Harley to shift some production overseas, Walker pushes for ending all tariffs

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Harley-Davidson said Monday it will move production of its motorcycles headed for European Union customers outside the United States to avoid a new tariff.

"Harley has opted not to raise prices, instead bearing the $90 million to $100 million annual cost of the tariffs in the short term", the Journal explained.

In the meantime, it's planning to increase production in worldwide plants over the next 18 months.

The EU is Harley's most important market outside of the USA, accounting for 40,000 sales in 2017.

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

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. US exports of Harley-Davidson motorcycles there, on which India used to impose whopping 60 to 75 percent tariffs.

Harley-Davidson's warning is a huge blow for the Republican President, who says he is safeguarding jobs in the US's industrial hotspots.

Not long ago, US President Donald Trump pointed to Harley-Davidson as an example of what was going to go right for manufacturing in America.

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.

Harley forecast US$30m to US$45m in costs linked to the European Union tariffs for the remainder of 2018.

The company chose to build the Thailand plant in response to Trump's decision to pull out of the Trans-Pacific Partnership, which would have lowered import tariffs on its bikes in some of the fastest-growing motorcycle markets in Asia.

In February, Harley-Davidson announced the recall of 251,000 motorcycles due to possible brake failures, a move estimated to have cost the company $25 million.

In the wake of the sluggish USA sales, Harley-Davidson announced in January it would close its Kansas City, Missouri assembly plant and consolidate jobs in York, Pennsylvania. As a result, Harley-Davidson said there will be an incremental cost of approximately $2,200 per average motorcycle exported from the U.S.to the EU. Harley-Davidson has plans to open another facility in Thailand for the same reason.

"We can not speculate about how this morning's announcement will impact employment in the U.S. Domestic sales are what drive production and employment at Harley's U.S. facilities". The latest victim of Trump's tariffs is our very own Harley-Davidson.

The EU said that if the US retaliates, it's prepared to slap additional tariffs on 160 USA products worth roughly $4.3 billion. It added that the decision is the only way to operate a viable business in Europe, which Harley-Davidson called a 'critical market'.

Harley-Davidson representatives did not immediately return a request for comment. It would be alarming, to say the least, to find out that Harley Davidson motorcycles assembled elsewhere would later be exported to the U.S.

The shift in production is expected to take about 18 months.