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 US goods.
The statement is one of the first by a major US company that implies the recently announced tit-for-tat tariffs will force it overseas and counters the Trump administration’s efforts to protect US jobs by implementing tariffs.
In response to US duties on European steel and aluminium, the EU enacted tariffs Friday on more than $3 billion worth of US goods including bourbon, yachts and motorcycles.
The EU duties on US-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.
No production will be moving to Europe as a result of the tariffs, according to the company. Harley’s overseas manufacturing plants are located in countries such as Brazil, India, Australia and Thailand. The company said it will not raise retail or wholesale prices but expects an incremental cost of $2,200 per motorcycle exported from the US to the EU.
Later Monday, President Donald Trump said he was “surprised” by Harley’s decision.
“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,” the Wisconsin-based motorcycle maker said in the filing. Wisconsin was also the state that helped Donald Trump win the 2016 presidential election.
The stock closed 5.97 percent lower Monday, down 18.3 percent for the year so far. Shares have lost more than 25 percent since Trump’s election.
Harley sold nearly 40,000 new motorcycles last year in Europe, 16 percent of overall sales and its biggest market outside of the US, according to the company.
The company expects the additional investment in international facilities to take at least nine to 18 months to complete.
The EU tariffs reduce the company’s 2018 profits by 5 to 8 percent, according to an 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 US
The White House said in a briefing the EU has repeatedly engaged in unfair trade practices and is trying to punish US workers but adding the administration would like to work with the EU to try and level the playing field.
“We want Harleys made here, more made here, and that’s going to happen under the President’s trade policies,” Peter Navarro, White House trade advisor, said on Monday.