Harley-Davidson moving US production over European Union tariffs

President Donald Trump and Vice President Mike Pence walk together on their way to greet Harley Davidson executives on the South Lawn of the White House

Harley-Davidson plans to shift some manufacturing of its iconic motorcycles overseas to avoid retaliatory European tariffs imposed last week, the company said Monday.

Instead, it will eat $30 million to $45 million for the rest of this year and $90 to $100 million annually.

Harley-Davidson said that moving some production from the U.S.to factories overseas could take at least nine to 18 months to be completed. While numerous company's efforts to grow its brand focus on Asia, the European market remained the second largest after the USA with about 40,000 in retail sales a year ago.

"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.

Harley-Davidson's stock fell 5% on Monday.

Either way, Harley-Davidson's announcement drew criticism from the White House.

Hours after Mnuchin's tweet, Peter Navarro, head of the White House office of trade and manufacturing policy, appeared to contradict the treasury chief.

President Trump, pushing a get-tough trade policy aimed at trade partners he says have taken advantage of the USA for years, has cited Haley-Davidson as a company hurt by Europe's trade barriers.

Donovan, however, says that the move makes flawless sense in the context of the new tariffs.

The iconic brand said the move was prompted by the financial burden of tariffs levied against U.S. products.

"If Trump's trade policies are leading an iconic company like Harley-Davidson to move production out of the United States, then who exactly is benefiting?" The full-year tariff bill could reach $100 million, the company said. "I expect many other companies will be forced reluctantly to move production as Harley has done in order to maintain their viability". Harley-Davidson say the tariffs will result in approximately $2200 (£1650) being added to the export cost of each motorcycle.

The International Association of Machinists and Aerospace Workers (IAM), the union that represents Harley employees in three U.S. plants, said the offshore move had been planned long in advance.

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The maker of the well-known motorcycle said on Monday that European Union tariffs on its motorcycles jumped between six percent and 31 percent.

The company said that retaliatory European taxes on imported motorcycles will have a "significant impact" on its business, increasing the cost of motorcycles by $2,200 on average, so has made a decision to move production elsewhere.

It also did not say which USA factories would be affected.

"We are extremely anxious about the consequences of a trade war and are urging the White House to not advance with this plan", Ryan's spokeswoman, AshLee Strong has previously revealed.

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. According to Harley Davidson, Europe accounts for around 16 percent of all motorcycle sales.

Harley-Davidson said that shifting targeted production from the U.S. to worldwide facilities could take up to 18 months to be completed.

In turn, it also incentivizes firms to move their production overseas since other countries may have lower tariffs - or no tariffs - on the same intermediate product.

Harley-Davidson's global factories are in Manaus, Brazil; Bawal, India; and Rayong, Thailand.

Additionally, retaliatory tariffs from the EU, Canada, Mexico, and more make it expensive to get finished goods into those markets.

An employee tends to Harley Davidson Motorcycles at the Boston Harley Davidson dealership in Revere, Massachusetts, USA 25 June 2018.

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

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