- President Donald Trump attacked Harley-Davidson over its decision to shift some of its motorcycle production out of the US.
- But many of Trump’s policies helped contribute to Harley-Davidson’s decision.
- Everything from steel tariffs to the decision to pull the US out of the Trans-Pacific Partnership helped contribute to Harley’s move.
President Donald Trump is targeting Harley-Davidson for its decision to move some of its manufacturing out of the US, but the president may be to blame for pushing the iconic motorcycle company away.
Harley-Davidson announced Monday that it would move some production of its motorcycles out of the US to overseas facilities, calling it a result of Trump’s recent trade fights with the European Union. The firm said the increased costs to ship US-made motorcycles to the EU – roughly $US2,200 per unit – made it necessary to shift production.
Trump slammed Harley’s decision on Twitter and said during a meeting with Republican lawmakers that the company was just using tariffs as an excuse, since the company previously announced the opening of a plant in Thailand.
But Chad Bown, a senior fellow at the Peterson Institute for International Economics, pointed out that Trump hit Harley-Davidson with a “triple whammy” of policy changes that helped to push the company towards its decision.
Those three factors were:
- Steel and aluminium tariffs: Harley uses a significant amount of steel in the production of its motorcycles, so Trump’s 25% tariff on steel imports to the US will hurt the company’s bottom line. According to an analysis by Wedbush Securities, the steel tariff alone could push up the company’s costs by $US30 million a year. By increasing the cost of manufacturing motorcycles in the US, Trump incentivized Harley to move more of the production offshore, where steel could be sourced at a lower cost.
- Ending the steel tariff exemption for the European Union: The second hit came from the European Union’s tariff on US-made motorcycles, a policy that came in response to Trump’s decision to end the steel and aluminium tariff exemption for the EU. In the filing announcing the production shift, Harley said the EU motorcycle tariff would push up their costs by $US30 million to $US45 million a year. Given that Europe is the second-largest market for the company, finding a cost effective way to maintain access to the continent is important.
- Pulling the US out of the Trans-Pacific Partnership: While the US is still Harley’s largest market, Asia and South America are also important components of the company’s long-term growth prospects. When Trump pulled the US out of the Trans-Pacific Partnership, the president also killed Harley’s chances of being able to access key countries in those markets with little to no trade barriers. In fact, Harley-Davidson CEO Matt Levatich told Bloomberg in April that the company decided to go all-in on the new factory in Thailand because of the TPP withdrawal.
There are certainly other reasons that Harley-Davidson is starting to move more and more of its production away from the US – cheaper labour costs and the ease of transportation to international markets, for instance. But the company’s move has been aided by Trump’s policies.