June 27, 2018
Facing mounting operational costs estimated at $100 million annually, iconic American motorcycle brand Harley-Davidson announced on June 25 that it will further curtail its U.S. operations—manufacturing and selling more of its bikes abroad in coming years.
Not only is the company worried about the aluminum and steel tariffs that the Trump administration is imposing on its G7 allies—which the motorcycle maker believes “will drive up costs for all products with these raw materials, regardless of their origin, “ Barron’s reported—but it already had been forced to close a factory in Missouri and build one in Thailand, after Trump pulled the United States out of the Trans-Pacific Partnership.,
Now, Bloomberg divulged on June 26, Harley joins other quintessential American companies, including Levi Strauss, in getting caught in the middle of the Trump administration’s trade skirmishes with major trading partners.
Indeed, the European Union’s retaliation against the White House’s steel and aluminum levies will cost about $2,200 per motorcycle shipped to Harley’s second-biggest market in the world, the company estimated in a filing on June 25. So it’s shifting production of bikes for European riders overseas.
Harley plans to eat much of the cost increase tied to the EU’s tariffs, Bloomberg said, because trying to pass it on to dealers or customers would make an “immediate and lasting detrimental impact” on its business, it said in the filing.
“A company that is as connected to America, and Americana, as Harley is probably going to be laying off U.S. workers in favor of foreign workers and going to be losing money as a result of this,” James Hardiman, an equity analyst with Wedbush Securities, told Bloomberg this week, of the trade battle between the U.S.A. and the EU. “There’s a lot of irony here, to put it mildly.”
The reaction from the POTUS was immediate and incensed.
“Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” President Donald Trump tweeted Monday. Trump said he had “fought hard” for the company and said it ultimately won’t have to pay the tariffs, urging it to “be patient!”
He further threatened, “A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end—they surrendered, they quit! The Aura will be gone and they will be taxed like never before!”.
In 2017, Harley sold nearly 40,000 new motorcycles in Europe, accounting for more than 16% of the company’s sales. Revenues from EU countries were second only to those in the United States.
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