President Donald Trump’s trade policy is backfiring on Harley-Davidson.
The company is shifting some production of motorcycles for European customers out of the United States to avoid EU retaliatory tariffs.
Harley-Davidson’s move is some of the most direct evidence yet that tit-for-tat trade fights between the United States and other countries have consequences for American companies. Harley-Davidson said it stood to lose as much as $100 million a year.
“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option,” Harley-Davidson said in a regulatory filing on Monday.
The EU began imposing tariffs Friday on $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 aluminum imports from Europe.
For motorcycles, the EU raised its 6% tariff to 31%. That will make each bike about $2,200 more expensive to export, Harley said.
Harley is not raising bike prices for customers or retailers.
“The tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region,” the company said.
Instead, it will eat $30 million to $45 million for the rest of this year and $90 to $100 million annually.
The company did not say whether any jobs are at risk. Harley-Davidson, based in Milwaukee, employed 5,800 workers at the end of 2017. It makes most of its motorcycles in the United States and has plants in Wisconsin, Pennsylvania, and Missouri. It also has facilities in Brazil, India, and Australia.
Europe is its second-largest market behind the United States. In 2017, nearly 40,000 European customers bought new Harleys, compared with about 148,000 in the United States.
And Europe is becoming more important to the company as sales in the United States slump. Harley-Davidson’s US bike revenue dropped 8.5% last year from 2016, but only 0.4% in Europe.
Harley-Davidson’s stock fell 5% on Monday.