Harley-Davidson, maker of the iconic motorcycle, today said it will shift some production from the US overseas because the European Union slapped tariffs on its bikes in retaliation for US tariffs placed on its steel and aluminum.
Harley thus becomes the first US casualty in president Trump’s global trade war.
In its Securities and Exchange Commission filing, the Milwaukee-based company said the tariffs would increase the average cost of a bike exported from the US to the EU about $2,200.
Rather than pass the cost along to consumers, Harley will absorb the incremental $30M to $45M cost of the tariffs for the rest of the year. The annual incremental cost is $90M to $100M.
Harley expects to ramp up oversees production over the next nine to 18 months. There's no estimate on how many Americans will lose their jobs, thanks to president Trump's trade policy.
Will president Trump go Carrier on the Milwaukee-based company? Candidate Trump bashed Carrier for a plan to shift some Indiana production to Mexico, a country not very high on the president’s list of most loved nations.
During a high-profile press conference at Carrier’s Indianapolis plant, Trump claimed he saved at least 1,100 jobs. “And by the way, that number is going to go up very substantially as they expand this area, this plant,” he said. Wrong.
The reality: Carrier kept 730 hourly workers at the plant and parent company United Technologies said a $16M investment will further automate the facility thus reducing headcount.
Harley’s decision puts President Trump in a special bind. On Feb. 2, 2017, the president met with Harley executives and union reps at the White House. Here’s what he said:
“Harley-Davidson is a true American icon, one of the greats. Your motorcycles have carried American servicemembers in the war — in the wars. They take care of our police officers. And I see it so often — whenever I go — whenever there’s a motorcycle group, oftentimes it’s a Harley. And the sound of that Harley is a little different, I have to tell you. It’s really good.
“So thank you, Harley-Davidson, for building things in America. And I think you’re going to even expand — I know your business is now doing very well and there’s a lot of spirit right now in the country that you weren’t having so much in the last number of months that you have right now. You see what’s happening.?
Harley does “see what’s happening,” which is why it’s moving production overseas to keep consumers in its second biggest market happy.
In its SEC filing, Harley says its “purpose is to fulfill dreams of personal freedom for customers who live in the European Union and across the world.”
Harley operates in the reality world of globalization. It understands that there are consequences for either a company or country that walls itself off from the rest of the world.
The president hasn't gotten that message yet. He may when more US companies follow Harley's example.