Iconic U.S. company Harley-Davidson has been hit hard by tariffs the European Union is imposing in retaliation for President Trump’s steel and aluminum tariffs. Understandably, the E.U. could not just idly accept Trump’s massive tariffs, predicated on reasons of national security because Trump only has the power to impose tariffs for reasons of national security. It is false to say that the E.U. (or Canada or Mexico, for that matter) represents a national security risk to the United States, but Trump is doing so anyway because that is the only legal basis he has for imposing the tariffs. The E.U. has in response particularly targeted products from states represented by prominent Republicans going along with Trump’s agenda. As a case in point, Harley-Davidson is headquartered in Wisconsin, home to Speaker of the House Paul Ryan (R-WI).
If Harley-Davidson were to pass along to E.U. consumers the cost of the tariffs that went into effect last Friday, which have now increased from 6% to 31%, doing so would raise the average price of their motorcycles in that market by $2,200. Knowing that increase in price would lose them a lot of business, Harley-Davidson has decided for now not to raise prices, but to eat the added costs of up to $100 million a year, and plan to make more of their motorcycles outside of the U.S., so they will not face the same tariffs going into the E.U. That move may also mean job losses in the U.S., but it is the reality Harley-Davidson faces as it finds itself caught up in President Trump’s trade war. According to Quartz:
Donald Trump’s “America First” trade policy is backfiring. The US president’s imposition of steel and aluminum tariffs on the European Union and other allies—pitched as a way to boost domestic manufacturing and protect local jobs—were swiftly met with retaliatory tariffs. The EU’s tariffs went into effect on Friday (June 22), following through on a threat to target Harley-Davidson motorcycles, Levi’s jeans, and bourbon…To try and reduce the long-term cost of the tariffs, Harley-Davidson said it would move production of EU-bound motorcycles from the US to plants it operates elsewhere in the world. The company said that despite being committed to US-based manufacturing, the move is the “only sustainable option” to maintain its business in the EU. Last year, nearly 40,000 new Harley-Davidson bikes were sold in Europe, the company’s second-largest market.
The source of Harley-Davidson’s predicament is of course Donald Trump, who somehow imagined he would impose these tariffs and the countries effected would not retaliate. Trump keeps threatening these same countries not to retaliate or he’ll retaliate again – of course, that’s what a trade war is, although that seems a bit lost on Trump. To add insult to injury, Harley-Davidson has now also been insulted by Trump for planning to move some more of their manufacturing abroad. That move is one of economic survival for Harley-Davidson in response to the retaliatory tariffs. Yet Trump took to Twitter to lambaste Harley-Davidson, writing, “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. 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!”
Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. 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! #MAGA
— Donald J. Trump (@realDonaldTrump) June 25, 2018
Be patient? A company cannot afford this kind of patience or it will go under – are companies just supposed to rely on Trump vague promise that “ultimately they will not pay tariffs selling into the E.U.”? Those tariffs started to be applicable on Friday – there is no time to wait around. What Trump particularly doesn’t like about Harley-Davidson’s announcement of their plan to move more manufacturing abroad is the optics – that the way Trump is pursuing his America First policies is actually pushing manufacturing out of the U.S., pushing jobs out of the U.S., as is happening with Harley-Davidson. At the end of the day, Trump doesn’t seem to know what he is doing even in trying to further his own agenda.