Harley-Davidson plans to shift the production of some of its bikes out of the US in response to Europe’s new tariffs on motorcycle imports.
In a stock market filing, the company said the EU’s reaction to Donald Trump’s steel tariffs, which will add $2,200 (£1,657) to the average cost of a motorcycle exported from the US to Europe, will result in up to $100m of extra charges over the next couple of years.
To prevent further long-term damage to the company’s revenues, it said the production of motorcycles for EU destinations needs to switch from the US to its international facilities.
“Harley-Davidson expects ramping up production in international plants will require incremental investment and could take at least nine to 18 months to be fully complete,” the company said.
The decision is a blow to the Trump administration, which has defended its imposition of tariffs on the EU as part of a strategy to boost jobs in the US.
Earlier this year the White House imposed a 25% tariff on steel and a 10% tariff on aluminium imports from several countries, including the 27-member EU.
Retaliation by Brussels targeted producers in Republican states where Trump draws much of his support – including bourbon whiskey, Levi’s jeans – and is expected to raise the prices of US goods worth up to €2.8bn (£2.5bn).
Trump has threatened to widen the mounting trade dispute by imposing tariffs on European cars, saying in a tweet: “If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!”
It is not clear where Harley-Davidson will boost production but the impact on jobs in the US could be severe.
The company said: “Harley-Davidson maintains a strong commitment to US-based manufacturing which is valued by riders globally. 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. Europe is a critical market for Harley-Davidson. In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the EU countries is second only to the US.”
Europe implemented tariffs on the imports of US goods, including motorbikes and bourbon, in response to Donald Trump’s tariffs on steel and aluminium.
In the short term, Harley says it will absorb the cost of the tariffs, rather than passing it on to customers.
“Harley-Davidson believes the tremendous cost increase, if passed on to its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses.
“Therefore, Harley-Davidson will not raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs.
It said the cost for the remainder of 2018 would amount to $30m to $45m.
“On a full-year basis, the company estimates the aggregate annual impact due to the EU tariffs to be approximately $90m to $100m,” it added.