Harley-Davidson to move production overseas to avoid tariffs imposed by the EU. The EU has announced the imposition of tariffs on certain American imports, including Harleys, bourbon, orange juice and peanut butter. These tariffs, totaling $3.4 billion of US products, have been applied in retaliation to the application of tariffs on EU goods by the Trump administration.
First Stages of a Global Trade War?
Did the US authorities really believe that such a reaction would not happen? These tariffs started rolling out from Friday, making such US goods uneconomical relative to other sources of such products. This is in retaliation to tariffs imposed by the US on EU steel and aluminum. It is fundamentally part of the first stages of what could turn out to be a global trade war which will benefit nobody but is likely to hit the US hardest
Harley-Davidson to Move Production Overseas
Harley Davidson annual sales of around 40,000 motorcycles in the EU represented its largest market outside of the US. The company has estimated that the tariffs will add around $2,200 to the price of every machine. This would undoubtedly result in loss of sales in what is a very important, in fact, a critical market for the American company. For that reason, the firm has made the decision to transfer a large part of its production overseas.
Harley-Davidson Will Not Raise Prices
The company has stated that it will not raise its prices. Rather, it will initially absorb a large part of the cost increase itself over the short term. Ultimately, though, production will have to be moved outside of the US. Harley-Davidson shares dropped close to 3% at the opening bell on Monday. The company has stated that it would take 9 – 18 months to transfer production.
Was Relocation of Production Unanticipated?
This may just be the beginning of a trend that President Trump may not have anticipated. The move of production of various goods out of the US, with consequent loss of tax revenue and jobs. This at a time when the US claims to be close to 100% employment.
The EU stated on Monday that Europe will form a group with China to update global rules regarding government subsidies, technology policy (which might include rights to intellectual property) and other issues. The objective is to help support continuing international commerce. Meantime, this is unlikely to affect the decision of Harley-Davidson to move production overseas.