NEW YORK (NYTIMES) - Harley-Davidson, the US motorcycle manufacturer, said on Monday (June 25) that it was shifting some of the production of its bikes outside the United States to avoid European Union tariffs imposed as part of a widening trade dispute.
The announcement, made in a public filing, is an early sign of the financial cost to companies on both sides of the Atlantic as the United States and Europe impose tariffs and counter-tariffs on each other.
The moves have raised the spectre of a full-blown trade war as the Trump administration pursues a protectionist tack with both allies, including the European Union, Canada and Mexico, and rivals, like China.
Last week, the European Union imposed penalties on US$3.2 billion worth of US products, many of which are produced in areas that form the heart of President Donald Trump's political base, in response to steel and aluminium tariffs added by the White House.
The list included bourbon from Kentucky, the home state of Senate Majority Leader Mitch McConnell; as well as orange juice, which is made largely in the swing state of Florida; and motorcycles made by Harley-Davidson, headquartered in Wisconsin, the home state of House Speaker Paul Ryan.
Harley-Davidson said on Monday that EU tariffs on its motorcycles had increased to 31 per cent from 6 per cent. It estimated that the higher tariffs would add about US$2,200 on average to every motorcycle exported from the United States to the bloc, so it said it would move the production of bikes bound for Europe outside the United States.
The company sold about 40,000 new motorbikes last year in Europe, equivalent to a sixth of its worldwide sales, making the region its most important market after its home country.
"Harley-Davidson believes 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, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers' businesses," it said in the filing.
Harley-Davidson said the increase in tariffs would cost it an extra US$30 million to US$45 million for the rest of 2018. It said shifting its production outside the United States would take nine to 18 months.
The company said it planned to keep prices for EU customers steady while that shift was in progress, meaning it would absorb any tariff costs. It did not say how jobs in the United States would be affected.
The company, which is to give more details on the move next month when it reports second-quarter earnings, has been moving some production overseas for years, somewhat eroding its image as an iconic American brand.