Economy

Harley-Davidson responds to European Union tariffs by moving USA production overseas

President Donald Trump's trade war with the European Union is undermining Harley-Davidson Inc., a manufacturer he embraced soon after taking office, by costing the company as much as US$100 million a year and spurring a shift in motorcycle production out of the U.S.

In response to the US tariffs, the European Union began charging import duties of 25 percent on a range of USA products including big motorcycles like Harley's on June 22.

Brussels imposed tariffs on a range of US-made products, including cosmetics, whiskey and cranberry juice.

The business has seen its products hit with punitive import levies by the European Union as it retaliates against a 25pc tariff the U.S. placed on imports of steel and 10pc on aluminium.

President Donald Trump has used Harley-Davidson as an example of a US business that is being harmed by trade barriers.

In 2017, Harley sold almost 40,000 new motorcycles in Europe which accounted for 14 percent of the company's sales a year ago.

Harley says in the filings that it will not raise MSRPs or wholesale dealership prices to make up for the losses connected to tariffs.

The E.U. had specifically targeted Harley, as well as other familiar American brands like Jack Daniel's, to extract maximum punishment after Trump hit the bloc with the steel and aluminum penalties.

"Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers' businesses", the company said a statement. To avoid harming dealers and undermining its business, Harley said it will swallow the cost. In the near-term, the company will bear the significant impact resulting from these tariffs, and the company estimates the incremental cost for the remainder of 2018 to be approximately $30 to $45 million.

The company noted that ramping up production in worldwide plants will require incremental investment and take nine to 18 months.

The company is already struggling with falling sales. In January, it said it would consolidate its Kansas City, Missouri, plant into its York, Pennsylvania, facility. US motorcycle sales peaked at more than 1.1 million in 2005 but then plummeted during the recession.

Harley-Davidson maintains a strong commitment to USA -based manufacturing which is valued by riders globally.

With China and the European Union combining to slap the United States with more than $60 billion in tariffs, the end of the trade war is nowhere in sight and other countries including Canada and Mexico will likely step up their efforts in the coming months.

"We are now assessing the potential impact on our USA facilities", Michael Pflughoeft, a company spokesman, said in an email.



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