The new Forty-Eight. Picture: HARLEY-DAVIDSON SA
The new Forty-Eight. Picture: HARLEY-DAVIDSON SA

London/New York — Harley-Davidson plans to shift some production of its motorcycles out of the US in response to European Union tariffs, as President Donald Trump’s trade war undermines an iconic American manufacturer.

Each motorcycle will cost about $2,200 more after the European Union raised its levies on imported US bikes to 31% from 6% on June 22, the Milwaukee-based manufacturer said on Monday in a regulatory filing. This will cost Harley about $90m to $100m annually, as the company will absorb rather than pass extra costs on to customers.

While Trump has repeatedly claimed that the US can win trade wars, victims are starting to pile up at home and abroad. Harley’s filing follows a profit warning last week from Daimler, which cited escalating tensions between the US and China. The motorcycle maker tied its higher costs to a sequence started by Trump, who slapped tariffs on European steel and aluminium, prompting the EU’s retaliation.

Harley did not specify which international plants will boost output for EU markets. The company operates manufacturing facilities in Brazil, India and Australia, and is beginning production in Thailand this year.

Europe sales

Ramping up output in international plants for the EU may take at least nine to 18 months, according to the company. Harley said it was committed to making motorcycles in the US, it suggested it had no other choice but to move production from its home market. The company sold almost 40,000 bikes in Europe last year, and the continent’s share of total deliveries was the highest since 2011.

"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 the filing.

Harley shares fell 1.7% to $43.45 early in New York, before the start of regular trading. The stock is down 13% this year.

The EU tariffs are only the latest blowback Harley has faced from Trump’s trade policies. The company has warned that Trump’s tariffs on steel and aluminium will drive up raw materials costs.

CEO Matt Levatich also was a supporter of the Trans-Pacific Partnership (TPP), which could have lowered barriers in some of the largest markets for motorcycles in the world. Trump withdrew from the long-planned trade pact in January 2017.

A week after pulling the US out of the TPP, the president hosted Levatich and other Harley executives and union leaders for a White House listening session and praised the company as a model American manufacturer.

A US motorcycle sales slump has deepened since then, spurring Harley’s decision in January to close a plant in Kansas City, Missouri, eliminating about 260 jobs.

Bloomberg