Harley-Davidson to make bikes out of US, owing to trade-war
What's the story
It seems that US President Donald Trump's forceful push to make America great again has returned to bite him in the back. On Monday, Harley-Davidson announced that it would move production of motorcycles, shipped to the European Union, to its international facilities. This is on account of retaliatory tariffs imposed by the EU, in response to Trump's aggressive trade policies. Here's more.
Twitter Post
Trump is surprised, but should have seen it coming
Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse - be patient! #MAGA
— Donald J. Trump (@realDonaldTrump) June 25, 2018
Costs
Why Harley-Davidson needs to produce bikes outside the US
Harley-Davidson said that retaliatory import duties recently imposed by the EU would result in an incremental cost of about $2,200 on an average per motorcycle, and in the absence of moving its production elsewhere, would cost the company around $90-100mn per year. The company is already facing a loss of $30-45mn in 2018, owing to its decision to not raise retail or wholesale prices.
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Why Harley-Davidson isn't passing on costs
"Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region," said the company in a statement.
EU-US trade war
How the trade war between EU, US came to be
Earlier, the Trump administration, in a bid to 'Make America Great Again' and protect jobs of US workers, had imposed tariffs on aluminium and steel imports from the European Union. Not to be outdone, the EU responded by imposing import duties of 25% on a range of US products, including motorcycles produced by the iconic motorcycle company, on June 22.
Motorcycle demand
Harley-Davidson is eyeing international markets as domestic demand slumps
Harley-Davidson had, in April, complained about new costs arising out of Trump's import duties on metal, saying that the metal tariffs would cost it an additional $15-20mn over and above already rising raw material prices. In January, it closed down two US plants owing to a six-year-low slump in motorcycle shipments. Owing to low demand in the US, Harley-Davidson is looking to expand abroad.
International plants
Harley-Davidson has international plants in India, Brazil, and Thailand
Notably, Harley-Davidson has no manufacturing facility in Europe, but has three assembly plants outside the US - one each in India, Brazil, and Thailand. Harley-Davidson built the Thailand plant in response to Trump's decision to pull out of the Trans-Pacific Partnership which would have lowered import tariffs on its bikes in the fast growing economies of Asia.