The iconic motorbike manufacturer has announced the move in response to retaliatory tariffs from the EU.
“To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the US to its international facilities to avoid the tariff burden,” the company said in its Securities and Exchange Commission (SEC) filing.
The tariff burden of exporting motorcycles into EU nations became more onerous last week when new EU tariffs came into effect. The tariffs impose additional duties on US goods including orange juice, jeans, bourbon and motorcycles, which are now subject to tariffs of up to 31%.
That round of tariffs was the latest tit for tat move after the US imposed new duties on steel and aluminium imports. Trump’s tariffs have already incensed other world leaders and have been opposed by some within his Republican Party.
Harley-Davidson has also been beset by higher steel costs as a result of Trump’s tariffs on imported steel.
It is anticipated the move to new production facilities will take between nine and 18 months though the company plans to absorb the cost of the EU tariffs during this time. That cost is expected to cost the company between US$90 million to US$100 million a year.
In response, shares in the company had fallen 6.4% by early afternoon trading.
On Twitter, Donald Trump hit out at the company and accused them of waving the white flag of surrender. “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” he wrote.
Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse – be patient! #MAGA
— Donald J. Trump (@realDonaldTrump) June 25, 2018
Consequences of trade warfare
The Wisconsin-headquartered company has assembly plants in Australia, Brazil, India and Thailand as well as its US facilities. It is not known where the company will move production though its Australian plant is not an option as it is being shut down.
The company’s decision to move some production out of the US is a blow to the Trump administration. Trump had previously welcomed Harley-Davidson executives to the White House in February 2017 and told them his policies would make them “very happy”.
— President Trump (@POTUS) February 2, 2017
The EU targeted Harley-Davidson because it is located in Wisconsin, the home state of Republican House Speaker Paul Ryan. Similarly, the EU has imposed tariffs on bourbon as it mainly originates from Kentucky, home to Senate Majority Leader Mitch McConnell.
Harley-Davidson may choose to move the production to its Thailand facility. It had previously started manufacturing in Thailand in 2017 to avoid a 60% tariff on Thai imports. That tariff was imposed after Trump pulled out of the Trans-Pacific Partnership.