Harley to Shift Some Production Overseas: Harley and GE in Trump Crossfire:

Trump seeks to bring jobs to the US via tariffs. It's backfiring.

In yet another example of the silliness of Trump's trade policy, Harley-Davidson to Shift Production Overseas to Offset EU Tariffs.

Harley-Davidson Inc. plans to shift production overseas to avoid European Union tariffs on its iconic motorcycles, the latest manufacturer to reconfigure operations amid a widening global trade fight.

Harley said in a security filing on Monday that tariffs of 31% the EU enacted last week on its motorcycles would raise the cost of each Hog it ships there from the U.S. by about $2,200. Rather than raise prices, Harley said it would shift production of the motorcycles it sells in the EU outside of the U.S. over the next 18 months.

“Expanding international production to alleviate the EU tariff burden is not our preference, but it’s the only sustainable option we have to make motorcycles available and affordable to EU customers,” Harley spokesman Michael Pflughoeft said.

“This will make their manufacturing less efficient.,” said Sharon Zackfia, an analyst for William Blair & Co. “It’s just another another headache for Harley.”

GE Caught in Trade Fight

The Wall Street Journal reports GE Factories in Wisconsin, South Carolina Caught in Trade Fight.

GE’s MRI business is just one part of the company’s health-care division, which last year accounted for about 16% of companywide sales, or $19 billion. Still, it offers a window into the complex interconnections of global trade, where components made in one country get assembled in another—and, once in finished form, may be sold back into the first. Some parts make more than a single roundtrip.

“Global supply chains have become so integrated over the last few decades that it’s really hard to put tariffs in place that are not going to harm some domestic manufacturers,” said William Hauk, an economics professor at the University of South Carolina.

The stakes are higher for companies like GE that own the factories producing their imported parts, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, a Washington, D.C., think tank. “The factory may become economically obsolete even though it’s technically very good,” Mr. Hufbauer said.

Winning Easy

Trump must be exceptionally pleased with all this easy winning.

  • Autos: BMW's largest plant in the world is in South Carolina
  • MRIs: GE in the Spotlight
  • Harley Motorcycles: Harley will move some production overseas
  • Nails: US' largest producer of nails at risk
  • Whiskey
  • Tires: Three US businesses may go under
  • Cranberries
  • Lobster
  • Nuts, Soybeans, Chicken, beef etc.

Related Articles

For all the affected industries related to China retaliation, please see Chinese Tariff List Translated, 545 Items: US Farmers and Automakers Clobbered.

Finally, I repeat No Matter What Any Other Country Does, the Correct Action is to Reduce Tariffs.

Mike "Mish" Shedlock

Comments (27)
No. 1-27
Carlos_
Carlos_

No surprise there. GM will do the same: http://www.the-japan-news.com/news/article/0004531697 Only Trump and his supporters think that the strategy will work. Tariff will not work. The idea that China will buckle is preposterous. IMO a country like China that has endure (its people) a lot worst than any tariff can bring to them. China will not buckle. Americans on the other hand are use to the good life and lower prices and they will not take pain for long (remember the oil shock?). So no Trump will also lose this one. Extortion as a tool for negotiation only works for small potato businessmen, not countries

Carl_R
Carl_R

It's a two-headed advantage for American manufacturers to move production overseas. They not only avoid the tariff on goods exported, they avoid the tariff on steel an aluminum that they would have to pay if they manufactured in the US. Yes, I know, they could use US made steel, if they can get it, but the prices will be significantly higher due to the tariff.

If I could describe the absolute worst possible strategy, I would say, put a tariff on manufacturing inputs, like steel, aluminum, and chips, to kill American manufacturers and then let foreign countries retaliate by putting a tariff on manufacturing outputs, to further kill American manufacturers.

