Trump 'surprised' by Harley-Davidson move to shift work out of US

Logo of U.S. motorcycle company Harley Davidson

Harley-Davidson Is Shifting Production Away From the U.S. As Trump's Trade War Rages On

The Associated Press reports that while President Donald Trump is pointing to Harley as a prime example of an American business as those hurt by trade barriers, the bike maker has regularly warned against imposing tariffs.

Harley-Davidson, which Trump has cited in the past as a company hurt by USA trade regulation, said the increased tariffs would cost the company an extra $30 million to $45 million in 2018. Now, lawmakers are weighing in.

"Increasing global production...is not the company's preference", the statement said.

In response to the USA tariffs, the European Union began charging import duties of 25 percent on a range of US products including big motorcycles like Harley's on June 22.

Trump's claim that "ultimately [Harley-Davidson] will not pay tariffs", appeared to imply that he believed that the European Union would reverse its decision.

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

The American company Harley-Davidson will move the production of some motorcycles out of the United States to avoid rising costs from tariffs.

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"For Harley to be forced to move production out of the country because of the tariffs is very damaging to Trump's repeated claim that his trade, tax and regulatory policies will get companies to boost their United States investments and create good manufacturing jobs", Edward Alden, senior fellow at the Council on Foreign Relations, told Business Insider. Case in point, Harley Davidson.

The motorcycle manufacturer, founded in 1903, has factories in Kansas City, Missouri; York, Pennsylvania; Menomonee Falls and Tomahawk in 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. The tactic is meant to give US factories producing those raw materials a better chance, because they'll be competing against importers who now have additional tariff costs.

"We think Harley's decision to protect European Union demand is wise for the long-term health of the market", Baird Equity Research said in a note. But since then the company has been counting the costs of his trade policy. "We need to hold China accountable for its trade abuses, but that does not need to come at the expense of American workers and businesses". So U.S. producers of unique high-quality goods are getting squeezed on two sides.

"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.

And the USA energy industry could lose some of its competitive advantage if there are changes to the North American Free Trade Agreement, which is now in danger of breaking up based on disagreements between the US and Canada and Mexico.

For motorcycles, the European bloc raised its 6% tariff to 31%.

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

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Harley-Davidson's goal is to fulfill dreams of personal freedom for customers who live in the European Union and across the world, and the company remains fully engaged with government officials in both the US and the EU helping to find sustainable solutions to trade issues and rescind all tariffs that restrict free and fair trade.

Thanks to the trade war that was ostensibly meant to preserve and create American jobs, some American workers will lose theirs.

President Trump had previously thanked Harley-Davidson for staying in America, while criticizing other firms for moving production outside the U.S. There's disagreement on the impact on jobs.

Harley-Davidson said it would raise investment in its worldwide plants, though it did not say which ones, adding that it expected the increase in production to take nine to 18 months. Trump has argued that the U.S.is being taken advantage of, but some business leaders argue that Nafta facilitated the exact kind of trade that benefits USA companies. Bush's tariffs were much more modest, as they exempted dozens of countries and gradually diminished, but one analysis found that overall they were a slight drag on the economy. It's unclear at this stage where production outside of the USA will be carried out.

A business like Harley-Davidson gets hit at both ends, as American tariffs on steel and aluminum imports drive up the cost of raw materials used to build motorcycles and retaliatory European Union tariffs make it more hard to sell their products.

The tariffs will increase the cost of a motorcycle exported from the U.S.to the E.U.by about $2,200 per bike, and would cost Harley-Davidson between $90 and $100 million per year, the company told the SEC.

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