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Harley-Davidson to shift some bike production outside US

Harley-Davidson plans to shift some motorcycle production away from the US to avoid the “substantial” burden of European Union tariffs.

Last week, the EU imposed retaliatory tariffs on US goods, including bourbon, orange juice and motorcycles.

Wisconsin-based Harley-Davidson has assembly plants in Australia, Brazil, India and Thailand.

The company said it would raise investment in its international plants, but did not say which ones.

“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 US to its international facilities to avoid the tariff burden,” the company said.

Harley-Davidson said it expected the ramp-up in production to take nine to 18 months.

  • EU tariffs on US goods come into force
  • Who is losing out from Trump’s tariffs?

The company’s decision is one of the most visible consequences of the trade disputes triggered by US President Donald Trump’s decision to levy tariffs on steel and aluminium imports.

The duties, which Mr Trump says are necessary to maintain national security, have drawn retaliation from the EU, Canada, Mexico, India and others, while driving up the cost of metals for manufacturers in the US.

US companies that range from boat-builders to nail manufacturers have warned about the consequences of escalating trade tensions.

However, the tariffs have also spurred investment in US steel plants.

For example, British-owned GFG Alliance, has said it plans to invest $5bn over several years to reopen a shuttered steel plant in South Carolina. The firm says the move will put about 125 people back to work “immediately”.

‘Only sustainable option’

Harley-Davidson, which has been focused on expanding its overseas sales amid challenges in the US, said it remained committed to US manufacturing.

It said the tariffs made shifting production “the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe”.

Analysis

Kim Gittleson, New York Business Correspondent

In early 2017, President Donald Trump met with executives from Harley-Davidson who he thanked for “building things in America”.

But just over a year later, Harley serves as a sobering example of what happens when Trump’s America First trade policy collides with the rest of the world.

While Harley-Davidson had been struggling financially well before the EU’s retaliatory tariffs went into effect, the import duties of 25% certainly didn’t help matters.

It is worth mentioning that Harley could make the decision to shift production because it had chosen, in 2017, to open a new manufacturing plant in Thailand.

At the time, the company said it was moving manufacturing there to avoid a different tariff: this one being the 60% duty levied on Thai imports. That decision, of course, was made after Trump decided to pull out of the Trans-Pacific Partnership, a trade treaty that Harley had said it supported.

All of which goes to show that when it comes to “winning” a trade war, the only certainty is the unintended consequences that inevitably result when decades of trade policy are reversed in a matter of months.

The company said the tariffs would add, on average, $2,200 (£1,660) to each bike exported to the EU from the US, as the import tax increases from 6% to 31%.

Harley, which sold nearly 40,000 motorcycles in Europe last year, said it planned to absorb those costs, which are expected to add $30m to $45m to its expenses this year.

Passing the costs onto customers “would have an immediate and lasting detrimental impact to its business in the region”, the firm argued.

The majority of Harley’s motorcycles are currently built in the US, where the firm employs about 2,100 people at manufacturing facilities.

However, the firm had already announced plans to close a facility in Kansas City, Missouri – a decision workers said was due to the opening of a new facility in Thailand.

The company denied those claims, arguing the move was about boosting overseas sales.

‘Headwind to hiring’

Mr Trump had made raising manufacturing employment a goal, but economists warn that the escalating trade tensions are likely to be counter-productive.

In addition to the metals tariffs, the Trump administration has also said it will impose tariffs on $34bn of Chinese goods starting on 6 July as punishment for violations of intellectual property protections.

China is due to retaliate in kind.

Mr Trump has also threatened tariffs on foreign cars and auto parts, arguing that firms should make such products in the US.

Source: BBC

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