Harley Davidson 'waving the white flag', tweets Trump

Harley Davidson 'waving the white flag', tweets Trump

US President Donald Trump on Monday slammed Harley-Davidson Inc after the motorcycle maker said it would move production for European customers overseas to avoid retaliatory tariffs that could cost it up to US$100 million (S$136.2 million) per year.

Harley-Davidson Inc. sold nearly 40,000 motorcycles in the European Union a year ago, its second-largest market after the United States, according to the company.

The United States earlier this month imposed tariffs on steel and aluminum imports from the European Union, provoking a "tit-for-tat" response from the trading bloc against US goods.

The story of William Harley and Arthur Davidson's brainchild turning into one of the most well-known motorcycle companies is a quintessential example of the American dream.

But then, unbidden, came the trade war.

To hear President Donald Trump explain it, tariffs should force foreign manufacturers to "build them here", but Harley-Davidson's announcement shows how a trade war will give American businesses a strong incentive to relocate elsewhere.

India's 50% and similar tariffs on imported motorcycles make it hard to sell in those markets.

Adding to the difficulty facing the company were steel and aluminum tariffs on the EU, Canada and Mexico finalized by the Trump administration at the start of June. On Friday, it began new tariffs on around $3.4bn worth of USA products being brought into the EU.

It anticipates the cost for the rest of the year to be approximately $US30 million ($40 million) to $US45 million ($61 million).

The International Association of Machinists and Aerospace Workers (IAM), the union that represents Harley employees in three USA plants, said the offshore move had been planned long in advance. In the near term, Harley-Davidson will instead absorb most of the cost of moving the production of motorcycles overseas.

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The EU's levies are only the latest blowback Harley has faced from Trump's trade policies.

After early steep declines, markets pared losses after White House trade adviser Peter Navarro softened the country's stance on investment restrictions.

It had already announced plans to close a plant in Kansas City, Missouri - a decision which workers claimed was due to the opening of a new facility in Thailand.

The move is in response to new European Union tariffs that recently took effect.

Harley Davison is based in Milwaukee, Wisconsin and employs 5,800 workers.

Harley-Davidson said it will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe.

The company did not comment on how many jobs would be shifted away from the USA, but said that it would take between nine and 18 months to move production away from Wisconsin. The company maintains facilities in Brazil, India and Thailand where it completes assembly of motorcycles for sales in those and other markets.

Retaliation by Brussels targeted producers in Republican states where Trump draws much of his support - including bourbon whiskey, Levi's jeans - and is expected to raise the prices of USA goods worth up to €2.8bn (£2.5bn).

Analysts at Baird Equity Research cut its 2018 profit estimates for Harley-Davidson to $3.70 per share from $3.90 and now expect 2019 profit of $3.85, down from $4.20.

Other US products caught up in European Union tariffs include cranberries, peanut butter, playing cards and whiskey.

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