Jean Turner | June 26, 2018
Harley-Davidson Cites EU Tariffs In Shifting Production Overseas–Harley-Davidson is in mainstream news headlines again this week after announcing in a public filing with the Securities and Exchange Commission on Monday, June 25 that it will shift some of its motorcycle production overseas in order to avoid retaliatory tariffs imposed by the European Union. The EU announced 25% tariffs on Harley-Davidson motorcycles in response to President Trump’s steel and aluminum tariffs.
Harley-Davidson Cites EU Tariffs In Shifting Production Overseas
The Trump Administration’s tariff war with the EU will see Harley-Davidson move production of European-bound motorcycles out of the U.S.
Harley-Davidson explained that the 25% increase effectively raises the tariff from 6% to 31%, and would tack on an additional $2200 (on average) to each unit exported from the U.S. to the EU. The Wisconsin-based company estimates that the annual impact of the cost increase will total $90 to $100 million.
“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 U.S to its international facilities to avoid the tariff burden,” the company stated in the filing. “Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete.”
President Trump has already hit back with a response to Harley-Davidson’s announcement, claiming via Twitter that he “fought hard for them” and that they would ultimately not have to pay the European Union’s tariffs.
A tweet on Monday afternoon read: “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!” [sic]
In a previous tweet sent on Sunday afternoon, Trump addressed world leaders on the topic of trade, declaring, “The United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street!” [sic]
“Forward Thinking” from Harley-Davidson
The SEC filing is what Harley-Davidson calls a “forward-looking statement,” and at this point, the Motor Company has not detailed its plans regarding where exactly it will move production to, nor did it identify which US factories might be affected. Harley-Davidson currently has factories in York, Pennsylvania; Kansas City, Missouri and Menomonee Falls, Wisconsin. The company already announced in January, following a sharp drop in domestic sales, that the Missouri plant will close in 2019.
“Harley-Davidson maintains a strong commitment to U.S.-based manufacturing which is valued by riders globally. Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only viable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” the filing stated.
Europe is the second-largest market for Harley-Davidson. It sold nearly 40,000 units in 2017 and hopes to continue its overseas growth in the face of weakening sales in the U.S.
Harley-Davidson added in the filing that it “remains fully engaged with government officials in both the U.S. and the EU helping to find sustainable solutions to trade issues and rescind all tariffs that restrict free and fair trade.”
It is little coincidence that the EU is retaliating against President Trump’s tariffs by targeting an iconic American brand that resides in Wisconsin, the home state of House Speaker Paul Ryan (R-WI). A spokeswoman for Ryan stated on Monday morning that Harley’s decision is “further proof of the harm from unilateral tariffs,” adding that “the best way to help American workers, consumers and manufacturers is to open new markets and not raise barriers.”
Harley-Davidson shares (NYSE: HOG) fell nearly seven percent on Monday, June 25, following the release of the SEC filing.
