In news that is breaking almost by the hour, Harley-Davidson’s decision to move some of its manufacturing overseas is rocking the business community both here and abroad. That the iconic American bikemaker would abandon our shores, even for a portion of its operation, speaks to the business upheaval created by the trade wars currently underway. Predictably, President Trump had harsh words for Harley-Davidson, including threats to impose punitive taxes on the company. But, what does it all mean? Gildshire wanted to explore further. Yahoo Finance helped with the research.
Here are the bare facts. Harley is shifting some production of motorcycles for European customers out of the United States to avoid EU retaliatory tariffs. The Milwaukee-based bikemaker said it stood to lose as much as $100 million a year from the tariffs.
The EU began imposing tariffs last Friday on $3.2 billion worth of American goods, including motorcycles, orange juice, bourbon, peanut butter, motorboats, cigarettes, and denim. They are a response to the Trump administration’s tariffs on steel and aluminum imports from Europe.
In terms of the motorcycle surcharge, Harley says the retaliatory tariffs will make each bike about $2,200 more expensive to export, due to an increase in the trade tariff from 6% to 31%. The company believes such a price increase is unsustainable given the narrow profit margins Harley maintains.
Will the move cost the company employees jobs? Obviously, there will be some impact but the company is staying coy about how many jobs will be affected. Thay will say only, that the job situation is “being evaluated.”
Historically, Harley sold most of its bikes in the U.S., but the market for the big bikes that are Harley’s stock in trade has softened. That makes the price of bikes sold in Europe to be of paramount importance. Harley-Davidson’s US bike revenue dropped 8.5% last year from 2016, but only fell 0.4% in Europe. The lost revenue already cost Harley manufacturing workers in Kansas City to lose their jobs due to the plant shutdown.
The trade situation is in constant flux and will remain so for the foreseeable future. Today, Harley. Tomorrow, who knows? Gildshire will remain vigilant to the action.