Harley says EU tariff deal will save company up to $225 million in 2022

Last updated on November 5th, 2021 at 11:36 pm

The trade deal announced Saturday between President Joe Biden and the European Union will save Harley-Davidson up to $225 million in tariff costs next year, the Milwaukee-based motorcycle maker said in a securities filing.

Harley’s motorcycles were the target of increasing EU tariffs following the U.S. imposition of tariffs on European steel and aluminum in 2018 by President Donald Trump. The tariff on Harley’s motorcycles increased from 6% to 31% and was set to increase to 56% in December.

The company had sought to avoid the tariffs by moving assembly of European motorcycles to Thailand, a move that led to Trump accusing Harley of waiving “the White Flag.” European regulators initially signed off on Harley’s plans to use its Thailand facility to avoid the tariffs but later reversed course and imposed tariffs on those bikes

The deal announced Saturday will suspend the increased tariffs. Harley will save around $3 million in additional tariff costs for the remainder of 2021 as a result. The company is also still pursuing an appeal the EU decision on its bikes assembled in Thailand.

It also allows duty-free import of steel and aluminum from the EU at historical levels and calls for the two parties to develop an agreement that promotes trade in steel and aluminum produced at lower emission levels.

Jochen Zeitz, chairman, president and chief executive officer of Harley-Davidson, called the agreement “a big win for Harley-Davidson, and our customers, employers and dealers in Europe.”

“We are excited that this brings an end to a conflict that was not of our making, and in which Harley-Davidson had no place. This is an important course correction in U.S.-EU trade relations, that will allow us to further Harley-Davidson’s position as the most desirable motorcycle brand in the world,” Zeitz said.

The additional tariff had added around $2,000 to the cost of a Harley and the company opted to cover the increase itself rather than passing it on to dealers or customers. Executives said passing the costs along would have priced Harley’s product out of the market.

Europe is an important market for Harley. Combined with the Middle East and Africa, it has accounted for around 20% of worldwide retail sales in recent years, a figure that is primarily made up of sales in Europe.

The company’s market share in Europe has slid in recent years from nearly 9% in 2019 to 7.7% in 2020 and 6% through the first three quarters this year.

The increased costs of the tariffs has been adding up for Harley. The company had $44.3 million in additional costs in the first three quarters of 2021 and is now expecting $61 million for the full year. It estimated the additional costs would total $200 million to $225 million in 2022.

For 2019 and 2020, the company had spent $97.9 million and $24.5 million respectively on increased tariff costs. Those figures also include increased costs on components imported from China under a separate tariff action implemented by the Trump administration in 2018.

Sign up for BizTimes Daily Alerts

Stay up-to-date on the people, companies and issues that impact business in Milwaukee and Southeast Wisconsin

Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

No posts to display