Harley-Davidson shifts some production overseas as EU tariff of $2,200 per bike kicks in

Production of Harley-Davidson motorcycles sold in Europe will move from U.S. factories to facilities overseas, the Milwaukee-based company announced Monday, a consequence of the retaliatory tariffs the EU is imposing on American exports in an escalating trade war with the Trump administration.

President Donald Trump has used the American motorcycle maker as an example of a U.S. business harmed by trade barriers in other countries, but Harley had warned that tariffs could hurt its sales.

The European Union on Friday began rolling out tariffs on American imports including bourbon, peanut butter and orange juice.

The EU tariffs on $3.4 billion US worth of U.S. products are retaliation for duties the Trump administration is imposing on European steel and aluminum.

The company said in a regulatory filing Monday that EU tariffs on its motorcycles exported from the U.S. jumped between sixper cent and 31 per cent, adding about $2,200 US per average motorcycle exported from the U.S. to the EU.

The impact on U.S. workers because of Harley-Davidson's decision was not immediately clear. Harley-Davidson declined interview requests Monday but said in prepared remarks that the company "maintains a strong commitment to U.S.-based manufacturing which is valued by riders globally."

Meanwhile, Trump once again tweeted about the company on Monday afternoon, asking it to "be patient."

White House press secretary Sarah Huckabee Sanders also defended Trump's trade policies Monday during a press briefing.

"The EU is attempting to punish U.S. workers with unfair and discriminatory trade policies, and President Trump will continue to push for free, fair and reciprocal trade and hopes that the EU will join us in that," Sanders said.

Harley-Davidson Inc. sold almost 40,000 motorcycles in the EU last year, its second-largest market after the United States, according to the company. The EU sales make up almost 16.4 per cent of Harley-Davidson's worldwide sales. In the U.S., Harley-Davidson sold 147,972 motorcycles last year, according to company data.

"Increasing international production to alleviate the EU tariff burden is not 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 in its prepared remarks.

H-D to absorb tariff cost

Harley-Davidson said it will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe. It will instead absorb a significant amount of the cost in the near term. It anticipates the cost for the rest of the year to be approximately $30 million US to $45 million US.

Shifting the production overseas could take up to 18 months, the motorcycle maker said.

The company is already struggling with falling sales. In January, it said it would consolidate its Kansas City, Mo., plant into its York, Pa., facility. U.S. motorcycle sales peaked at more than 1.1 million in 2005 but then plummeted during the recession. It wasn't immediately known whether any other facilities would be consolidated.

"Harley-Davidson's announcement today is the latest slap in the face to the loyal, highly skilled workforce that made Harley an iconic American brand," Robert Martinez Jr., president of the International Association of Machinists and Aerospace Workers, said in a statement. The union represents Harley-Davidson workers in Milwaukee, and the Kansas City and York plants.

"Will Harley use any excuse to ship jobs overseas?" Martinez added. "Does Harley even understand what 'Made in America' means?"

The Trump administration has started fights with trading partners around the world, imposing tariffs on imported steel and aluminum, provoking retaliation from close U.S. allies including the European Union, Canada, Mexico and Turkey. And it has announced tariffs on $50 billion US in Chinese goods a tariff list that could swell to $450 billion US if Beijing refuses to back down and counterpunches with retaliatory moves.

"More firms will follow Harley's lead and move production overseas," says Mary Lovely, a Syracuse University economist who studies trade. "Can't blame them. Many companies are being put in very difficult positions."

Lovely said Harley and other companies face retaliatory tariffs in Europe and elsewhere if they try to export products. Trump's tariffs also raise costs on imported parts they need to manufacture in the United States.

Meanwhile, the maker of Jack Daniel's, Brown-Forman Corp., said Monday it would have to raise the price of its product sold in the EU because of the tariff hike, Bloomberg reported.

Wisconsin's elected leaders said the decision pointed to the need to expand markets.

"This is further proof of the harm from unilateral tariffs," said AshLee Strong, a spokesperson for House Speaker Paul Ryan, a Wisconsin Republican. "The best way to help American workers, consumers, and manufacturers is to open new markets for them, not to raise barriers to our own market."

Gov. Scott Walker echoed those comments, saying increasing markets for Wisconsin and American-made goods will reduce the trade imbalance and needs for tariffs.

"The ultimate goal, if we could get there, is no tariffs or if anything few tariffs on anything," said Walker, a Republican. "That's what I'm going to push for, ways that we can get to a level playing field then we don't have this tit for tat on any number of products out there."