Marco_
Marco_

The tarriffs aren't backfiring. They are designed to bring global recession. There is zero evidence anywhere that says tarriffs help so let's not pretend that this is just a side-effect.

pi314
pi314

To be fair, there are many more factories returning to the US. US is the largest market so it makes sense to build here if tariffs become the norm. Overall is a gain for the US, a loss for China.

Sechel
Sechel

Trump being Trump he'll simply villify and jawbone Harley Davidson and G.E.. Not that this will be effective but Trump is looking at a political solution not an economic one. I'm convinced this is about keeping his base happy , maybe getting re-elected and protecting himself from impeachment. The economics are not there. Harley Davidson was already on the losing side of steel and aluminum tariffs. Trump is trying to win a battle and he doesn't care if winning the battle means losing the war.

Sechel
Sechel

there are many businesses and industries that are mostly outside the united states. the u.s. like germany can sell to them, but american based companies will have to shift production over-seas if they get penalized as a result of trump's trade war.

And for a services company like Jacob's Engineering , Virtually all of their businesses is outside the U.S. If Trump puts them at a competitive disadvantage when competing for international business they might as well shift resources outside the U.S.

Realist
Realist

“The US is the largest market”? 300 million in the US. 7.3 billion in the rest of the world.

Carlos_
Carlos_

Just listened Navarro on TV and he is already trying to talk the market up. Never seen anyone more nervous explaining why what he is doing is good. He just called Trump a visionary LOL

Stuki
Stuki

If any company wanted to shift production abroad, but was concerned about the public relations impact of doing so.... Well now they just got handed a get out of jail free card..

Mike Mish Shedlock
Mike Mish Shedlock

Editor

That is a good point Stuki - It is likely Harley was on the verge of doing this and just got a free pass to do so.

mbass100
mbass100

great news, if the europeans could only find something made in mississippi and alabama to put tarriffs on

mbass100
mbass100

the harley workers will leave their jobs, but they are still happy with their choice because of hillary's emails

Sechel
Sechel

harley alreay satisfies local indian demand with production from within the country

Realist
Realist

“the harley workers will leave their jobs, but they are still happy with their choice because of hillary's emails”. LMAO! Sorry, I’m not American, so perhaps I misunderstood, but are you saying that all Trump supporters will gladly give up their jobs “for the cause”!

Escierto
Escierto

The Trump cult members hate criticism of the cult and its beliefs. Our Kool Ade is the best!!!

pi314
pi314

Shanghai stock market is off 20% from the January peak. Chinese economy is definitely hurting more than the US. German DAX if also off almost 10% from January high. In contrast, S&P is off about 5% from January high. In the past 6 months, I am pretty sure the US has gained jobs overall from tariff/trade actions.

yooj
yooj

So, we lose less? That's how we won in Viet Nam, by losing less than the VC. Suppose we will have to destroy some industries to save them, too.

Sechel
Sechel

today's ft says workers in the harley plant are sticking by trump

pi314
pi314

First, you have no clue what the outcome will be. The US/NK were preparing for war six months ago and now their relation is dramatically better than ever. When the dust settles in 6 months, the US may well come up ahead. Just watch. Second, even with S&P losing 5% from peak, which may or may not be linked to current trade disputes, the job market is better than 6 months ago. Many of the created jobs are from companies moving back their operations from overseas. It is getting tiresome that every setback is criticized, even by Mish, when the overall picture is ignored.

pgp
pgp

Let's face it, Harley is a relic. Yet another gasoline burning engine producer. A manufacturer of boat pump motors more notable for their noise than their performance. They are a company that refuses to innovate surviving on tradition, a faded American dream and an unsustainable religious following. Such relics are doomed regardless of trade wars.

Zardoz
Zardoz

... and they’ll be blaming Hillary’s emails to Benghazi when they’re laid off.

mdbu
mdbu

You don't offer any evidence to back up the claim that it is "backfiring". That may end up being true but Wolfstreet has a much more detailed analysis which states that HD's statement is just political cover for a decision to offshore production to Thailand that was made in 2017.