Trump tariffs backfire after EU retaliates against Harley-Davidson

Shares of Harley-Davidson plunged Monday after the iconic American motorcycle manufacturer said it will begin shifting some production overseas to offset the impact of retaliatory EU tariffs on certain U.S. goods.

The statement is one of the first by a major U.S. company that implies the recently announced tit-for-tat tariffs will force it overseas, and counters the Trump administration’s efforts to protect U.S. jobs by implementing tariffs.

In response to U.S. duties on European steel and aluminum, the EU enacted tariffs Friday on more than $3 billion worth of U.S. goods including bourbon, yachts and motorcycles.

The EU duties on U.S.-made motorcycles were raised to 31 percent from 6 percent, Harley-Davidson said in an 8-K filing Monday with the Securities and Exchange Commission.

The company said it will not raise retail or wholesale prices but expects an incremental cost of $2,200 per motorcycle exported from the U.S. to the EU.

“To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden,” the Wisconsin-based motorcycle maker said in the filing.

The company expects the additional investment in international facilities to take at least nine to 18 months to complete. Harley’s overseas manufacturing plants are located in countries such as Brazil, India, Australia and Thailand. No production will be moving to Europe as a result of the tariffs, according to the company.

The stock fell more than 6 percent in afternoon trading Monday, tracking for a decline of more than 18 percent for the year.

Harley sold nearly 40,000 new motorcycles last year in Europe, 16 percent of overall sales and its biggest market outside of the U.S., according to the company.

The EU tariffs reduce the company’s 2018 profits by 5 to 8 percent, according to a CNBC analysis of Thomson Reuters data and Harley’s cost projections. The full-year impact of $90 million to $100 million is about 15 percent of the company’s annual profits.

President Donald Trump has publicly thanked Harley-Davidson in the past for “building things in America” and criticized other companies for moving production outside the U.S.

The White House did not immediately respond to a CNBC request for comment.

— CNBC’s
Juan Aruego
and
Morgan Brennan
contributed to this report.