan B” in the event Trump pulled out of the TPP. The agreement “would have helped us a lot,” Levatich said.
Harley announced the closure of its Missouri plant and shifting resources to York, Pennsylvania, which the company says will result in 260 jobs being lost. The company also closed their Kansas City plant, which means shedding 800 jobs.
Of the Thailand factory, Levatich said:
We would rather not make the investment in that facility, but that’s what’s necessary to access a very important market. It is a direct example of how trade policies could help this company, but we have to get on with our work to grow the business by any means possible, and that’s what we’re doing.
Harley Davidson’s domestic sales declined in recent years. “U.S. retail sales plunged 12 percent this year through March and have dropped in 13 of the last 14 quarters,” writes Gabrielle Coppola of Bloomberg. In 2017 alone, worldwide sales slumped 6.7 percent.
To improve sales, Harley plans on introducing electric bikes that will be marketed to city residents. After announcing their “tuned-up turn around plan” on Tuesday, which also includes expanding research into consumer demands, the company’s stocks jumped 5.1 percent.
Harley's decision to move production out of the United States is at odds with Trump's claim that "trade wars are good and easy to win."
This didn't go unnoticed on Twitter.
"Hard to think of a more American icon getting screwed by the president," one person said.
Others noted Harley's move as evidence that Trump isn't bringing as many jobs back to the United States as he had promised.
