Harley-Davidson plans to move some motorcycle production outside of the U.S. to escape retaliatory tariffs the European Union imposed after President Trump hit the trading bloc with stiff metals duties.
The Trump administration ended exemptions last month for Europe, Canada and Mexico from levies of 25 percent tariff on steel imports and 10 percent on aluminum, which were imposed on national security grounds, frustrating longtime American allies. In response, the EU imposed its own duties on nearly $3.4 billion in U.S. products like bourbon and orange juice.
Harley-Davidson said in a regulatory filing on Monday that the European tariffs will add $90 million to $100 million in costs for all motorcycles it sells in Europe this year, or about $2,200 per bike. To avoid them, the company said it would begin a nine- to 18-month process to move production away from the U.S.
[Opinion: Trump’s trade war sends Harley Davidson packing for Europe]
“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business,” Harley-Davidson said in a statement.
White House press secretary Sarah Huckabee Sanders on Monday said the EU “is trying to punish U.S. workers because they’ve engaged repeatedly in unfair trade practices.”
Europe is the company’s second-largest market, accounting for roughly 16 percent of sales, and risking it with a hefty price increase wasn’t a viable option, said Sharon Zackfia, an analyst with William Blair.
“There’s been a hope among many that the tariff discussions would be fluid and perhaps transitory,” Zackfia noted, ” but Harley management cannot run their business based on hope.
The main risk in moving production overseas, possibly to sites in India or Thailand, is a negative reaction from customers who wanted bikes made in the U.S., she said.
Whether that happens has yet to be seen, but “to some extend, you’re talking about the lesser of two evils: raising prices 25 percent or finding another place to make motorcycles,” Zackfia said. “Any reaction to the motorcycles not being made in the U.S. pales in comparison to the reaction if prices were raised.”
Harley-Davidson shares fell 6.5 percent to $41.35 in New York trading on Monday.
The European tariffs that the company cited were imposed strategically, targeting products in states that supported Trump and are home to top GOP congressional leadership. Bourbon, for example, is an iconic product of Kentucky, represented in the Senate by Majority Leader Mitch McConnell, whose wife, Elaine Chao, is Trump’s transportation secretary.
The tariffs on Harley-Davidson, which is headquartered in Milwaukee, Wis., are a direct challenge to House Speaker Paul Ryan, who hails from the state and previously opposed Trump’s tariffs.
Harley-Davidson’s announcement “is further proof of the harm from unilateral tariffs,” said Ryan’s spokeswoman AshLee Strong. “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.”
Sen. Ron Johnson, R-Wis., said the announcement “confirms my concerns and is a far too predictable outcome of policies that give companies like Harley-Davidson incentives to make their products elsewhere.”
“We need to hold China accountable for its trade abuses, but that does not need to come at the expense of American workers and businesses,” he said in a statement.
