Europe's Retaliatory Tariffs Push Harley-Davidson to Move Production Outside US
Harley-Davidson said retaliatory tariffs against its motorcycles in Europe cannot be passed on to consumers without massively impacting sales, so it will work on increasing capacity at its plants outside the U.S. to serve the European market. Harley-Davidson motorcycles sold into the European Union have faced a 31 percent tariff since June 22; before that, there was a 6 percent tariff. In a regulatory filing June 25, the Milwaukee-based company said it will have to eat between $30 million and $45 million in tariffs for the rest of 2018. It estimated it will take nine to 18 months to complete a ramp-up in capacity in other factories. The company has factories in India and Brazil, and is in the process of opening a factory in Thailand.
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Earlier this year, Harley-Davidson announced it would be closing a factory that employs 800 in Kansas City, and that the closure would be complete by the fall of 2019. Harley-Davidson has said it opened the factories in Brazil, India and Thailand in part to avoid tariffs on motorcycles in those countries that are high. But sales are softening in the U.S. and Canada and are stronger elsewhere. In its last quarterly report, the company said its U.S. sales were down 12 percent while international sales rose 0.2 percent. Europe is the company's second-largest source of sales. Its worldwide retail sales decreased 7.2 percent.
The increase in tariffs is about $2,200 for the average motorcycle exported from the U.S. to the EU, the company said. It sold nearly 40,000 Harleys in Europe in 2017. "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 filing said.
House Speaker Paul Ryan hails from Wisconsin, and his spokeswoman said after the announcement: "This is further proof of the harm from unilateral tariffs. The best way to help American workers, consumers, and manufacturers is to open new markets for them, not to raise barriers to our own market."