Harley-Davidson US production a casualty in Trump tariff war

Logo of U.S. motorcycle company Harley Davidson

Harley-Davidson said Monday it will move production of its motorcycles headed for European Union customers outside the United States to avoid a new tariff.

Harley said ramping up production at overseas global plants could take at least nine to 18 months.

The EU is Harley's most important market outside of the USA, accounting for 40,000 sales in 2017.

Harley-Davidson said the EU's new tariffs on US-made motorcycles would drive up costs and force the company to shift a sizable portion to its production outside of the U.S. to avoid the tariff.

The shares dropped 2.7 percent to $43 in early USA trading.

Trump praised Harley-Davidson as an "American icon, one of the greats" and expressed confidence the company would expand USA manufacturing under his administration. The president hailed the company as a model of American manufacturing, an industry he promised to restore.

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"Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag", Trump said on Twitter.

The move, the US President argued, was to protect American businesses, though many experts thought differently. Harley fell 2.2% on Friday as European Union tariffs against Harley took effect.

The Wall Street Journal newspaper reports that the Trump administration plans to limit Chinese investment in American technology companies and high-tech exports to China.

Harley said it chose to build the Thailand plant after Trump pulled out from the Trans-Pacific Partnership, which would have lowered import tariffs on its bikes in some of the fastest-growing motorcycle markets in Asia.

Just minutes before. he wrote: "Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand".

Harley-Davidson shares have lost about 9 per cent since early March when the trade skirmish between the United States and the European Union started, and are down over 18 per cent since end-December 2017. Daimler AG warned last week that escalating tension between the USA and China will impair earnings its Alabama SUV plant and lower profit this year.

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It also did not say which US factories would be affected.

In 2017, Trump welcomed executives and workers from Harley-Davidson to the White House, thanking them for building their vehicles in the United States and assuring them, "I think you're going to even expand".

"In the near-term, the company will bear the significant impact resulting from these tariffs, and it estimates the incremental cost for the remainder of 2018 to be approximately $30 to $45m", it continued.

Harley-Davidson announced its intentions in regulatory filings posted to the company's website on Monday, June 25.

Harley-Davidson said it will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe.

Shares of Harley were down 1.7% to 43.45 before the open on the stock market today, as trade concerns had the Dow Jones industrial average, S&P 500 index and Nasdaq 100 futures all off to poor starts for the week. The company did not comment on how many jobs would be shifted away from the US, but said that it would take between nine and 18 months to move production away from Wisconsin. Paul Ryan, the Republican speaker of the House of Representatives, hails from Harley's home state of Wisconsin, while Senate Majority Leader Mitch McConnell represents Kentucky, a major maker of bourbon.

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