President Donald Trump continued his criticism of Milwaukee-based Harley-Davidson Inc. Tuesday on Twitter, after saying on Monday the company had surrendered by choosing to shift some production overseas.
Harley announced Monday it would move production of motorcycles destined for the European Union to international facilities in Brazil, India and Thailand. The decision came in response to the EU announcing an increase in tariffs on Harley motorcycles from 6 percent to 31 percent.
Harley said the tariffs would increase the average price of a motorcycle by $2,200 and the company wouldn’t pass along the cost to dealers or consumers. The EU’s actions were in response to Trump’s tariffs on steel and aluminum.
Trump took to Twitter Tuesday to comment on Harley’s plans to move production.
Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand. That was long before Tariffs were announced. Hence, they were just using Tariffs/Trade War as an excuse. Shows how unbalanced & unfair trade is, but we will fix it…..
— Donald J. Trump (@realDonaldTrump) June 26, 2018
….We are getting other countries to reduce and eliminate tariffs and trade barriers that have been unfairly used for years against our farmers, workers and companies. We are opening up closed markets and expanding our footprint. They must play fair or they will pay tariffs!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
But for Harley the back-and-forth of the trade dispute poses a significant business risk. The increased costs of the European tariffs would cost the company up to $100 million an annualized basis, a potential 2 percentage point hit to its operating profit margin. Those costs are on top of up to $20 million in increased raw material costs prompted by the steel and aluminum tariffs.
Harley determined passing the costs on to dealers and consumers in Europe would have “an immediate and lasting detrimental impact on its business.” While increasing international production was not its preference, it was the best option for maintaining a viable business in Europe, where nearly 40,000 Harley’s were sold last year.
Trump said in a tweet Monday he was surprised Harley “would be the first to wave the White Flag,” adding the company should 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
The president returned to the topic Tuesday morning, tweeting five times about Harley and trade. Trump claimed Harley had announced earlier this year it would move “much of their plant operations in Kansas City to Thailand.”
Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand. That was long before Tariffs were announced. Hence, they were just using Tariffs/Trade War as an excuse. Shows how unbalanced & unfair trade is, but we will fix it…..
— Donald J. Trump (@realDonaldTrump) June 26, 2018
A company spokesman did not immediately respond to requests for comment on the latest string of tweets and declined to elaborate on the company’s decision Monday, pointing to the company’s securities filings instead.
Harley is closing its Kansas City plant where it assembled its smaller Sportser and Softail platforms, eliminating 800 jobs. The company said in February it would move the work to its facility in York, Pennsylvania, where it already makes its larger touring models. About 400 jobs are expected to be added in York.
Harley is opening a new facility in Thailand this year. Like similar facilities in Brazil and India, the new plant will assemble motorcycles for international markets. Harley says those facilities are necessary to get around tariffs in Asian and South American markets and would not be able to sell as many motorcycles internationally without them.
The Milwaukee Journal Sentinel, however, reported in May that unions representing workers at the Kansas City plant believe some of their jobs are going to Thailand. The company denied any connection between the two actions.
Trump is familiar with Harley’s challenges in international markets. He cited the 100 percent tariff the company faces in some countries during an address to a joint session of Congress in early 2017, just days after company executives made a visit to the White House.
He referenced that meeting in one of his Tuesday morning tweets.
….When I had Harley-Davidson officials over to the White House, I chided them about tariffs in other countries, like India, being too high. Companies are now coming back to America. Harley must know that they won’t be able to sell back into U.S. without paying a big tax!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
….We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs. In the end it will all even out – and it won’t take very long!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
Harley’s international production, however, isn’t aimed at selling motorcycles into the United States. The company has had a complete-knock-down assembly facility in Brazil since 1999. The company ships parts into the country and completes final assembly there to avoid some tariff costs.
A major portion of Harley’s strategy for the next nine years also focuses on growing the international portion of the business to 50 percent of the total. International sales accounted for about 40 percent of the 241,498 motorcycles Harley shipped last year.
The company is also trying to add 150 to 200 new international dealership between 2016 and 2020. Harley has added a net of nearly 70 dealerships outside the United States since the end of 2015 and is also opening brand apparel stores in China and India.
