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Harley, stung by tariffs, shifts some production overseas

26 June 2018

The company's move is one of the most visible consequences of the trade disputes triggered by Mr Trump's decision to levy tariffs on steel and aluminium imports.

The firm's stock fell nearly 6% to $41.57 in a turbulent day for United States stocks amid concerns of a trade war.

The maker of the iconic American motorcycle said in a regulatory filing Monday that European Union tariffs on its motorcycles exported from the US jumped between 6 percent and 31 percent, which translates into an additional, incremental cost of about $2,200 per average motorcycle exported from the the EU. Those were applied last week in response to Trump's own tariffs on steel and aluminum.

President Trump had previously thanked Harley-Davidson for staying in America, while criticizing other firms for moving production outside the U.S. Since Trump's trade tariffs took effect in March, the company has reported losses of 9 percent.

"Taxes just a Harley excuse", Trump added.

Despite Trump's assertion that "trade wars are good, and easy to win", however, Harley isn't so impressed. He has already imposed $50 billion in tariffs on China and threatened another $400 billion.

Reaction to the company's announcement suggested that the EU's strategy of targeting products made in politically-important states in its response to Trump's metals tariffs was succeeding, according to Edward Alden, a senior fellow at the Council on Foreign Relations.

All three states voted for Donald Trump in the 2016 presidential election.

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USA companies that range from boat-builders to nail manufacturers have warned about the consequences of escalating trade tensions. But since then the company has been counting the costs of his trade policies.

"The whole idea that we're putting investment restrictions on the world - please discount that", he said in an interview with CNBC.

Even as American companies feel the heat from Trump's economic aggression, there is no sign that he is backing down. And in recent years, Harley-Davidson has been courting a younger, more culturally diverse audience anyway-people less likely to have ties to factory workers in Wisconsin and Kentucky who will soon be out of work.

Free trade agreements like KORUS and NAFTA helped open up overseas markets for multinational companies to outsource their American manufacturing jobs to countries like Mexico, leaving millions of Americans laid off in the process.

In the wake of the sluggish U.S. sales, Harley-Davidson announced in January it would close its Kansas City, Missouri assembly plant and consolidate jobs in York, Pennsylvania.

It also has production facilities in India, Brazil and Thailand. Moving production to overseas factories is expected to require nine to 18 months, so in the near-term Harley-Davidson will absorb the costs of European Union tariffs, the company said in a regulatory notice.

It reassured customers it would not raise prices in the short term as a result of the new tariffs. It anticipates the cost for the rest of the year to be approximately $30 million to $45 million.

Harley-Davidson said it would raise investment in its worldwide plants, though it did not say which ones, adding that it expected the increase in production to take nine to 18 months.

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Harley-Davidson, which has been focused on expanding its overseas sales, said it remained committed to United States manufacturing.

However, the tariffs have also helped to spur investment in USA steel plants.

Setting up production facilities overseas will take between nine and 18 months, the company said. I think it's great that they can get away with it.

Initial reaction from prominent Republicans on Capitol Hill highlighted unease with the president's tactics.

A week ago, a 25 percent tariff on steel and a 10 percent tariff on aluminum affecting trade partners Canada, Mexico and the European Union, was implemented by the Trump administration.

"The problem isn't that Harley is unpatriotic - it's that tariffs are stupid; they're tax increases on Americans and they don't work", he said. The company said it may not survive past Labor Day if it doesn't get relief from the tariffs. "We didn't see this coming".

That will make each bike about $2,200 more expensive to export, Harley said.

It said the cost for the remainder of 2018 would amount to $30m to $45m.

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Harley, stung by tariffs, shifts some production overseas