Harley-Davidson plans to shift the production of some of its bikes out of the US in response to Europe’s new tariffs on motorcycle imports.
In a stock market filing, the company said the EU’s reaction to Donald Trump’s steel tariffs, which will add $2,200 (£1,657) to the average cost of a motorcycle exported from the US to Europe, will result in up to $100m of extra charges over the next couple of years.
The decision is the most high-profile example to date of the potential impact of a widening trade dispute between the US and its largest trading partners. It came amid reports of US plans to escalate its trade spat with China, reports that led to sharp selloffs in global stock markets on Monday.
Trump said he was “surprised” that Harley-Davison “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! #MAGA,” he wrote on Twitter.
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! #MAGA— Donald J. Trump (@realDonaldTrump) June 25, 2018
“Harley-Davidson maintains a strong commitment to US-based manufacturing, which is valued by riders globally,” Harley-Davidson said in the filing.
“Increasing international production to alleviate the EU tariff burden isn’t the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe.”
The company said ramping up production in international plants would require incremental investment and could take at least nine to 18 months to be fully complete.
The decision is a blow to the Trump administration, which has defended its imposition of tariffs on the EU as part of a strategy to boost jobs in the US. Harley-Davidson is based in Wisconsin, a state Trump narrowly won in the last election and the home of the Republican House speaker, Paul Ryan.
Earlier this year, the White House imposed a 25% tariff on steel and a 10% tariff on aluminium imports from several countries, including the 27-member EU. The US has also announced a range of tariffs on Chinese goods, and over the weekend the Wall Street Journal reported the US is considering barring some Chinese companies from investing in US technology firms and blocking additional technology exports to Beijing.
European and US stock markets all fell on Monday on fears that the world was heading towards a fully fledged trade war. In London the FTSE 100 fell 2.24% or 172.43 points to 7509.84, its worst daily performance since 6 February this year. Germany’s Dax, already weak on worries about the impact of tariffs on its key car producers, dropped 2.46%, while France’s CAC closed nearly 2% down. In the US stock markets had their worst day in months, the Dow Jones Industrial Index and S&P 500 were both down over 1% while the tech-heavy Nasdaq dipped over 2%.
Retaliation by Brussels and Beijing has targeted producers in Republican states where Trump draws much of his support – including bourbon whiskey and Levi’s jeans – and is expected to raise the prices of US goods worth up to €2.8bn (£2.5bn).
Trump has threatened to widen the mounting trade dispute by imposing tariffs on European cars. In a tweet last week he said: “If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!”
Harley-Davidson’s decision is particularly awkward for Trump. Last year he used a White House visit from the company’s executives to push his “America First” trade policies. “A lot of countries are taking advantage of us,” Trump said during a press briefing. “Thank you Harley-Davidson for building things in America.”
It is not clear where Harley-Davidson will boost production but the impact on jobs in the US could be severe and comes while sales are slumping. In January the company closed a factory in Kansas City as it struggled to overcome a four-year slide in sales.
About 16% of Harley’s sales are to Europe. The company sold 40,000 bikes in Europe last year and the revenue generated from EU countries is second only to the US.