European Union import tariffs force Harley to rethink

European Union import tariffs force Harley to rethink

European Union import tariffs force Harley to rethink

On March 1, President Donald Trump announced that the us would be imposing steep tariffs on all imports of steel and aluminum into the United States.

American motorcycle company Harley-Davidson announced it would move some of its production outside of the USA in response to the trade spat between the European Union and President Donald Trump.

The company chose to build the Thailand plant in response to Trump's decision to pull 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.

Analysts have noted the irony of Harley-Davidson's plight given that its executives were among the first to visit the White House in February 2017 shortly after Trump took office.

To deal with the increased costs, Harley announced it will shift production of motorcycles for European Union destinations from its USA facilities to global operations.

The European Commission in Brussels gave final approval last month for a 25 per cent duty on 2.8 billion euros (US$3.2 billion) of EU imports covering a range of USA products including Harley motorcycles, Levi Strauss & Co. jeans and bourbon whiskey.

Harley-Davidson plans to shift some manufacturing of its iconic motorcycles overseas to avoid retaliatory European tariffs imposed last week, the company said Monday. "Harley-Davidson expects ramping-up production in worldwide plants will require incremental investment and could take at least nine to 18 months to be fully complete".

The EU began imposing tariffs Friday on $3.2 billion worth of American goods, including motorcycles, orange juice, bourbon, peanut butter, motorboats, cigarettes and denim.

"Harley-Davidson maintains a strong commitment to US -based manufacturing which is valued by riders globally", said the company.

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"Harley's desire to improve sales both domestically and abroad predates the Trump administration's tariffs, as does the company's willingness to build assembly facilities overseas to avoid tariffs", he said in a statement.

Daimler, which also produces its premium Mercedes cars in the U.S., said its 2018 profits were expected to be hit by higher Chinese tariffs on imports of American-made cars.

Tariffs increase costs for businesses. But since then the company has been counting the costs of his trade policy.

In turn, it also incentivizes firms to move their production overseas since other countries may have lower tariffs - or no tariffs - on the same intermediate product. The tariff on motorcycles rose from an initial 6 percent to 31 percent. By shifting production closer to the point of sale, businesses can avoid the increased cost to sell in Europe or other countries with restrictions.

"We are now assessing the potential impact on our U.S. facilities", said Harley-Davidson spokesman Michael Pflughoeft.

"I think this is only the beginning".

Last week German automaker Daimler AG cut its 2018 earnings outlook, a change that it says is partly due to increased import tariffs for US vehicles in China.

With China and the European Union combining to slap the United States with more than $60 billion in tariffs, the end of the trade war is nowhere in sight and other countries including Canada and Mexico will likely step up their efforts in the coming months. Seemingly, this has left Harley-Davidson little option but to shift production elsewhere.

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