“Waive the White Flag:” President Trump blasts Harley-Davidson for overseas production shift

MILWAUKEE — President Donald Trump blasted Harley-Davidson, the iconic American motorcycle manufacturer, after the company said Monday it will begin to shift the production of motorcycles headed for Europe from the U.S. to overseas factories to avoid new tariffs.

The European Union on Friday began rolling out tariffs on American imports like motorcycles and bourbon. The EU tariffs on $3.4 billion worth of U.S. products are retaliation for duties President Donald Trump's administration is imposing on European steel and aluminum.

President Trump has used Harley-Davidson as an example of a U.S. business that is being harmed by trade barriers. Yet Harley has warned consistently against tariffs, saying they would negatively impact sales.

"Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag," the president said in a Monday afternoon tweet. "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!"

Harley-Davidson Inc. sold almost 40,000 motorcycles in the European Union last year, representing 16.6 percent of the company's sales. The U.S. remains the company's largest market, with 60 percent of sales, and Monday's announcement does not affect production of bikes destined for American dealers.

"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 Milwaukee-based company said in a regulatory filing. "Europe is a critical market for Harley-Davidson."

 

Harley's costs jump

The 115-year-old motorcycle maker said that EU tariffs on its bikes exported from the U.S. jumped between 6 percent and 31 percent on Friday, when the European duties took effect. The tariffs translate to an additional cost of $2,200 per average motorcycle exported from the U.S. to the European Union.

Harley-Davidson will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe, it said. It will instead absorb a significant amount of the cost in the near term. It anticipates the cost to the company will near $100 million per year.

 

Harley-Davidson said that shifting production from the U.S. to international facilities could take at least nine to 18 months. It has not said how many U.S. jobs are at stake, or whether its plants in Menomonee Falls and Tomahawk will be affected.

With its tariffs on Harley motorcycles, the European Union is targeting House Speaker Paul Ryan's home state. Ryan has publicly split with President Trump on the issue of trade.

"This is further proof of the harm from unilateral tariffs," said AshLee Strong, a Ryan spokeswoman, in response to a question about Harley's announcement. "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."

'True American icon'

Harley's plans are a blow to President Trump, who intended to visit one of the company's Wisconsin factories shortly after taking office in 2017. The plans were scuttled, but the president hosted Harley executives at the White House soon after. At the time, the president called the company "a true American icon, one of the greats."

Yet two labor unions that represent Harley workers questioned the company's motives with its production shift.

“Harley-Davidson’s announcement today is the latest slap in the face to the loyal, highly-skilled workforce that made Harley an iconic American brand, said Robert Martinez, Jr., president of the International Association of Machinists and Aerospace Workers. “Will Harley use any excuse to ship jobs overseas? Does Harley even understand what ‘Made in America' means?”

The company is already struggling with falling sales. In January, it said it would consolidate its Kansas City, Missouri, plant into its York, Pennsylvania, facility. U.S. motorcycle sales peaked at more than 1.1 million in 2005 but then plummeted during the recession.

The company plans to open a factory in Thailand this year.

Michael Bolton, director for the United Steelworkers district that covers Wisconsin, said "if the company wants to continue to market itself as an iconic American brand both at home and abroad, it needs to focus on U.S. production."

Walker prefers no tariffs

Wisconsin Gov. Scott Walker said he was asking President Trump to back away from increasing tariffs.

"The ultimate goal, if we could get there, is no tariffs or if anything few tariffs on anything," said Walker, a Republican. "That's what I'm going to push for, ways that we can get to a level playing field then we don't have this tit for tat on any number of products out there."

Gov. Scott Walker

Increasing foreign investment in the United States, something Walker was in Washington advocating for at a U.S. Department of Commerce event last week, will also help reduce the trade imbalance and need for tariffs, he said.

More potential pitfalls for Harley-Davidson and other U.S. manufacturers could be on the way.

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

On Monday, the vice president of the European Union's governing body said that Europe and China will form a group aimed at updating global trade rules to address technology policy, government subsidies and other emerging complaints in a bid to preserve support for international commerce.

European Commission Vice President Jyrki Katainen said unilateral action by U.S. President Donald Trump in disputes over steel, China's technology policy and other issues highlighted the need to modernize the World Trade Organization to reflect developments in the world economy.

The Wall Street Journal reported that the Trump administration plans to impose curbs on Chinese investment in American technology companies and high-tech exports to China.