Think American heritage and Harley-Davidson is one of the most iconic brands that comes to mind. So it is definitely a matter of concern to US President Donald Trump when the motorcycle maker threatens to shift some of its production abroad, because it has become tough to make in America.
Why has it become tough for Harley-Davidson to continue making bikes in Milwaukee, Wisconsin? The problem lies in protectionist tariffs that the US has imposed on raw materials. And this has also got its allies to impose retaliatory tariffs, which just can’t be good for business overall. We explain how this affects the bike maker on its home turf and abroad.
Trump vs Harley-Davidson: Why It’s Tough to Make Bikes in America
1. Why Harley-Davidson plans to shift some production abroad
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US President Donald Trump is trying to encourage more companies to manufacture their products in the US, and is hence raising tariffs on imports into the country. The trouble is this has got its allies to impose retaliatory tariffs, matching that of the US. This has made it difficult for US companies to export their products too.
In mid June 2018, the US announced it was raising tariffs on steel imports from Europe, Canada and Mexico to 25 percent, and tariffs on aluminium imports to 10 percent. Earlier tariffs on these commodities were under 3 percent.
In retaliation, the European Union imposed a 25 percent tariff hike on US-made motorcycles, going from 6 percent to 31 percent. Europe is Harley-Davidson’s biggest market outside the US, with the motorcycle maker selling 40,000 units there last year.
Hence to offset that, Harley-Davidson planned to shift some of its production, especially for the European market to Thailand.
The new 2018 edition Harley-Davidson motorcycles. (Photo: The Quint) Expand2. What Trump said about Harley-Davidson
The EU tariffs on Harley-Davidson will result in an increase of $2,200 per motorcycle on average, Harley-Davidson said in a filing to the stock exchange. To avoid this burden, it plans to supply the European market with bikes built in Thailand or any one of its overseas plants.
That statement riled the US President. He said in a tweet: “A Harley-Davidson should never be built in another country - never!”
He went on to add that Harley-Davidson would be taxed heavily if it tried to bring its bikes made abroad, back into the US.
Expand3. Trump’s tariff spat with India
In February 2018, Donald Trump took issue with the tariffs charged by India on bikes imported from the US to India.
Trump said India charges a 50 percent import duty on completely built motorcycles, specifically referring to Harley-Davidson bikes sold in the country. However, he said India also exports a “big number” of bikes to the US and the US charges zero duty on importing these bikes. The bikes in question, although Trump did not name them, are from Royal Enfield.
Expand4. The road ahead for Harley-Davidson
Harley-Davidson is just being used by Donald Trump as an example, because of its brand recall. Trump’s talk of import tariff policies wouldn’t have had much effect if he had used aluminium as an example. Harley, as a brand, connects better with his audience.
The US tariffs on steel and aluminium have caused its domestic prices to shoot up. That will increase cost of manufacture for Harley-Davidson. It is already under pressure.
Sales in the US fell by 8.5 percent last year. Most of that fall happened in the last quarter of 2017.
The tariff won’t really impact Harley-Davidson bikes in India. Only a handful are imported to India, while the rest are assembled. However, India has raised duties on components, and that is likely to have some effect on prices of Harley-Davidson bikes in India.
The bigger issue is the impact on Harley-Davidson sales and prices in the US, because of higher import costs for raw materials, due to the reciprocal tariffs being charged by the EU and other countries.
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)
Expand
Why Harley-Davidson plans to shift some production abroad
Listen to the podcast:
US President Donald Trump is trying to encourage more companies to manufacture their products in the US, and is hence raising tariffs on imports into the country. The trouble is this has got its allies to impose retaliatory tariffs, matching that of the US. This has made it difficult for US companies to export their products too.
In mid June 2018, the US announced it was raising tariffs on steel imports from Europe, Canada and Mexico to 25 percent, and tariffs on aluminium imports to 10 percent. Earlier tariffs on these commodities were under 3 percent.
In retaliation, the European Union imposed a 25 percent tariff hike on US-made motorcycles, going from 6 percent to 31 percent. Europe is Harley-Davidson’s biggest market outside the US, with the motorcycle maker selling 40,000 units there last year.
Hence to offset that, Harley-Davidson planned to shift some of its production, especially for the European market to Thailand.
What Trump said about Harley-Davidson
The EU tariffs on Harley-Davidson will result in an increase of $2,200 per motorcycle on average, Harley-Davidson said in a filing to the stock exchange. To avoid this burden, it plans to supply the European market with bikes built in Thailand or any one of its overseas plants.
That statement riled the US President. He said in a tweet: “A Harley-Davidson should never be built in another country - never!”
He went on to add that Harley-Davidson would be taxed heavily if it tried to bring its bikes made abroad, back into the US.
Trump’s tariff spat with India
In February 2018, Donald Trump took issue with the tariffs charged by India on bikes imported from the US to India.
Trump said India charges a 50 percent import duty on completely built motorcycles, specifically referring to Harley-Davidson bikes sold in the country. However, he said India also exports a “big number” of bikes to the US and the US charges zero duty on importing these bikes. The bikes in question, although Trump did not name them, are from Royal Enfield.
The road ahead for Harley-Davidson
Harley-Davidson is just being used by Donald Trump as an example, because of its brand recall. Trump’s talk of import tariff policies wouldn’t have had much effect if he had used aluminium as an example. Harley, as a brand, connects better with his audience.
The US tariffs on steel and aluminium have caused its domestic prices to shoot up. That will increase cost of manufacture for Harley-Davidson. It is already under pressure.
Sales in the US fell by 8.5 percent last year. Most of that fall happened in the last quarter of 2017.
The tariff won’t really impact Harley-Davidson bikes in India. Only a handful are imported to India, while the rest are assembled. However, India has raised duties on components, and that is likely to have some effect on prices of Harley-Davidson bikes in India.
The bigger issue is the impact on Harley-Davidson sales and prices in the US, because of higher import costs for raw materials, due to the reciprocal tariffs being charged by the EU and other countries.
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)