Iconic American company Harley-Davidson plans to shift its production of motorcycles overseas. Europe increased the amount of tariffs on its high-end motorcycles. Likewise, Europe slapped additional tariffs on American peanut butter, bourbon, and orange juice.
The decision of Harley-Davidson is intended to lower its production cost. America and Europe remain the biggest markets for its motorcycles.
Europe’s decision to increase tariffs on American products was in retaliation to United States President Donald Trump’s announcement of imposing higher tariffs on steel and aluminium products coming from Europe, Mexico, and Canada.
Harley-Davidson hopes that by transferring production overseas, it could mitigate the effects of the higher tariffs on its dwindling profit margins. While its sales in overseas markets only rose by 0.2%, sales in America fell by 12%.
Harley-Davidson sold 40,000 motorcycles in Europe in 2017 which was only slightly higher than 2016.
Harley- Davidson indicated in its filing with the Securities and Exchange Commission (SEC) that the increase in tariffs from 6% to 31% would increase the cost of every motorcycle exported to Europe by $2,200. The company feels that such an increase would drastically reduce its sales in Europe.
Harley-Davidson intends to absorb the cost of the tariffs instead of increasing its prices in Europe. The cost of the tariffs will range from $30 Million to $45 Million this year.
The company plans to shift production to its manufacturing plants in Brazil, India, and Australia. Harley- Davidson is set to open another plant in Thailand. According to the company, the planned shift may take around 18 months to complete.
Shares of Harley-Davidson fell when news spread of its plan to shift production overseas. They are now down 18% for the year.
President Trump did not take too kindly to the news and tweeted a threat to the company:
“A Harley-Davidson should never be built in another country!… If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!”
Ironically, Harley- Davidson once campaigned for tariffs against imported motorcycles in the 1980’s.