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Stung by tariffs, Harley shifts some motorcycle production overseas

26 June, 2018, 16:14 | Author: Shawna Walton
  • Harley-Davidson to move production for some motorcycles out of US after EU tariffs

Harley announced Monday that because of the European Union's new tariffs on USA motorcycles -retaliation for Trump's steel and aluminum tariffs - the company was shifting some production to non-US plants.

The maker of the iconic American motorcycle said in a regulatory filing Monday that European Union tariffs on its motorcycles exported from the USA jumped between 6 percent and 31 percent, which translates into an additional, incremental cost of about $2,200 per average motorcycle exported from the U.S.to the EU.

The motorbike maker also forecast that the EU's retaliatory tariffs against USA goods would cost the company $90 million to $100 million a year.

In the meantime, it's planning to increase production in global plants over the next 18 months.

In 2017, Harley sold almost 40,000 new motorcycles in Europe which accounted for more than 16% of the company's sales past year. Besides its USA plants, Harley-Davidson maintains manufacturing facilities in Australia, Brazil, India and Thailand, according to its website.

"Thank you, Harley-Davidson, for building things in America", Trump said at the time.

"The company built its reputation and image by making motorcycles here, and if the company wants to continue to market itself as an iconic American brand both at home and overseas, it needs to focus on USA production", he added.

The move, the US President argued, was to protect American businesses, though many experts thought differently.

Harley's move is an example of what economists say will be a significant long-term problem with the tariffs and represents a black eye for Trump's arguments in favor of the measures.

USA president Donald Trump has used Harley-Davidson as an example of a U.S. business that is being harmed by trade barriers. With the European Union tariffs applied, the average cost of a bike faces an increase of around $2,200, it's calculated.

Mercedes-Benz maker Daimler last week cut its 2018 profit forecast citing growing trade tensions.

The EU, like Canada, Mexico and China all are aiming retaliatory tariffs at targets aimed to weaken Trump and the GOP in key political battlegrounds.

Spokesman Michael Pflughoeft told CNN that as of Monday Harley-Davidson was still "assessing the potential impact" on the company's 6,000-plus workforce that is mainly concentrated in Pennsylvania, Missouri and Wisconsin.

Harley-Davidson said it will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe. S. plants will require additional investment overseas and is expected to take nine to 18 months, Harley said. According to Harley Davidson, Europe accounts for around 16 percent of all motorcycle sales.

"On a full-year basis, the company estimates the aggregate annual impact due to the European Union tariffs to be approximately $90m to $100m", it added.

Executives in Harley-Davidson were among the first to visit the White House in February 2017 shortly after Trump took office. Paul Ryan, the Republican speaker of the House of Representatives, hails from Harley's home state of Wisconsin, while Senate Majority Leader Mitch McConnell represents Kentucky, a major maker of bourbon.



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