Trump Criticises Harley-Davidson for Moving Some Production Overseas to Avoid Tariffs

Washington: US President Donald Trump, who had batted for Harley-Davidson’s case against India over its high tariffs on the iconic motorcycles, has criticised the company for its plan to shift some of its production units overseas to avoid retaliatory tariffs by the European Union.

Trump said he was surprised by such a decision by the Wisconsin-based motorcycle manufacturer, saying it amounted to raising the “white flag”.

Outside the US, Harley-Davidson has manufacturing facilities in India, Brazil and Australia.

Trump has repeatedly raised the issue of high tariffs by India on high-end Harley-Davidson motorcycles, which in part is responsible for the current trade tension between the two countries.

In February, Trump had said the Indian government’s decision to reduce the tariff on Harley-Davidson motorbikes from 75 per cent to 50 per cent was not enough and asked that it should be reciprocal, as the US imposes “zero tax” on the import of motorcycles.

The EU began imposing tariffs on Friday on US$ 3.2 billion worth of American goods, including motorcycles, orange juice, bourbon, peanut butter, motorboats, cigarettes and denim. They are a response to the Trump administration’s tariffs on steel and aluminium imports from Europe.

Trump says the duties are necessary to protect the US steel and aluminium industries, which are vital to national security. They have drawn retaliation from the EU, Canada, Mexico, India and others while driving up the cost of metals for manufacturers in the US.

Harley-Davidson in its US Securities and Exchange Commission (SEC) filing on Monday said new retaliatory tariffs by the European Union (an increase from six per cent to 31 per cent) will result in an incremental cost of approximately US$ 2,200 on an average motorcycle exported from the US to the 28-member trading bloc.

“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 US to its international facilities to avoid the tariff burden,” said the company without indicating to which country it plans to move its production facilities to.

Harley-Davidson said shifting targeted production from the US to international facilities could take at least nine to 18 months to be fully completed.

The company's decision surprised Trump. “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” he said. “I fought hard for them and ultimately they will not pay tariffs selling into the EU, which has hurt us badly on trade, down USD 151 billion. Taxes just a Harley excuse - be patient!” Trump tweeted.

The White House backed Trump’s trade policies. “The President’s trade and economic policies have been a huge benefit to the American economy, and this includes the creation of over 300,000 manufacturing jobs. Unemployment is at 3.8 per cent, the lowest since 2000. And manufacturing confidence is at historic highs,” White House Press Secretary Sarah Sanders told reporters at her daily news conference.

The European Union, she alleged, is attempting to punish US workers with unfair and discriminatory trade policies, and Trump will continue to push for free, fair and reciprocal trade in hopes that the EU will join is in that.

“The European Union is trying to punish US workers because they have engaged repeatedly in unfair trade practices. And the president is saying enough is enough. We'd like to work with the EU to work on a level playing field,” Sanders said in response to a question.

In its SEC filing, Harley-Davidson said the company maintains a strong commitment to US-based manufacturing which is valued by riders globally. “Increasing international production to alleviate the EU tariff burden is not the company's preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” it argued.

“Europe is a critical market for Harley-Davidson. In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the EU countries is second only to the US,” the company said.