Published: Fri, June 29, 2018
Markets | By Jeffery Armstrong

Union Responds To Harley-Davidson Decision To Move Some Work Overseas

Union Responds To Harley-Davidson Decision To Move Some Work Overseas

Trump's tweet on Monday is a sign the administration will continue placing blame on USA trading partners, even as American companies shift production or lay off workers amid escalating trade battles. "If bikes are made elsewhere, European Union taxes on trade hurt the U.S. economy but do not hurt Harley Davidson profits or the European Union consumer".

Harley-Davidson said the EU's new tariffs on US-made motorcycles would drive up costs and force the company to shift a sizable portion to its production outside of the USA to avoid the tariff.

Trump also suggested Tuesday morning that his adversarial approach to trade policy had only begun.

That statement drew criticism from Eurasia Group president Ian Bremmer, who said on Twitter, "If the Germans started saying this about BMWs or the Japanese about Toyotas, that's a whole lot of Americans out of work".

"I do not think anybody expected this to escalate to the level that it's at", he said.

In response to Trump's tariffs, Europeans are targeting the most iconic American products, such as motorcycles, blue jeans, and bourbon. And many of Trump's tariffs focus on intermediary goods, or parts, that are then incorporated into finished products.

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JBK has total revenues of $15 million a year and income of a few million, so Trump's policies are taking real money from his workers' pockets. Around 40% of global trade is estimated to take place within companies, moving things from one subsidiary to another.

Tearing into Germany, he said, "They send Mercedes, they send BMWs, they send everything; we tax them practically nothing". "It's a big chunk of our profits". Harley-Davidson says it will manufacture some of its motorcycles overseas to escape rising European tariffs.

Trump's tariffs on steel and aluminum will cost Harley up to $20 million this year, with European Union retaliation adding perhaps an additional $45 million, the company said.

Harley, which sold nearly 40,000 motorcycles in Europe past year, has also said it planned to absorb these costs rather than raise its prices and risk damaging sales.

"A Harley-Davidson should never be built in another country-never!"

The company, which sold almost 40,000 motorcycles in Europe a year ago, said it planned to absorb those costs rather than pass them on to customers and risk damaging sales.

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In his Tuesday morning series of Twitter posts, Trump wrote that "Harley must know that they won't be able to sell back into the USA without paying a big tax!"

Harley-Davidson was already struggling to combat a dip in US demand by boosting sales overseas to 50% of total annual volume from about 43% now. Harley-Davidson and its European Union consumers, however, are still winners. "Made in America", Trump said at that photo opportunity.

Ryan says the USA should counter unfair trading practices, but says, "There are better tools than tariff increases".

So you can see that President Trump's series of tweets was mostly more of the same: defending his use of tariffs, pointing out that the rest of the world uses tariffs, and patting himself on the back for other countries reducing their tariffs and bringing down trade barriers. Mid-Continent Nail, the country's largest nail manufacturer, laid off 60 employees this month and has warned that the entire 500-person factory could shut down by Labor Day. Shifting production overseas while explicitly citing tariffs as the impetus for the shift is not something that covers Trump's tariffs in glory.

However, the tariffs have also helped to spur investment in U.S. steel plants. Daimler last week said the tariff escalation will crimp its earnings. "I'm nervous about the wisdom of this strategy".

But what he doesn't realize is that no one ever wins a trade war, and consumers on both sides always lose. That was long before Tariffs were announced.

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